Pertamina Turns to New Energy Sources to Become Global Player

More than 50 years ago, Pertamina became the nation’s first oil and gas company.

Now the state-controlled company is diversifying, becoming a provider of coal, solar, geothermal and other

forms of energy in a move that will boost the country’s electricity-generation capabilities and reduce its

reliance on crude oil and natural gas.

Ali Mundakir, Pertamina’s vice president for corporate communications, said on Friday that the change would set

a “legal foundation” for the Jakarta-based company to become a world-class energy company by 2023.

“So in the future, should Pertamina try to move into sectors outside oil and gas, like renewable energy, we

will have no barriers,” Ali said on Friday.

Pertamina’s move comes at a time when the nation’s crude oil production is falling and four years after it lost

its status as a member of the Organization of the Petroleum Exporting Countries.

Proven oil reserves have dropped by 1.9 billion barrels since 1991, faster than the rate in any other Asian

country, according to the latest oil and gas report by British oil giant BP.

But the nation has plentiful sources of natural gas and coal, and its proximity to a volcanic range makes

geothermal production abundant.

Still, expansion into other forms of energy would not mean a drastic change in the way Pertamina does business,

Ali said. He added that the shift will provide more options for Pertamina, established in 1957, to explore new

business opportunities.

“For example, we now can sell the excess from our power plant in Balikpapan to state electricity firm PLN

[Perusahaan Listrik Negara], or maybe we will build a geothermal power plant ourselves,” he added.

Ali’s comments confirmed remarks by Afdal Bahaudin, Pertamina’s director of investment planning and risk

management, earlier on Friday to Antara. Afdal said Pertamina changed the description of the company on its

charter to an energy company from an oil and gas company. The change was made at a shareholder meeting on

Thursday.

“There are many types of energy, like geothermal or coal-bed methane. Pertamina would find itself in a

difficult position should it continue to rely on oil and gas,” Afdal said. The change underscores the company’s

aggressive goal to compete with its rivals in the region.

Ali said that Pertamina will use more of its resources for the downstream sector — meaning the distribution and

selling of fuel — but the firm will continue to develop its oil and gas assets.

Pertamina, with total assets of Rp 319.9 trillion ($34 billion) last year, has 21 subsidiaries including

upstream business operator Pertamina Hulu Energi, liquefied natural gas seller Nusantara Regas and Pertamina

Geothermal Energy.

Pertamina’s move is also playing catch up with its regional rivals, such as Malaysia’s Petronas and Thailand’s

PTT, both of which are expanding across the region. Recently, Pertamina has been in talks to buy a stake in a

Venezuelan oil firm after failing to buy assets in Angola last year.

In its 55-year history, Pertamina is suspected to have become the target of corruption by the country’s

political elite.

During the New Order regime, corruption was rife and Pertamina contracts were rigged in favor of people

well-connected with cronies of long-time authoritarian leader President Suharto.

After the regime fell in 1998, Pertamina conducted a massive corporate clean-up with the intention of elevating

the firm to become one of the best in the world.

Indonesia, however, is no longer the oil-powerhouse country it used to be and imports crude oil to meet the

nation’s needs.

Analysts such as Pri Agung Rakhmanto, an executive director at Reforminer Institute, a think-tank, welcomed

Pertamina’s change, saying that it indicates the company’s intention to explore other energy sources because

the nation’s oil reserves have decreased significantly.

“In geothermal energy, for example, we had only explored 5 percent of our vast reserves,” he added. However,

Pri Agung said the move was merely a formality, as Pertamina had long explored other unconventional energy

sources like geothermal.

Still, Kurtubi, an oil and gas analyst and professor at the University of Indonesia, questioned the company’s

move.

“It will pave the way for oil and gas regulator BPMigas to emerge as a dominant force in the sector,” Kurtubi

said, adding that the move was unnecessary as geothermal and coal-bed methane are also considered as types of

gas.

Indonesia holds 40 percent of the world’s geothermal reserves, according to data from Pertamina. Although

geothermal energy is considered clean and durable, it cannot be transported, so a power plant must be built

nearby to tap it.

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