High Global Crude Oil Prices, Pertamina's Efficiency Reaches US$ 2.2 Billion

Jakarta, June 19, 2022 - Amidst the increasing crude oil price challenges, PT Pertamina (Persero) is strengthening its financial strategy and operational efforts to improve efficiency in all business lines, both holding and sub-holding from its upstream processing to downstream.

Through this business strategy, in 2021, Pertamina succeeded in cost optimization of US$ 2.21 billion, obtained from the cost savings program (Cost Saving) of US$1.36 billion, Cost Avoidance of US$ 356 million, and additional Revenue (Revenue Growth) of around US$ 495 million.

Director of Finance of Pertamina, Emma Sri Martini, explained that Pertamina had developed various policies and business strategies from the financial and operational perspective to face the increasing global oil prices challenges.

From a financial perspective, Pertamina implements a cost optimization program throughout the Pertamina Group, including cost savings, cost avoidance, and increased revenue. According to the savings efforts, Pertamina also runs a hedging program for market risk management. In addition, the company also centralizes procurement, prioritizes capital expenditures, and manages assets and liabilities to reduce costs or interest expenses (cost of funds).

“We are trying to optimize all costs and manage the company’s finansial aspects, to reduce costs, including prioritizing projects that have fast”results," she said.

Besides financial tightening, ​​Pertamina also implements an operational strategy to increase revenue, run by its six sub-holdings. In the upstream business, Pertamina continues to increase oil and gas production and lifting to take advantage of the increasing oil prices. As a result, production increases by four percent and lifting three percent.

The positive performance from upstream operations was contributed by the Rokan Block and foreign assets and consistent efforts to maintain production levels through well drilling and resource discovery. Through 2021, Pertamina has drilled 12 exploration wells and 350 exploitation wells. In the same year, discovered reserves (2C) reached 486.70 MMBOE, and additional proven reserves (P1) reached 623.47 MMBOE.

In processing and petrochemicals, in 2021, Pertamina implemented a crude and product optimization strategy. This contributed to an increase in product yield value by around 3%. The strategy is related to the selection and economical substitution of crude oil and maximizing high valuable products with high spreads. On the other hand, refinery production also increased in response to higher energy demand due to the national economic recovery.

Then in the transportation and logistics lines, Pertamina optimizes the load factor to achieve revenue and cost-efficiency. In the gas business, Pertamina has also increased the gas trade volume and transportation, as well as oil transportation volume.

"And after the legal end state, we also intensify resource sharing, such as sharing facilities and development agreements, especially in upstream sub-holding," Emma added.

Emma added that the positive performance downstream was also supported by the government through the recognition of the difference in compensation for HJE JBT Solar and JBKP Pertalite in 2021, reaching around US$4 billion equivalent to IDR 58.6 trillion (excluding tax) and around US$1.7 billion equivalent to IDR 24.1 trillion (excluding tax) payments for 2018 and 2019 compensation.

According to Emma, ​​the government's support will continue in 2022 through a policy revision that stipulates Pertalite (RON90) as a Special Assignment Fuel to replace Premium (RON88) and an adjustment to the price of Pertamax. As Pertamina's appreciation for this support, several initiatives in the downstream sector have been implemented that simultaneously respond to market changes, such as an expansion of digital transactions, accelerating Pertashop outlets to capture larger market opportunities in rural areas, and diverting gas station energy sources to solar panels.

"We appreciate the government and the DPR's decision which has increased the budget ceiling for subsidies and compensation for 2022 to maintain and protect people's purchasing power and contain potential inflation. This is a support for Pertamina in providing energy amidst the challenges of high crude oil prices,” Emma added.

With this support, ​​in 2022, Pertamina will develop a main strategy through efforts to increase 17% oil and gas production, targeting  79.9% Valuable Product Yield, adding fuel outlets of around 3,000 Pertashops, developing digital markets for up to 25 million MyPertamina users, and increasing revenue portion from non-captive markets in the shipping business to 7.5%. To strengthen its commitment to low-carbon energy, it will produce 7,138 GWh of electricity and is supported by a targeted increase in installed capacity of up to 2.9 GW. Another important strategy, unlock value developed by the Subsidiaries.

“In the financial sector, we will focus on optimizing costs targeted to reach up to US$600 million. We will continue to communicate with the government to ensure a good decision for the company,” Emma said.**