Pertamina

Pertamina established a target to reduce its absolute scope 1 and 2 emissions by 4% by 2030 compared to 2020. This target is insufficient to align with the company’s 1.5°C pathway. This is part of a longer-term ambition to reduce scope 1 and 2 emissions by 30% by 2030 compared to 2010, 26% of which the company reports it has already achieved. Pertamina would need an annual reduction of about 8% in scope 1 and 2 emissions intensity to align with its 1.5°C pathway. The company should also establish a scope 1, 2 and 3 emissions reduction target that covers the entire lifecycle emissions of the energy it sells. Scope 3 emissions account for the vast majority of the overall emissions impact of oil and gas companies. However, Pertamina does not yet disclose its scope 3 emissions.

Unlike many other companies assessed in this benchmark, Pertamina has disclosed its planned expenditure on low-carbon projects. The company will be dedicating 9% of its capital expenditure (CapEx) between 2020 and 2024 to low-carbon projects. However, Pertamina needs to increase this share significantly if it is to meet the sectoral expectation for oil and gas companies to dedicate 77% of CapEx to low-carbon and mitigation technologies for alignment with a 1.5°C scenario.

Pertamina’s scope 1, 2 and 3 emissions intensity showed a marginal decreasing trend between 2014 and 2019. If this same trend is continued, Pertamina will see no significant change in its emissions intensity, in contrast to the company’s 1.5°C pathway that requires an annual reduction of around 4%. The company’s absolute scope 1, 2 and 3 emissions were also about 23% higher in 2019 than in 2014, due to the company’s overall production and sales of oil and gas increasing.

Pertamina has started implementing management practices to steer its business towards a low-carbon transition, but there are a number of areas it could improve in. The company has board-level oversight of climate change, but there is no public evidence that the company’s executive renumeration is linked to emissions reduction, nor of a decoupling between renumeration and growth in fossil fuel production volumes.

Pertamina has completed a climate scenario analysis informed by the scenarios that are outlined by the International Energy Agency (IEA), BP and Total. However, the company should focus more on testing the resilience of its business to a 1.5°C pathway. The company can also drive emissions reduction by introducing an internal carbon price, using the carbon prices in IEA’s ‘Net Zero by 2050’ road map as a guide.

Pertamina does not have clear processes in place to monitor suppliers’ emissions and was not found to have partnerships with suppliers to drive greenhouse gas emissions reductions. This is particularly important as Pertamina uses palm oil to deliver B30, a biodiesel blend with a 30% bio content. The oil and gas company Eni withdrew from a joint venture with Pertamina to develop a biodiesel refinery, due to concerns that the palm oil could not be internationally certified. Pertamina should establish robust monitoring of its suppliers to ensure its biodiesel blend is not linked to deforestation, or the company could face reputational risks.

Pertamina has set out plans for expanding its renewable power business and nascent battery business. As of 2019, the company had 672 megawatts (MW) of installed geothermal power capacity and a deployment schedule for a further 440 MW to be installed by 2027.

The company is also seeking to diversify into other renewable power sources, such as solar and wind power, bioenergy and hydro power, with a target of 3.4 gigawatts (GW) by 2026. It expects to invest USD 2 billion in geothermal power and USD 2 billion in other renewables to achieve these goals. Collaborating with other state-owned enterprises, Pertamina is also developing the battery industry in Indonesia, with the goal of reaching 1,300 million megawatt-hours (MWh) of production capacity by 2026.

Pertamina is targeting a 4% reduction in its absolute scope 1 and 2 emissions between 2020 and 2030. The company is also aiming to increase its power production to 10 GW by 2026, through the addition of gas power plants with a capacity of 5.7 GW and renewable energy capacity of 3.8 GW.

Pertamina will be investing 9% of its CapEx between 2020 and 2024 in low-carbon projects. The company has a deployment schedule to increase its geothermal capacity from 672 MW in 2019 to 1,112 MW by 2027. It is also upgrading its refineries to be able to produce less harmful Euro 4 and Euro 5 fuels.

Pertamina’s main low-carbon business Pertamina Geothermal Energy made a net profit of USD 95.6 million in 2019. Its product portfolio comprised approximately 58% oil, 41% gas and only 0.1% renewable electricity sales in 2019.

Pertamina’s emissions intensity, both scope 1 and 2, and scope 1, 2 and 3, remained flat between 2014 and 2019. The company’s total absolute scope 1, 2 and 3 emissions were about 23% higher in 2019 than in 2014 due to increasing overall oil and gas production and sales.

Pertamina’s level of ambition for emissions reduction is inadequate and the company lacks a target that covers scope 3 emissions. Although the company is exploring low-carbon business activities, it is not investing sufficient CapEx to scale these up at the rate required by a 1.5°C scenario.