Indonesia's Pertamina targets higher crude output as fuel price rise eyed

[JAKARTA] Indonesian state oil company Pertamina aims to increase its crude oil production by nearly a fifth next year to 400,000 barrels per day, a senior official said on Tuesday, up from an estimated 342,000 bpd in 2017.

Pertamina is also targeting a 52 per cent increase in natural gas output to 3,069 million cubic feet per day (mmcfd) in 2018, up from an expected 2,015 mmcfd this year, Meidawati, Pertamina's senior vice president for upstream strategic planning and operation evaluation, said via a text message.

Pertamina also intends to raise upstream capital expenditure by 21 per cent to US$3.32 billion, up from an estimated US$2.74 billion this year, said Ms Meidawati, who uses one name.

Pertamina has said it plans a total capital expenditure of US$5.5 billion in 2018.

The state energy company has estimated it will need to spend US$115 billion over the next eight to 10 years to achieve energy self-sufficiency, including in oil refining.

Pertamina's finances have been hurt in recent years due to government-controlled gasoline and diesel prices that have been held below market levels.

"It's a loss of revenue, not a loss, because the government hasn't permitted an increase in prices in 2017," Pertamina chief executive Elia Massa Manik told parliament on Monday.

Ms Manik said the sharp increase in crude oil prices over the past year should be followed by fuel price adjustments.

Indonesia shifted the burden of fuel subsidies to Pertamina in 2015, shortly after President Joko Widodo took office, forcing losses on the company to ensure retail fuel prices did not rise too fast for consumers.

Prices of low-octane gasoline and diesel were initially expected to be revised by the government every three months.

Pertamina lost an estimated 18.9 trillion rupiah (S$1.89 billion) on sales of RON 88 gasoline and diesel from January to September, finance director Arief Budiman also told a parliament hearing on Monday.

Indonesia's director general for oil and gas, Ego Syahrial, said the government is considering hiking fuel prices if Indonesia's crude oil benchmark price (ICP) climbs above US$60 per barrel in 2018.

The ICP benchmark rose to US$59 in November, Mr Syahrial said. That would be about 36 per cent higher than the ICP a year ago, according to prices listed on the energy ministry website.

The pricing formula was being discussed and "there's a possibility we'll adjust the fixed price," Mr Syahrial told reporters.

"We are looking for a middle point so that people's purchasing power is maintained," Mr Syahrial said.

REUTERS