The future of the oil and gas industry is in the upstream sector, and we don’t want to be left behind; we have to focus on that sector as well, according to Omar S. Anwar, Pertamina deputy president director.

Omar said that the upstream sector offered higher returns than the downstream sector.

Pertamina’s returns from its downstream operation average between 5% and 10%, while returns from the upstream industry were 50%.

Our downstream operations require a lot more work, especially in infrastructure. But the returns are much lower, Omar said.

To reflect its priorities, Pertamina will assign 60% of its investment plan in 2009 and in the future for projects in the upstream sector.

The company will develop existing oil fields, comprising of an area of 1.2 million hectares, acquisition of oil fields from other operators, development of natural gas, and development of geothermal energy.

Indonesia has the largest geothermal resources in the world, and this is still underdeveloped because of lack of incentives. We believe that when incentives are right, this sector will pick up, and when that happens, we will already be well-positioned, Omar noted.

Pertamina will not do all its upstream development alone. It would look for outside partners to develop its upstream businesses, joint acquisition, joint management and joint bidding on new regions, including overseas oil and gas fields.

However, Omar noted although Pertamina’s future focus would be on the upstream sector, it would carry on to maintain downstream operations and keep a market share at the level of around 60%.

There will be a lot of competition and tighter competition in the downstream sector, and we will continue to maintain our presence as part of our public service obligation, Omar said.

Some major downstream investment projects coming up and offered up for foreign participation, are the development of oil refineries, liquefied petroleum gas (LPG) depots, as well as new gas stations.

Pertamina is planning to build 45 new gas stations in 2009, which is also open for investor participation.

Of the total investment needs, Omar said, Pertamina would seek outside financing of up to 40%, or IDR8.8 trillion in 2009.