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Gas supply for industries remain in limbo

Gas supply for industries this year remains uncertain as the government says that the allocation may slump due to lack of infrastructure and contract expirations with several gas suppliers, an industry association says

Rangga D. Fadillah (The Jakarta Post)
Jakarta
Wed, January 19, 2011

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Gas supply for industries remain in limbo

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as supply for industries this year remains uncertain as the government says that the allocation may slump due to lack of infrastructure and contract expirations with several gas suppliers, an industry association says.

Forum for Natural Gas Using Industries (FIPGB) secretary-general Achmad Widjaya said that as of today, the government and state gas distributor PT Perusahaan Gas Negara (PGN) had not finalized the precise number for gas allocation for industries.

“We’ve requested that the government allocate 1,016 million standard cubic feet per day (mmscfd) of gas for industries, but due to the decline, the government said it could only supply 751 mmscfd,” he told a press conference following a meeting with oil and gas director general Evita Herawati Legowo at the Energy and Mineral Resources Ministry in Jakarta.

The forum was now struggling to secure a minimal allocation of 796 mmscfd to support member-companies’ production activities, Ahmad said, adding that to optimize the industrial sector performance, the government should be able to allocate around 1,500 mmscfd. 

He said that during the meeting Evita told him that the gas supply might decline this year due to the lack of pipelines and terminations of contracts with several producers.

She also warned industries about the possibility of soaring natural gas prices, and asked whether they were ready to absorb the allocated supply at higher prices, Achmad said. “The director general estimated that the gas price might reach US$8.80 [Rp 80,000] per million British thermal unit (mmbtu) next year, up from only $6.3 currently,” said Achmad, who is also the chairman of the Indonesian Ceramic Industry Association. 

Uncertain gas supply for industries has long been a major factor hindering the development of the country’s industrial sector and one reason why many potential investors have canceled investment plans.

Achmad said that heavy gas users such as ceramic, glass and cement producers were forced to reduce their working hours due to the gas supply shortage. If the government failed to ensure sufficient gas allocation for industries, many foreign investors might relocate their factories to other countries, he added.

In answer to industry requests, Evita promised to take all measures necessary to ensure industries received sufficient gas supply, but said the government was not ready to reveal the precise number yet.

She added that currently the main constraint that might impede gas supply for industries was lack of infrastructure due to the limitations of PT PGN’s pipeline network.

Upstream oil and gas regulator BPMigas claimed that the agency had boosted the natural gas allocation for industry from 1,203.18 mmscfd last year to 1,690.43 mmscfd this year. However, FIPGB said that the number included allocations for state electricity utility PT PLN and fertilizer producers, while for industry alone the allocation was only 536 mmscfd in 2010.

Energy and Mineral Resources Minister Darwin Zahedy Saleh had also said that the government would ensure gas supply for PLN and fertilizer producers first before other industries, because electricity and fertilizer were correlated with the country’s energy and food security.

The gas supply shortage for industries contradicts the country’s surging natural gas production.

BPMigas official data shows that since 2007 Indonesia’s gas production has grown consistently. Production reached 7,460 in 2008, increasing from 7,283 mmscfd a year earlier, and then jumped to 7,962 mmscfd in 2009 and 8,888 mmscfd last year.

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