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Business

National energy company delays major non-core investment

Construction of Pertamina Tower in the heart of Jakarta has been put on ice until oil prices recover.

JAKARTA -- As a result of depressed oil prices, Pertamina, Indonesia's state-owned energy company, is postponing development of a 10.68 trillion rupiah ($840.95 million) office and hotel building dubbed Pertamina Tower, cutting overall planned investment this year by 37% to $4.4 billion.

     Construction of Pertamina Tower was due to begin in the center of Jakarta for completion in 2020. The 99-story structure will provide the energy company and its subsidiaries with 240,000 sq. meters of office space.

     Other international oil and gas companies have also cropped investment plans with oil prices slumping 60% since June 2014. In January, France's Total SA shaved nearly $3 billion from its 2015 budget.

     Pertamina Finance Director Arief Budiman said on Thursday that the investment cut came after a number of non-core investment proposals were reviewed.

     Around $3.3 billion, or 75%, of the remaining investment budget will go into upstream business. In the next five years, Pertamina's Chief Executive Dwi Soetjipto has set a target of 50% of total revenues from upstream production compared to the only 20% contribution previously.

     Pertamina has plans to increase oil and gas production to 2.2 million oil equivalent barrels per day by 2025 with its existing fields and domestic and international expansion.

     To achieve the output target, Pertamina has earmarked up to $20 billion for its Refinery Development Master Plan (RDMP), upgrading five refineries at existing blocks: Balongan and Balikpapan in East Kalimantan; Cilacap in Central Java; Dumai in Riau; and Plaju in South Sumatra.

     Saudi Aramco, China's Sinopec and Japan's JX Nippon Oil & Energy Corporation are partners in Indonesia's refinery capacity expansion. Pertamina and Saudi Aramco are jointly developing Balongan, Cilacap and Dumai; JX Nippon is working on Balikpapan; and Sinopec on Plaju.

     Work on Dumai will not start until 2021 for completion by 2025, but the other four are due to come fully on line in 2019.
 
     Pertamina began making overseas acquisitions in 2002. In November 2013, it acquired ConocoPhilips Algeria Ltd and control of Block 405a there worth $1.75 billion.

     Pertamina also acquired 30% of US-based Murphy Oil Corporation's oil and gas assets in Malaysia for $2 billion in January, 2015.

     In conjunction with Thai state enterprise PTT Exploration and Production, Pertamina acquired 75% participating interests in Indonesia's offshore Pangkah Block and 23% in Natuna Sea A Block from US-based Hess Corporation for 1.3 billion in 2013.

     In 2014, Pertamina acquired 10% of Texas-based ExxonMobile's assets in the West Qurna I project in Iraq, and in 2012 acquired 58.28% participant interests in Offshore North West Java PSC oil and gas field from Canada's Talisman Energy.

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