PLN plans hefty savings with gas use

Alfian , The Jakarta Post , Jakarta | Tue, 09/16/2008 10:25 AM | Business

State power firm PT Perusahaan Listrik Negara (PLN) plans to convert its oil-based fuel consumption to gas at two of its major power plants next year in a bid to reduce costs by more than Rp 5 trillion (US$531 million).

PLN president Director Fahmi Mochtar said the company would boost gas use at its Muara Tawar and Tanjung Priok power plants by about 65,701 BBtu (billion British thermal units) in 2009.

"This is the company's effort to reduce costs. The gas will be used to reduce oil-based fuel at these two power plants so that PLN can benefit from the cheaper gas price," Fahmi said.

PLN will reduce oil-based fuel consumption by 955,993 kiloliters at the two plants, reducing the 2009 actual electricity subsidy by Rp 5.33 trillion to Rp 59.13 trillion from Rp 64.46 trillion, he added.

PLN is suffering from a deficit of Rp 5.48 trillion acquired during 2007 and 2008.

The central government has been subsidizing the company to keep the price of electricity in the domestic market below that of international competitors.

PLN will propose a 2009 subsidy of Rp 60.43 trillion, Fahmi said.

"We can use the funds to achieve a higher electricity penetration to keep up with economic growth," he added.

"The subsidy, combined with the aggressive gas conversion program, could boost electricity sales by 6.99 percent."

Without the conversion program, growth will be closer to 5.63 percent, Fahmi said.

The electricity company has signed contracts with state-controlled gas utility company PT Perusahaan Gas Negara (PGN) to secure 50 million standard cubic feet per day (mmscfd) of gas for the Muara Tawar plant at a price of $4.5 per MMbtu, with 150 mmscfd of gas reserved for the Tanjung Priok plant at $5.6 per MMbtu.

The government and the House of Representatives' budget committee are in discussions regarding the electricity subsidy to be included in the 2009 state budget.