Pertamina - Indonesia's Oil Company

Pertamina (Perusahaan Tambang Minyak Negara, lit. 'State Oil Extraction Company') is an Indonesian government-owned corporation which extracts and refines the country's oil and gas reserves. It was created in August 1968 by the merger of Pertamin (established 1961) and Permina (established 1957). Pertamina is the world's largest producer and exporter of Liquefied Natural Gas (LNG).

Fact
Type     Government-owned corporation
Founded     10 December 1957
Headquarters     Indonesia Jakarta, Indonesia
Key people     Karen Agustiawan, President & CEO (2009-...)
Industry     Oil and Gas
Website     Official website
Head Office
PERTAMINA PUSAT
Jl. Medan Merdeka Timur 1A, Jakarta 10110
Telp : (021) 3815111,3816111 (86 Saluran)
Fax : (021) 3633585,3843882
Telex: 44152, 44302, 46549, 46552, 46554 

History

Nationalization

In 1957, Dutch assets in petroleum were nationalized, from which Permina was founded as a state-owned oil monopoly, headed by Lieutenant-General Ibnu Sutowo.Ibnu Sutowo's position as the second deputy of Abdul Haris Nasution was the beginning of the army's involvement in the oil industry. Permina distributed oil for the entire archipelago.

Permina founded the Apprentice Technical School (Sekolah Kader Teknik) in Brandan to train and produce experts in the field. To meet this goal Permina established the Oil Academy in Bandung at 1962. Oil Academy's curriculum pertains to the technical aspects of the oil industry, and the graduates turned into the main forces in Pertamin (which later transformed to Pertamina).

In 1960, the Congress enacted a policy that the mining of Indonesian oil and ground gases are only permitted for the state, through a state-administered company. Pertamin, established in 1961, was responsible for the administration, management and controlling of the exploration and production. The policy was short lived. An agreement between the state and foreign companies was affirmed that gradually, oil refinement manufactures and other assets in marketing and distribution were to be sold to Indonesia within five to fifteen years.

In 1968, to consolidate oil and gas industry for its management, exploration, marketing and distribution, Permina and Pertamin merged and became PN. Pertamina. It continued to do little drilling itself, but made production-sharing agreements with foreign companies.

The 1970s

After the merge, Pertamina's production rose considerably (about 15% each in 1968 and 1969, and nearly 20% in 1973). By the end of 1973, it directly produced 28.2% of Indonesia's oil, with agreements of Caltex and Stanvac to produce the rest (67.8% and 3.6%, respectively). Its assets included seven refineries, oil terminals, 116 tankers, 102 other vessels and an airline. It was also active in cement, fertilizer, liquid natural gas, steel, hospitals, real estate, a rice estate, and telecommunications.

The 1974 oil price increases produced revenues of $4.2 billion in that year, equivalent to approximately one sixth of Indonesia's gross domestic product. Much of this revenue was used by Sutowo to expand Pertamina's interests far beyond oil production to include investments in oil tankers, steel and construction. Pertamina built the Bina Graha, the presidential executive office building in Jakarta. The global oil crisis of the 1970s greatly increased oil prices and profits. Pertamina initially provided a fiscal lift to the hopes of Indonesia's development planners.

For President Suharto and other members of the ruling elite, revenue from Pertamina "an ongoing source of funding" without accountability: "they ran this cash-cow into the ground, using it for both military and personal ends." Historian Adrian Vickers describes the endemic corruption at Pertamina:

    At each stage of the transaction chain somebeody was getting a percentage... If accidents occurred, as in 1972 when eighty impoverished people died... they could be covered up.

In 1973, the government's ability to borrow money from overseas was constrained, and Pertamina was no longer providing revenues to the state. Instead, the massive enterprise turned out not to be making money, but compiling exponentially large losses. In February 1975, Pertamina could no longer pay its American and Canadian creditors. An investigation followed, which revealed over US$10 billion in debts, mismanagement, and corruption within the company. This debt was equivalent to approximately thirty percent of Indonesia's GNP at the time. Others offer a figure of a $15 billion debt. A public investigation hurt the reputation of the national elite both among Indonesians and foreigners. The man most responsible for the collapse, Ibnu Sutowo, was never punished. He and his family were among the richest and most powerful in Indonesia, into the 21st century. The government took over the operation of the company and sought means by which to repay its debts. Pertamina's debt problems were eventually solved through a large government bail-out, which nearly doubled Indonesia's foreign debt.

In the 1980s, major partnerships with American and French firms produced vast quantities of petroleum. Caltex, a joint Chevron-Texaco company, and Total S.A. were some of the largest foreign players.

Human rights observers have long expressed concerns about Indonesia's hostility to labor unions. According to the Multinational Monitor: "In 1985, the government ordered the firing of over 1,600 workers at Pertamina and foreign oil companies, charging that they had been members of the Indonesian Communist Party, which had been banned 19 years earlier when Suharto took power."

In 2003 Pertamina legally became PT. Pertamina (Persero), as per the enactment of Government Regulation No.31/2003. Pertamina is now under the coordinator of the State Minister of State-owned Enterprises.

Like other contractors, Pertamina holds Cooperation Contract to Oil and Gas Regulatory Body. With its transformation into a limited liability company, Pertamina has become a business entity with the main target of making a profit.

Facilities and Products

Currently Pertamina owns six oil refineries which have a capacity of 1,041.2 thousand barrels (Refinery Unit (RU) II in Dumai, RU III in Plaju, RU IV in Cilacap, RU V in Balikpapan, RU VI in Balongan, and RU VII in Kasim/Sorong), two gas reserves with a capacity of 31 tons per year, and a petrochemical company. Pertamina's products include a great variety of fuels, chemicals, additives, and retail products.

Filed Under: Feature , WikiArea