Petrohina Case Study

Demand conditions: a national demand for fuel supply is around a million barrel per day. Indonesia needs to imported 300.000 to 400.000 barrels per day. Indonesia has inadequate infrastructure, technology, and human resources to do their own operations in order to acquire oil and gas. The one and only local oil and gas company, owned by state. By the withdrawal of Indonesia membership from OPEC. This decision can bring advantages for foreign oil and gas Company that operating in Indonesia, due to several reason. First, Indonesia no longer bound by the OPEC quota system so that this condition may be used contractors to boost production of crude oil as much as possible. This is evidence from the recent rise in oil exploration and production in
The company not only distributing their product in local market, meanwhile there plenty of competitors all over the world, such as Devon, Chevron, Total, and many more. Each of these companies are trying to fulfill world’s demand of oil and gas. It is limited resources, especially local resources are not able to fulfill production quota that has been set-up the company. As the result, the company is trying to find another oil and gas resources from other countries. In most cases, the company will build a joint venture company in the country with low cost of production to reduce the total cost. PetroChina usually build a partnership with state-owned company in destination country. For example, in Indonesia, PetroChina make business agreement with BP Migas, which representing Indonesia government to dealing with oil and gas business. The agreement is consisted with Product Sharing Contract (PSC) and Joint Operation Body (JOB). It gives the company two advantages. First, PetroChina is able to look for new oil and gas sources. Second, the company is able to reduce its production cost. Moreover, to guarantee that the company will acquire maximum result, a number of policies are implemented. For instance, the essential ability and skills that owned by the company will be transferred to its partner. Hiring local employees brings more advantages, such they might accepting lower
PetroChina is making the partnership agreement with BP Migas and Pertamina EP. The agreement is consisted with PSC and JOB. In PSC, PetroChina has right to work on exploration area that the ability to produce oil still unproven. However, if the area is able to produce oil, it will be continue to processing stage. In this agreement, PetroChina is acquire 15% of profit and the government 85%. PetroChina was establishing the new sub-companies PetroChina International Jabung and PetroChina Salawati Company, to support the operation in the exploration areas. Both companies, is under control of PetroChina International, and Chinese government as stakeholder. The companies are focused on upstream activity, and distribution activities to destination export countries.
Meanwhile, JOB is similar with PSC. However, BP Migas and Pertamina EP become its interest holder for 50%, and Pertamina has a role as operator. On the oil and gas field, the employees are taken from both parties. However, 98% are local hires, from 3,400