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Pertamina slashes 2019 spending target by nearly 25%

Jakarta

INDONESIA'S state energy company Pertamina has cut its 2019 capital spending target by about a quarter, after costly acquisitions of oilfields and integration with state gas company PGN in late 2018, the company's chief financial officer said.

The company's revised capital spending target will stand between US$4.2 billion and US$4.5 billion this year, CFO Pahala Nugraha Mansury told reporters on Wednesday.

That's significantly lower than the previous target of US$5.5 billion Mr Mansury had stated in November.

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The government had hoped that transferring operatorship of multiple upstream assets to Pertamina would "compensate" the state energy company for the dent in its profit from government fuel-pricing policies.

However, analysts have questioned the economics of that rationale as maintaining output from the ageing oilfields will require significant investment in coming years, and fuel price controls were estimated to have cost Pertamina up to US$2 billion in 2018.

Referring to the revised capital spending target, Mr Mansury discussed about the US$784 million signature bonus that Pertamina had to pay the government for the Rokan block acquisition from Chevron, and the US$1.39 billion acquisition of Pertagas by Pertamina's new gas subsidiary Perusahaan Gas Negara (PGN).

To achieve its 2019 spending plans, Pertamina planned to raise up to US$3.5 billion "from various instruments", Mr Mansury added.

He later clarified that Pertamina was looking at several fundraising options including project financing, global bonds, bank loans and syndicated loan facilities.

Pertamina is also targeting a profit of US$1.5 billion to US$2 billion in 2019, Mr Mansury said, below its initial 2018 profit target of 32.77 trillion rupiah (S$3.13 billion). REUTERS