Pertamina plans 77 % capital spending increase

Indonesia's state-owned Pertamina, aiming for an 11 % boost in oil production, expects to increase capital expenditure to $ 4.15 bn in 2010-a 77 % increase over spending in 2009, according to a company official.
"The increase in capital expenditures was made to meet the increasing number of new projects and preparations to build a number of refineries," said Pertamina financial director Frederick Siahaan. "This is our prediction, but we still need approval from the shareholder meeting," said Frederick, who noted that as much as $ 2.5 bn would be secured from loans, including $ 1 bn in dollar-denominated bonds and 1 tn rupiah in rupiah-denominated bonds."

"We can only issue the bonds after the financial audit for 2009 is finished. Thus, this will perhaps be in March or April next year," said Frederick, who added that Pertamina plans to use two thirds of the planned expenditure for upstream activities.
Frederick also said Pertamina will also use $ 17-$ 19 bn of the planned outlays to upgrade existing refineries at Plaju, Cilacap, Balikpapan, Dumai, and Balongan and to construct three new refineries in Cilacap, Banten Bay, and East Java.

According to Karen Agustiawan, Pertamina president director, the state firm expects to increase oil production to 193,900 bpd in 2010, up 10.93 % over the projected 174,000 bpd for 2009. Ms Agustiawan said the Cepu block is expected to contribute significantly to next year's targeted oil production increase.
"We expect that the Cepu block will start its early production of 20,000 bpd by the beginning of 2010. Of this production, Pertamina expects to get 9,000 bpd," she said.

The announcements of increased spending coincided with other reports that Pertamina is looking to acquire a 25 % participating interest in the Mahakam block before the expiry of Total E&P Indonesie's contract in 2017. Ms Agustiawan said Pertamina already had submitted a request letter to the government to control a 25 % participating interest in Mahakam block, East Kalimantan, but that the eventual target is 100 % control.
"In 2027, we hope to control 100 % participating interest and become the operator of Mahakam block. We have announced this to the government on Nov. 4," she said.

She said Pertamina also wants 100 % control in the West Madura block, where the contract will expire in 2011.
If 100 % control is not possible, Ms Agustiawan said: "We hope to at least seize a 60 % interest."