Doing business

with Pertamina

A fresh look at Pertamina

To understand Pertamina today requires insight into the broader context:
a period of unprecedented change in the global oil and gas industry
and the pursuit of a market friendly economic policy in Indonesia.
As largest state owned corporation, Pertamina is the energy
powerhouse of Indonesia, supplying significant oil, gas, petroleum
and other alternative forms of energy for vital needs every day.
To meet new challenges in global energy markets, Pertamina is
responding through a transformation programme from upstream
to downstream operations, and from management to employees as we
pursue a long term vision of becoming recognised as a world class
national oil company.
We have set ourselves regional and world-class goals in our medium
term plan. For today, the purpose of this profile is to examine the sound
progress to date in taking care of business at home.

Who we are

4
Where we operate

10
How we are moving forward

22
Transformation progress

26


Cilacap is our
largest refinery,
producing a wide
range of fuels, non
fuels and paraxylene
products.

Meeting energy needs in emerging markets

Even as multinational oil corporations publish new record levels of earnings
amidst energy price volatility, plans for restructuring, cost reduction,
productivity and efficiency are being announced in a new wave to address
declining production and meet future demand. In its 2007 annual report
the International Energy Agency (IEA) points to the need for significant new
levels of investment, amounting to hundreds of billions of dollars annually,
to stem a decline in oil production over the next two decades.
Most significantly, the IEA indicates that the majority of the increased
demand in the future will come from emerging markets. There has never
been a better time for rejuvenation and growth for Indonesias leading
energy producer.
Pertamina has a new role, new outlook
Progress with economic deregulation has significantly altered the role and
status of Pertamina. We no longer carry the functions of industry regulator
and licensor. Pertamina has become a limited liability company, operating
on an equal footing with private sector competitors in the oil and gas
industry. The new status brings new expectations; of improved financial
and operating performance, and greater transparency and cultural change
necessary to compete successfully in a dynamic open environment. Not
least in todays media driven society, is the need to maintain and build a
solid reputation with public stakeholders and the community at large.

Transformation
To meet these challenges the entire spectrum of Pertaminas operations is
undergoing a thorough transformation: on fundamental values and business
themes applied across upstream directorates and subsidiaries, across
exploration blocks, 160 production fields and a significant downstream
refining, marketing and trading network. Results of this transformation are
already becoming more visible, and a key part of this effort is Pertaminas
commitment to full transparency in reporting our financial and operating
performance, including our social and environmental responsibilities.

160

geothermal
production sites

oil and gas

production fields

140

46

thousand km2
E&P working area

exploration blocks

1,052

refineries

thousand
barrels capacity

1,378
full service gas
stations

Who we are




As a management team we have set a clear vision

and mission: To be a world class national
oil and gas company and To run our core
businesses in oil, gas and biofuels in
an integrated manner, based on strong
commercial principles.




Our bright,
motivated and highly
skilled employees
play a pivotal role
in the journey to
achieve our strategic
goals.

To achieve our vision and mission we have adopted core values and clearly
focused strategy.
Core values

Clean
managed professionally, avoiding
all forms of conflicts of interests,
corruption and emphasizing high
standards of trust and integrity
based on good corporate
governance principles

Confident
an active participant
in national reform and
economic development;
becoming a source of
national pride

Competitive
driving growth through
investment and building a
performance-focused and
cost-conscious culture

Pertamina has a seven point business strategy, to be:

1 Focused on core businesses in oil, gas, and biofuel production and sales
2 Commercially-oriented in all decision making
3 Managed to the highest standards in line with principles followed by
leading public companies
4 Employer of choice, engaged in best practices in human resources
development

Customer focused
committed to giving the
best service, in the best
interests of the customer

Commercial
adding value through a
commercial orientation and
taking decisions based on
healthy business principles

Capable
led by professionals with
high talent and technical
skill levels, and committed
to advanced research and
development

5 Creator of a healthy business environment engaging with professional,

trusted business partners with integrity
6 Investing in growth generated from within and through working with trusted
business partners
7 Driven by technology, research and development goals, shared with
universities and technical institutions as we strive for excellence

Purpose
We aim to become the leading oil and gas producer and supplier in
Indonesia outright, based on reliable and competitive upstream and refinery
operations. We are targeting market leadership from a foundation of a
sound, efficient infrastructure, and a highly visible network offering the best
standards in customer service. Implementing the latest information systems,
technology, health & safety standards, and research & development, we
seek to become the chosen workplace for qualified people. And through
these accomplishments we want to deliver profits that will support a prudent
investment programme to sustain growth and earnings for shareholder value.
Partners
Pertamina has a long history of cooperation and business partnerships
with various domestic and international oil and gas companies. As a
pioneer in the Indonesia Liquified Natural Gas (LNG) business, Pertamina
has formed joint venture companies in the Arun and Bontang LNG plants
with international companies such as Total and ExxonMobil. In technical
engineering services, Pertamina cooperates with engineering companies
such as Mitsubishi Engineering and Nippon Steel. In more recent times,
Pertamina has also conducted upstream exploration in partnership with Statoil
and Petronas. In refining, Pertamina has partnered with SK Corporation from
Korea to build and operate a new Lube Base Oil (LBO) plant in Dumai,
which was launched in 2008.
People
The efforts of our employees, at every level, contribute daily to the
transformation of the company and the achievement of our strategic goals.
We are investing more than ever before in cultivating young talent, our future
leaders, with the task of steering Pertamina through the challenges ahead.
A vital element in the transformation is a change in our culture, not imposed
but developed through listening as well as informing, testing ideas and
promoting an open environment in which employees are encouraged to
speak up and share views. Pertamina is an equal opportunities employer,
rewarding based upon merit and capability without discrimination on
any grounds. Over 1,700 managers have completed culture change
training modules and 2,000 managers now work to a merit-based
performance review. Since these programmes commenced, 110 champions
of transformation have emerged, new leaders to challenge, motivate,
innovate and add value key principles we seek to imbue throughout the
organization.

Where we operate

10
10

11
11

Strategic upstream oil and gas exploration and production

To achieve our vision, Pertaminas management is firmly focused on
expanding upstream oil and gas exploration and production in order to
raise profitability and earnings and in turn, capital expenditures for yet
greater production growth.
Emphasis on greater scale and diversity will contribute to cultivating
upstream expertise and the skills necessary for maintaining our momentum.
As we achieve more success upstream and value at home, we will
increasingly pursue further development of our overseas assets, thus raising
our profile in international oil and gas markets.

12

13

Lahendong
geothermal energy
operation.

Hot steam from

Lahendong supplies
PLN to generate
electricity of
10MW/year: serving
the energy needs of
North Sulawesi.

14

Geothermal energy: harnessing the Ring of Fire

Worldwide demand for thermal energy is estimated to triple over the next
decade. Pertamina is capitalising upon Indonesias unique geographical position
between the Eurasian and Indo-Australian tectonic plates. Our active volcanic
environment offers enormous potential as a source of sustainable, alternative,
clean energy. Pertaminas geothermal power plants work continuously day
and night, not only reducing our reliance on fossil fuels but providing a highly
attractive alternative to costly solar and wind energy.
Our subsidiary, PT Pertamina Geothermal Energy has identified 70 sites with high
temperature geothermal potential which can be used for generating electricity.

Area

Geothermal Potential - MWe

(Mega Watt equivalent)

Geothermal Production - MWe (location)

Sumatera

9,500

12 (Sibayak)

Java & Bali

5,600

825 (Kamojang, G. Salak, Darajat, Wayang Windu, Dieng)

Sulawesi

1,500

60 (Lahendong)

Others

3,100

Under development

Total

19,700

897

15

Upstream and Downstream Operations

Vietnam

Pacific Ocean

Malaysia

Indonesia

Indian Ocean
Oil & Gas
7 own operated areas
38 TACs
11 JOB-PSCs
3 JOB-EORs
12 IP/PPI

Iraq
Libya

Qatar

Geothermal
5 production sites
5 development sites
Refineries
6 locations
Retail full service gas stations
Over 4,000 locations
(not individually shown)
Legend

Sudan

Oil & Gas Producing Area

Oil & Gas Prospect / Lead Area

Geothermal Producing Area
Geothermal Developing Area
Refineries

16

Towards sustainability with biofuel

Pertamina supports the vision of the President of the Republic of Indonesia
for the creation of a world class, world scale biofuel production capability.
We are assisting Indonesia to reduce its dependence on imported oil,
creating a sustainable source of green fuel, new jobs, and regional domestic
economic development, and are contributing to the reduction of pollution
and greenhouse gas emissions, particularly CO2 from the use of fossil fuels.
While investing in oil and gas exploration will increasingly become
more costly, Pertamina can contribute to the development of palm oil,
a vast sustainable resource, currently available in sufficient quantities to
meet domestic cooking oil needs and the substitutions of 5% diesel as a
biofuel. This level of substitution may be extended to 10% upon further
evaluation, while trials continue to substitute 3% kerosene. By 2010, a full
range of biofuels is planned to be available at gas stations nationwide.
Notwithstanding short term fluctuations in CPO commodity prices (alongside
oil price volatility) that make final product pricing a challenge, Indonesias
strong fundamentals of an attractive climate, world leadership in palm
oil production and significant demand for transportation fuel make this a
compelling opportunity.

17

PASTI PAS! is our quality

and service guarantee that
Pertamina is committed
to world class standards.
Consumers can trust the
quality of our friendly
service and comfortable
facilities.

18

19

Pertaminas retail
franchise: A high
visibility 24-hour
service and a full
product range.

20

Pertamina today is a modern full service retail franchise

One of the strongest visible demonstrations of change at Pertamina is our
response to the deregulation of downstream distribution and retail of oil
and gas products. We have refreshed the look and functionality of our
gas stations, which are now truly service oriented, adding amenities and
new retail facilities for the motoring public. Over 4,000 sites, many of
them in entirely new locations, have sprung up in cities and suburbs, along
major trunk roads and multilane toll routes. They offer 24-hour service, a
comprehensive range of fuels including biofuels and lubricants, plus retail
and service offerings from strategic partners specializing in the stocking and
installation of automotive spares at selected sites.

Clean, convenient domestic fuel

The demand for natural gas is outstripping that of oil as more consumers
recognize gas as a clean and cost effective source of energy for cooking at
home. Pertamina has supported the Governments programme to encourage
switching from kerosene, offering subsidies to ensure the benefits of gas are
accessible and affordable.

Above:
Clean affordable
natural gas a
modern amenity.

21

How we are moving forward

22
22

Progress has been made with measurable results

in business performance. Successes are evident
in increasing production volumes, additional
revenues, quality improvements and significant
cost savings. Equally, the process of culture
change has contributed to ensuring everyone
at Pertamina is aligned and supportive of the
transformation process; that we all know where
we are going, why, and how we will get there.

23
23

2003

8,378

219

8,337

1,322

295

2007

2005

1,701

760

2,475

2004

263

327

538

2006

Proven
Probable
Possible

Proven
Probable
Possible

14,370

9,970

7,000

3,431

7,000

19,000

Gas Reserves
(BCF)

2005

19,654

2004

9,199

2003

1,473

565

540

172

304

600

883

1,070

1,361

1,500
910

Oil &
Condensate
Reserves
(MMSTB)

2006

2007

2003

2004

2005

4,140

2,460

3,830

2,080
580

2,620

3,030
750

3,480

2,354
585

430

2,201

2,812

9,100

Geothermal
Reserves
(MW)

2006

Proven
Probable
Possible

2007

Business
Upstream, against the general global trend of declining output, Pertaminas
production has been increased to over 150mbopd which represents
greater than 10% increase over production a year ago. Our operational
performance improvement programme at refineries, now in its second
year of a three-year plan, has already generated significant cost savings
amounting to over Rp 400 billion with a further Rp 2.5 trillion in savings
identified. Improvement in key performance ratios in a number of refineries is
raising output and quality.

24

Downstream, we have surrounded customers with an entirely different

automotive retail and service experience at our new Pasti Pas gas stations.
We have shaved distribution costs by 7% and achieved efficiencies in
shipping and reduced laytime at ports. The highly visible LPG conversion
programme to encourage consumers to use clean, affordable natural gas
liquids instead of kerosene has generated savings of Rp 9 trillion and
reached out to more than 17.5 million households and industries.
Culture
Oil price volatility, declining production, higher operating costs, and
shortages of skills and equipment from time to time, mark the increasingly
competitive environment of the oil and gas sector worldwide. Indonesia has
been not been untouched by these issues.
A number of performance improvements have already been completed
across the corporations directorates with encouraging results. While specific
improvement programmes are valuable, the Board of Directors has identified
the need for a long term, sustainable approach to enhance performance
in an open deregulated environment. The aim: to build a culture that can
adapt and thrive under the increasingly challenging conditions in the
industry, a culture that will attract the best recruits and strategic partners.
Action themes have been the basis for driving culture change so far.
They cover the need to develop openness, transparency, accountability and
merit-based rewards to encourage world-class performance. They address
the need to develop future leaders who will sustain and build upon the
achievements so far, in the process of transformation.

Control room
modern IT
systems ensure both
reliability and safe
operations.

25

Transformation progress

26
26

Transformation is an opportunity for building

partnerships with Pertamina in generating sound and
lasting business opportunities, furthering development
and contributing through self help as well as community
support.

27
27

Right: The utilisation

of geothermal
energy (brine water)
in Lahendong for
Masarang palm
sugar factory earned
us the Padma Award
for CSR programmes
from the Minister of
Energy and Mineral
Resources.

Pertamina works closely with the Indonesian government to contribute to

local economic development, community welfare including educational
needs and in the maintenance of safety and health standards in and around
our production facilities. Our approach is to look beyond community support
to identify opportunities that will cultivate business, sustain jobs and promote
commerce.
Our partnership programmes help contribute capital to fund small business
enterprises. Recycled by-products from our operations can be used
creatively to contribute to local manufacturing such as using brine from our
geothermal operations in Sulawesi to manufacture palm sugar.
Pertamina is making sound progress on a broad front and is already
reaping rewards. Considerable challenges lie ahead but we encourage you
to do business with Pertamina today:
As a reliable partner, welcoming strategic business relationships.
As an organization, committed to being open, transparent and focused
upon professional and ethical standards.
As a company transforming itself to adopt the convensions and
disciplines of public ownership as the next step towards its medium term
goals.

28

29

Head Office
Jl. Medan Merdeka Timur No. 1A
Jakarta 10110, Indonesia

www.pertamina.com
M

30

Tel: +62 21 500 000

Fax: +62 21 797 2177
Mobile: +62 21 7917 3000, sms: +62 21 7111 3000
E-mail: pcc@pertamina.com