M

anufacturing companies in North Sumatra have had to close operations after soaring gas prices forced them to lay off some 20,000 employees.

The number of layoffs will potentially rise as prices increase wildly due to a continuous shortage in supply.

Johan Brien, chairman of the association of gas-consuming companies (Apigas), said conditions in North Sumatra were worrying.

'€œAt least 20,000 people have lost their jobs due to the closures of companies,'€ Johan said Sunday.

The companies that have ceased operations include PT Glovindo, PT WRP, PT Flora Sawit, PT Cakra Compact, PT Abdi Raya Bakti and PT Ecogreen Oleochemical.

A former employee with PT Ecogreen Oleochemical, Nelson Manalu, said his employer had laid off a total of 200 people. '€œThe prolonged gas crisis has made us lose our jobs as the companies have had to close operations,'€ said Nelson.

Johan added that the number of layoffs would likely increase as several other companies that switched to alternative fuels have come to realize that these alternative sources are more expensive. Some others, including PT Kedaung, PT Gunung Gahapi, PT Growth Sumatera, PT Intan Mas Indo Logam and PT Intan Swarkatika, have reduced their production capacity by more than 50 percent from normal conditions.

'€œIt'€™s possible that this crisis will continue into the near future, causing an increase in the number of unemployed,'€ Johan said.

He said the gas crisis began when gas stocks for industrial use decreased from 29.54 million standard cubic feet per day (mmscfd) to only 5 mmscfd by July 31 of this year. The declining gas reserves caused the price to double, pricing out many operators in the industry.

Johan said the gas price in the area soared to US$14 per million British thermal unit (mmbtu), the most expensive compared to prices in other regions in the country.

Java and Batam in Riau Islands, by way of comparison, sell the gas at prices of $9 per mmbtu and $6 per mmbtu, respectively.

State gas company PT Perusahaan Gas Negara (PGN), meanwhile, has given its own version of the story, saying that the company'€™s selling price was high because it bought the gas from Pertamina at a high price.

'€œWe bought from Pertamina US$13.8 per mmbtu and sold it to the industry in Medan at $14 per mmbtu,'€ PGN corporate communication head Irwan Andri Atmanto said on Tuesday.

Irwan said soaring gas prices were because of depleted gas fields, which supplied gas to PGN.

Gas shortages in North Sumatra have been a common occurrence since 2000 but there is as yet no discernible solution despite manifold promises from the government.

In 2001, PGN promised to build a pipeline to channel gas from Duri-Dumai in Riau to Medan. However, the company did not receive a construction permit from the central government.

In 2010, PGN lost its tender to gas trader PT Pertiwi Nusantara Resources, forcing the company to buy gas at a higher price until 2013, when their contract was terminated.

In 2012, the Floating Storage Regasification Unit (FRSU), which was built by PGN for use in Belawan, was moved to Lampung by then State Enterprises Minister Dahlan Iskan, who promised to start pumping the gas from Arun (Aceh) to Belawan by October 2013. Until now, however, it has not happened.

According to Johan, Pertamina'€™s failure to channel gas from the Arun to Belawan was allegedly because of speculation by traders. The government should therefore, in Johan'€™s estimation, penalize Pertamina.

Johan added that Apigas, along with other business associations such as the Indonesian Employers Association (Apindo) and the Indonesian Chamber of Commerce and Industry (Kadin), had written a letter to President Joko '€œJokowi'€ Widodo, asking for a solution. They have yet to receive a reply.

Meanwhile, acting North Sumatra governor T. Erry Nuradi acknowledged that gas supply in the province currently could not fulfill industry demand and that the gas price in the province at $14 per mmbtu was twice the average gas price in other areas in the country. (rbk)
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