Meeting in the DPR, Pertamina’s boss revealed the current condition of the company

Pertamina Refinery Challenges: Low Crack Spread Impacts Profits

PT Pertamina (Persero) is facing significant challenges in its refinery business line due to persistently low crack spreads. Crack spread, the difference between the price of raw materials and refined products, has been substantially depressed, squeezing profits for the national oil company.

“What is more challenging in the refinery business is a global condition were our crack spread is very low. Crack spread is a comparison between product prices compared to raw material prices,” said Deputy director of PT Pertamina (Persero) Wiko Migantoro during a recent hearing with the House of Representatives Commission XII.

Low crack spreads have had a direct impact on Pertamina’s financial performance. “We are depressed this year and in the next few years, this condition will be the same,” Wiko stated, highlighting the bleak outlook for the refinery sector in the coming years.

Despite these challenges, Pertamina remains committed to maximizing the efficiency of its existing refineries. “This will be our focus in the company in fixing our refineries, considering that our refineries inevitably become part of national energy security,” Wiko emphasized.

Pertamina’s current refinery capacity stands at 1 million barrels per day. The company has achieved 100% domestic production of diesel fuel.However, gasoline production, specifically Pertalite CS, remains at only 40%. The anticipated completion of the Balikpapan refinery’s RDMP project will play a crucial role in boosting domestic gasoline production.

The challenges faced by Pertamina’s refineries underscore the need for ongoing investment and technological advancements to ensure energy security and profitability in the global oil market.

To mitigate these challenges, Pertamina is exploring various strategies, including:

• Optimizing refining processes: Implementing innovative technologies and operational efficiency measures to maximize yields and reduce costs.
• Diversifying product portfolios: Expanding the range of refined products to cater to evolving market demands and minimize reliance on single products susceptible to price fluctuations.
• Exploring strategic partnerships: Collaborating with international companies and research institutions to access cutting-edge technologies and expertise.

By proactively addressing these challenges and implementing comprehensive solutions, Pertamina can navigate the dynamic global energy landscape and solidify its position as a reliable provider of essential fuels to Indonesia.

What strategic partnerships could Pertamina form to enhance its refining capabilities and competitiveness?

Expert Insights: Navigating Pertamina’s Refining Challenges and Strategies Ahead

Interviewer: Archie, Archyde News Editor

Alex Reed: Dr. Linda Susanto, Chief Analyst and Senior Petroleum Engineer, energy research firm EnerData Asia

Q: dr. Susanto, thanks for joining us today. Pertamina’s refinery operations are facing notable headwinds due to persistently low crack spreads.How is this affecting the company’s financial performance?

Thank you for having me, Archie. Indeed,low crack spreads are putting substantial pressure on Pertamina’s refining margins. Crack spread, the difference between the price of refined products and raw materials, has been depressed, leading to a decline in profitability. This situation is exacerbated by global conditions where Pertamina’s crack spread remains low, further squeezing their profits.

Q: What does this means for pertamina’s future outlook, especially considering their commitment to maximizing domestic energy security?

The low crack spread scenario casts a shadow on Pertamina’s future outlook. Wiko Migantoro, Deputy Director of PT Pertamina (Persero), has already stated that this condition will continue to depress their performance in the coming years.However,Pertamina remains dedicated to optimizing its refineries,not only to ensure energy security but also to drive operational efficiency and sustain profitability.

Q: Pertamina’s refinery capacity stands at 1 million barrels per day, with 100% domestic diesel production. What opportunities exist to boost gasoline production, specifically Pertalite CS, which is only at 40%?

The completion of the Balikpapan refinery’s RDMP project is anticipated to play a crucial role in boosting domestic gasoline production. Moreover, Pertamina can explore new technology investments to improve refinery crude intake flexibility and conversion rates. This could lead to increased gasoline output and better product yields overall.

Q: What strategies can Pertamina adopt to mitigate these challenges and enhance its competitive position in the global oil market?

Pertamina can consider several proactive measures,such as optimizing refining processes thru innovative technologies and efficiency measures; diversifying product portfolios to cater to evolving market demands; and exploring strategic partnerships with international companies and research institutions to access cutting-edge technologies and expertise. Engaging in profitable crude oil upgrading projects could also be beneficial.

Q: Dr. Susanto, in your expert opinion, what overlooked factors could considerably impact Pertamina’s refining sector in the near future?

One overlooked factor is the potential impacts of the energy transition on Pertamina’s refining operations. As Indonesia strives to meet its emission reduction targets, the demand for cleaner fuels may increase. Pertamina should prepare for these changes by exploring opportunities in renewable energy sources and low-carbon technologies to remain competitive in the evolving energy landscape.

Q: Lastly, what advice do you have for Pertamina in navigating the dynamic global energy landscape and solidifying its position as a reliable provider of essential fuels to Indonesia?

My advice would be to proactively address the current challenges by investing in refinery upgrades and optimization projects. pertamina should also foster collaboration with upstream and downstream sectors to ensure supply adequacy and demand responsiveness. By embracing innovation and positioning itself as a key player in Indonesia’s energy future, Pertamina can strengthen its position in the market and contribute to the country’s energy security.

thank you,Dr. Susanto, for sharing your insights on Pertamina’s refining challenges and strategies. It has been a pleasure having you.

Thank you,archie. It has been my pleasure as well.