High time we plugged the international gas leak too…

The recent string of fatal gas cylinder explosions in several regions should be taken as a starting point for the government to immediately decide on a pricing policy for domestic gas consumption.

Moreover, if this issue is left unresolved it will cause problems for industries that are the primary consumers of domestic gas.

Once again, the government should be called up to quickly respond and focus on efforts to design a regulation on national gas pricing to end the sharpening polemic on the issue amongst industrial
operators. In other words, the government needs to avoid providing lip service.

It’s time to end the controversy on whether to utilize our national gas production for domestic industry or export it for higher profits.

This polemic will only create friction and negative sentiment among industry operators. Regarding the gas pricing issue, the government has yet to provide a solution to ease investors’ anxiety.

The low gas selling price for domestic consumption has been one reason why the abundant gas production in this country has been snatched up by the international market.

Investors chose to export gas, while domestic gas demand has increased following a declining supply of fossil fuels, such as diesel, for industrial machinery. It’s such an irony!

The House of Representatives is of the opinion that the government should seek a formula for domestic gas pricing that is commercially viable.

So far, the government has faced strong opposition to fulfill domestic gas supply, in a bid to prop up the economic growth — from investors who are intent on the economic principle to get as much profit as possible and from relatively difficult sources, such as marginal and deep-water gas fields, which would only be commercially viable only for export.

At this point, a domestic gas pricing scheme is necessary to avoid a gap in its economic value. The current approach to domestic gas pricing, which is based on basins, should be re-evaluated.

Varied domestic gas prices are seen to widen the economic value gap. We need a standard domestic gas price to be applied at a national level, which is cheaper than our fuel oil price.

“The low gas selling price for domestic consumption has been one reason why the abundant gas production has been snatched up by the international market. ”

Investors would gain huge profits from managing low-production-cost fields. They could still get some profit from marginal fields, but the amount would be smaller.

This would be an incentive for investors to enhance more gas exploration and exploitation. In the end, there would be a new mindset: “If we can profit from the domestic market, why export?”

All would be happy no doubt — the government, investors and domestic industry operators.

At the Indonesian Petroleum Association (IPA) 34th annual conference, in May 2010, Vice President Boediono said there was a changing paradigm on the utilization of oil and gas resources from merely a primary resource for state budget revenue, to a part of sustainable economic growth.

Boediono’s statement should be well-comprehended by the government itself in preparing regulations on domestic gas as well as the industries it needs to be aware of.

However, the changing paradigm as mentioned by Boediono would not be enough without oil and gas independency.

Why is such independency important? It’s time for Indonesia to become a host in its own country. This gas-rich nation must become a fair “king” who brings prosperity to his people.

Oil and gas, which has long served as a pillar of the national economy, should be enjoyed by all people, instead of being enjoyed by foreign gas importers as is happening at present. As a member of parliament, I saw this situation with a torn heart.

And not just changing from a revenue paradigm to one of national economic growth, the government should be able to encourage national oil and gas independency by focusing on popular policies, including domestic gas pricing that is still competitive.

There are three factors that I think would support oil and gas independency. First, gas supply should meet national demand. Second, optimum infrastructure; and third, the establishment of affordable pricing for energy consumption patterns nationwide.

We have to be proud of being a nation rich in gas reserves. But as it stands, this natural resource has not been utilized well because its domestic selling price is considered too low, and investors are not interested in exploration. Indonesia’s poor infrastructure has had a similar effect.

The government should not only see gas as a resource to increase national economic growth, but also encourage the materialization of three factors in an integrated scheme.

The national gas supply needs clear and concrete policies from the government to ensure huge investment, and its technical regulation. Until now this area has been carried out half-heartedly by our government.

It comes as no surprise that Indonesian gas is used to benefit overseas industries. We can track the source of investment funding for mining exploration and exploitation, especially for oil and gas in Indonesia.

Since the beginning of the Indonesian Republic, mining investment has been sustained by foreign funds or donor countries’ loans. Thus, there is an impression the Indonesia has an “obligation” to return gas production to fund owners. Such a scheme must be changed if we wish to be independent in the oil and gas sector.

From now on, the government needs to encourage national banks’ involvement to establish funding for gas projects. Otherwise we could establish a non-banking financial institution that would sustain long-term gas investment.

It would be detrimental to both the government and the public if Indonesia maintained dependency on foreign funding because in the end our gas fields will not be developed further.

The government would also have to wipe off high cost economy that has burden domestic gas consumers and industries.

The most important thing is for the government to encourage national investment in gas terminal development projects, as well as the trans-Java pipeline project (originally proposed to run from Kalimantan to Java) that remain unfinished.

The writer is a member of the House of Representatives’ Commission VII overseeing Energy, the Environment, Research and Technology.