Pertamina to cut employee costs amid low oil price

JAKARTA. The decreasing oil price, which has fallen below US$30 per barrel, has forced Pertamina to become more efficient in its upstream business by reducing employee costs, as some upstream projects cost more than $30 per barrel.

While the oil price has reached $27 per barrel, production costs in the Pertamina West Madura Onshore (WMO) project and Pertamina Offshore North West Java (ONWJ) project were at least at $30 per barrel, Pertamina CEO Dwi Sucipto said.

"Pertamina currently invests $3 billion to $4 billion per year in upstream projects. However, we will not cut investment as it is related to infrastructure. Therefore, we will try to cut employment costs," he said on Wednesday in Jakarta.

The state-owned oil and gas producer was considering whether to cut staff numbers or cut employee spending. "Let's hope Pertamina's staff agree to have their salaries reduced. We need to reassess the policy regarding bonuses, as well as the yearly salary increases," Dwi said.

Moreover, he added, Pertamina planned to conduct a “cross subsidy” from its downstream unit to the upstream one, because the company had successfully cut costs on the downstream side.

Pertamina has changed its trading supply chain from Petral to Integrated Supply Chain (ISC), which led to a $179.4 million efficiency, bought oil in a bigger capacity which saved $90 million, and prevented fraud in its oil shipments by implementing tighter controls, saving around $255 million.

"The normal oil loss during shipments, caused by technical factors such as oil evaporation, is just 0.2 percent. However, Pertamina’s level was so high, at 0.4 percent, that we implemented tight supervision on the ship and then managed to save a significant amount," Dwi said. (Ayomi Amindoni)