Pertamina

In 1957, Royal Dutch/Shell's assets in Indonesia (trading as Bataafse Petroleum Maatschappij) were nationalised, from which Permina was founded as a state-owned oil monopoly, headed by Lieutenant-General Ibnu Sutowo.[5] Ibnu Sutowo's position as the second deputy of Abdul Haris Nasution was the beginning of the armed forces' involvement in the oil industry.[6] Permina distributed oil for the entire archipelago.

Permina founded the Apprentice Technical School (Sekolah Kader Teknik) in Brandan to train and produce experts in the field. To meet this goal Permina established the Oil Academy in Bandung in 1962. Oil Academy's curriculum pertains to the technical aspects of the oil industry, and the graduates became the main forces of Pertamin (which later transformed to Pertamina).

In 1960, the Provisional People's Consultative Assembly enacted a policy that the mining of Indonesian oil and ground gases are only permitted for the state, through a state-administered company. Pertamin, established in 1961, was responsible for the administration, management and controlling of the exploration and production. The policy was short-lived. An agreement between the state and foreign companies was affirmed that gradually, oil refinery manufactures and other assets in marketing and distribution were to be sold to Indonesia within five to fifteen years.

In 1968, to consolidate the oil and gas industry for its management, exploration, marketing and distribution, Permina and Pertamin merged and became PN. Pertamina. It continued to do little drilling itself but made production-sharing agreements with foreign companies.

After the merge, Pertamina's production rose considerably (about 15% each in 1968 and 1969, and nearly 20% in 1973).[7] By the end of 1973, it directly produced 28.2% of Indonesia's oil, with agreements of Caltex and Stanvac to produce the rest (67.8% and 3.6%, respectively). Its assets included seven refineries, oil terminals, 116 tankers, 102 other vessels and an airline. It was also active in cement, fertiliser, liquid natural gas, steel, hospitals, real estate, a rice estate, and telecommunications.

The 1974 oil price increases produced revenues of $4.2 billion in that year, equivalent to approximately one-sixth of Indonesia's gross domestic product. Much of this revenue was used by Sutowo to expand Pertamina's interests far beyond oil production to include investments in oil tankers, steel and construction.[8] Pertamina built the Bina Graha, the presidential executive office building in Jakarta.[9] The global oil crisis of the 1970s greatly increased oil prices and profits. Pertamina initially provided a fiscal lift to the hopes of Indonesia's development planners.

For President Suharto and other members of the ruling elite revenue from Pertamina was "an ongoing source of funding" without accountability. "They ran this cash-cow into the ground, using it for both military and personal ends."[10] Historian Adrian Vickers describes the endemic corruption at Pertamina:

At each stage of the transaction chain, somebody was getting a percentage... If accidents occurred, as in 1972 when eighty impoverished people died... they could be covered up.[11]

Fokker F.27 Series 200 Friendship of Pertamina used for transport of employees and equipment during the 1970s

In 1973, the government's ability to borrow money from overseas was constrained, and Pertamina was no longer providing revenues to the state. Instead, the massive enterprise turned out not to be making money but compiling exponentially large losses. In February 1975, Pertamina could no longer pay its American and Canadian creditors.[12] An investigation followed, which revealed over US$10 billion in debts, mismanagement, and corruption within the company. This debt was equivalent to approximately thirty per cent of Indonesia's GNP at the time.[13] Others offer a figure of a $15 billion debt.[14] A public investigation hurt the reputation of the national elite both among Indonesians and foreigners. The charges against Ibnu Sutowo were dismissed. Ibnu Sutowo and his family were among the richest and most powerful in Indonesia, into the 21st century.[10] The government took over the operation of the company and sought means by which to repay its debts.[9] Pertamina's debt problems were eventually solved through a large government bail-out, which nearly doubled Indonesia's foreign debt.[13]

Human rights observers have long expressed concerns about Indonesia's hostility to labour unions. According to the Multinational Monitor: "In 1985, the government ordered the firing of over 1,600 workers at Pertamina and foreign oil companies, charging that they had been members of the Indonesian Communist Party, which had been permanently banned 19 years earlier when Suharto took power."[15]

To execute a clause in the 2001 Oil and Natural Gas Act, in 2003 Pertamina legally became PT PERTAMINA (Persero), as per the enactment of Government Regulation No.31/2003. Pertamina is now under the coordinator of the State Minister of State-owned Enterprises.

Like other contractors, Pertamina holds a Cooperation Contract with the Oil and Gas Regulatory Body. With its transformation into a limited company, Pertamina has become a business entity with the main target of making a profit.

Pertamina has not built any new refineries since the Balongan refinery was opened in West Java in the mid-1990s.[24]

PTT Public Company Limited and Pertamina signed into partnership to build a new petrochemical complex in Indonesia for an estimated cost of US $4 to 5 billion.[25]

As of 2013, Pertamina operates six oil refineries which have a total combined capacity of around 1 million barrels (160 thousand cubic metres) of oil per day:[26]

Source: Indonesian Ministry of Energy and Resources, 2012 Handbook of Energy and Economic Statistics of Indonesia.
(Note: By world standards, none of Indonesia's refineries are large. The world's largest refinery, at Jamnagar in India, has a production capacity of over 1,200,000 barrels (190,000 cubic metres) per day. As a rule of thumb, refineries need to produce at least 200,000 bbl (32,000 m³) per day to reach reasonable international standards of efficiency.)[27]

There are several other refineries in Indonesia which Pertamina has responsibilities for:

Source: Indonesian Ministry of Energy and Resources, 2012 Handbook of Energy and Economic Statistics of Indonesia.

In addition to the refineries which Pertamina owns, Pertamina has invested in two operating companies that manage output from LNG plants.

• PT Badak LNG operates a plant in Bontang, East Kalimantan, with 8 trains having a total capacity of 22.5 million tons per annum.
• PT Donggi Senoro LNG in Uso Village, Batui Subdistrict, Banggai Regency, Central Sulawesi Province, with 1 train with a capacity of 2 million tons per annum.[29]

Pertamina also invested in the PT Arun 6 LNG trains near Lhokseumawe, Aceh, which had a total capacity of 12.5 million tons per annum. They closed down due to a lack of feed gas in 2014, and now Arun has used an LNG import terminal.[30]

During 2012 and early 2013, it was announced several times that there were plans to build two more large fuel refineries, each with a capacity of around 300,000 barrels (48,000 cubic metres) per day, perhaps in Balongan, West Java (or, alternatively, in Bontang, East Kalimantan) and in Tuban, East Java. The first facility was planned to be built by Pertamina in partnership with Kuwait Petroleum, while the second was expected to be built by Pertamina in co-operation with Saudi Aramco. Total investment was expected to be around $20 billion.[31] One main problem holding up an agreement to build the refineries was the issue of financial concessions to be provided for the foreign investors.[32] Eventually, in September 2013 it was announced that the plans for the first refinery had been cancelled. At the same time, the government said that there were plans for yet a different refinery project which would be constructed solely by Pertamina and funded by the state. The crude oil for this alternative project was expected to be supplied from Iraq.[33] Pending further progress on these large investment plans, Pertamina has announced (late 2014) plans to upgrade the existing refineries so as to add around 500,000 bbl (79,000 m³) per day to Pertamina's current refining capacity of around 1 million bbl (160 thousand m³) per day.[34]

Pertamina also has two gas reserves and a petrochemical company. Pertamina's products include a great variety of fuels, chemicals, additives, and retail products.

Pertamina is the largest distribution network of petroleum products (gas stations, etc.) in Indonesia.

Along with the gas stations, Pertamina also has a convenience store chain, integrated with their gas stations. The development of Bright convenience stores and cafes is self-governed by PT Pertamina Retail.[35]