ASIA PACIFIC COMPANIES & FINANCE

Pertamina to lift output at home and abroad Alam

Damon Evans / Jakarta
Indonesia will start looking to acquire
international upstream assets from
next year that it can use to meet
its burgeoning domestic demand,
Upstream Director Syamsu Alam says.
SYAMSU ALAM WAS appointed upstream
director at Indonesian NOC Pertamina in
December 2014. He told Interfax Natural Gas
Daily that the state energy player aims to
boost its domestic output by 21% by 2020
while increasing its overseas production
threefold. Mergers and acquisitions will
form a key part of this expansion strategy.
Interfax Natural Gas Daily: How much oil
and gas is Pertamina producing domestically
and abroad? By how much do you hope to
increase this over the next one, five and
10 years?
Syamsu Alam: Pertamina is producing
529,000 barrels of oil equivalent per day from
domestic fields and 118,000 boe/d from
overseas working areas. We expect to pump
640,000 boe/d in 2020. Of that, 270,000 boe/d
will be domestic and 370,000 boe/d from
overseas. Our total production will continue
to grow to 1.9 million boe/d in 2030, of which
760,000 boe/d will be domestic and 1.14
million boe/d from overseas.
INGD: How much are you investing in the
upstream sector?
SA: Over the next 10 years we will spend
around $40 billion in total. Our budget for
2016 investment is around $3 billion. But over
the next 18 months we expect to spend about
$6 billion.
INGD: What is your strategy to increase
domestic production?
SA: We plan to optimise our existing assets
while also taking over expiring legacy
production-sharing contracts [PSCs]. This
is especially so for PSCs that have been
operated by IOCs for 50 years. We are
evaluating the potential of all the expiring
PSCs, but we dont want to manage all
of them.
In the immediate future, we will takeover
the Mahakam Block and we are also
Natural Gas Daily | 3 May 2016

interested in the East Kalimantan and Sanga

Sanga blocks. Besides the expiring PSCs, we
are looking at mergers and acquisitions. Were
really flexible, with up to $2 billion available to
spend on domestic and overseas deals. Were
bidding for oil and gas blocks at home, while
overseas were concentrating on oil assets. [...]
We forecast a gas shortage in Indonesia by
2020 so starting next year we will be looking
abroad for gas assets too.
INGD: Are you interested in more overseas
upstream acreage?
SA: Yes. As Indonesias domestic production is
trending down we need to ensure security of
energy supply by acquiring overseas upstream
assets. Were evaluating assets in North and
West Africa, Russia and the Middle East. Our
priority is conventional onshore assets, but
were open to buying companies too. Of
particular interest are regions that allow us to
export or resell production to Indonesia.
INGD: How about Indonesias unconventional
gas potential?
SA: We have two unconventional shale blocks
in North Sumatra targeting oil and gas. But
honestly, we dont have the experience yet.
Weve discussed shale with the IOCs and
North American companies. Although the
rocks are different than in the US, we all agree
there is potential here. But Indonesias PSC
terms need to be changed to make shale
commercially viable. As for CBM, our results in
South Kalimantan have not been promising.
The resources are there, but its still a big
challenge to commercialise.
INGD: How is the low oil price affecting
production in Indonesia?
SA: As long as the oil price is above our
production cost we will keep pumping to fulfil
national demand. Our average production
cost for oil is $23 per barrel and $1.4 per
thousand cubic feet [$1.3/MMBtu] of gas. Our
strategy is to be more cost efficient.
INGD: How do you believe gas pricing
should be determined in Indonesia? Will
Pertamina be involved in the proposed gas
aggregator concept?

Syamsu Alam, upstream director. (Pertamina)

SA: The challenge is in the upstream. We

take so much risk in finding gas that pricing
needs to be competitive to make a return
on the investment. The government
understands that upstream players need
higher gas prices to stimulate exploration
and production.
But there is a big disconnect in Indonesia
between the price producers sell their gas for,
which is typically around $6-7/MMBtu, and
what end-users pay, which is sometimes as
much as $12-14/MMBtu.
Indonesia needs to define a gas business
mechanism that balances the whole value
chain from the upstream and midstream to
the end-user. There must be a regulator, and
Pertamina is ready to be the national gas
aggregator, but its still a decision for the
government to take.
A $6 margin just to transport gas does
not make sense. There must be a pricing
regulation that ensures upstream players
make a good return on their investment.
Open access to infrastructure would help too.
INGD: How does Pertamina view the future
of IOCs in Indonesia?
SA: The IOCs make good partners for
Pertamina and they certainly complement us
technology-wise. They are still important as
this is a high-risk business. Of course they are
concerned about the expiring PSCs. But I dont
think the government will push them out. We
are not going to neglect their experience.
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