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Business

Pertamina appoints new directors, struggles for investors

Indonesian energy giant faces project delays, stiffening industry headwinds

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Elia Massa Manik, the president of Pertamina, has enlarged the energy conglomerate’s board of directors as industry headwinds stiffen and foreign investors make themselves scarce.   © Reuters

JAKARTA -- The appointment of two new directors at Pertamina, Indonesia's state-owned oil and gas company, has highlighted its problems attracting investment for a string of major projects in an increasingly tough operating environment.

The state enterprise ministry announced on Tuesday the two new positions: director for investment planning and risk management, and director for asset management. Both positions have been filled from inside the company. The former director for mega refinery and petrochemical projects has meanwhile been replaced by his subordinate.

Elia Massa Manik, Pertamina's president, himself just appointed to the job in March, said there had been no favoritism involved, and that increasing the board of directors to 10 was not evidence of inefficiency.

The director for asset management will manage non-core assets to improve cash flow, he said. The investment and risk director will address the "nature of the industry" - ensuring investments take account of falling hydrocarbon reserves and production.

"Because we need to keep doing project after project, we need more focused risk management and more mature planning," Manik said.

Pertamina has six mega refinery projects underway -- four upgrades of existing refineries and two new ones under construction -- at an estimated cost exceeding $40 billion. Completion dates have recently been set back to 2025 from 2023 due to difficulties finding strategic partners. Negotiations with Saudi Aramco to jointly develop two of the refineries did not come to fruition.

Pertamina now also faces the daunting possibility of having to develop the East Natuna natural gas block alone after ExxonMobil and Thailand's PTT Exploration & Production pulled out. Both companies decided the project was no longer viable in the present economic climate. Earlier this month, a Pertamina director told local reporters the company would not be able to handle the project alone.

Pertamina has meanwhile had to step up exploration activities in the light of depleted reserves in existing fields. Indonesia, a net oil importer since the early 2000s, is thought to be at serious risk of an energy crisis a decade from now.

Despite increased domestic demand and revenue in the first half of 2017, Pertamina reported a 24% year-on-year decline in net profit to $1.4 billion. Manik attributed the drop to a 35% increase in crude oil prices. Pertamina was unable to hike retail prices accordingly because of fuel subsidies still in place.

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