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Gas agency awaits clarity on Pertamina-PGN cooperation

The move to set up an agency in charge of supply and distribution of gas in the country is pending clarification about coordination between Pertamina and PT Perusahaan Gas Negara (PGN) on pipeline network management, an official says

Raras Cahyafitri (The Jakarta Post)
Jakarta
Thu, November 26, 2015

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Gas agency awaits clarity on Pertamina-PGN cooperation

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he move to set up an agency in charge of supply and distribution of gas in the country is pending clarification about coordination between Pertamina and PT Perusahaan Gas Negara (PGN) on pipeline network management, an official says.

'€œWe will continue improving the plan while awaiting clarity on the planned cooperation between Pertamina and PGN. We now have three options for the buffer agency,'€ said Energy and Mineral Resources Ministry legal division head Susyanto.

In a bid to improve the gas distribution system in the country, the government plans to set up a special agency to better coordinate the supply and distribution of gas.

The agency will also remove supply uncertainties caused by the competition among existing gas providers and distributors. The government is now drafting a presidential regulation on the agency, which has been described as an aggregator.

The aggregator will coordinate all gas supply from various gas fields that have different prices, mix the gas and sell it under a price formula set by the government before selling it to customers.

Several options have been on the table regarding the structure of the agency, including a single national aggregator '€” which could be Pertamina, PGN or a new firm '€” and aggregators based on clusters, with PGN and Pertamina aggregators for specific areas.

'€œIn the case were Pertamina and PGN were merged, it would be easier for us to decide because we would only have a single national aggregator,'€ oil and gas director general IGN Wiratmaja Puja said.

Pertamina and PGN have been increasingly competing against each other over the last few years, particularly after the government said it planned to merge the two companies.

Earlier this week, State-Owned Enterprise Minister Rini Soemarno reportedly planned to create a holding company in the oil and gas sector. A similar plan was suggested by the previous administration although it did not come to fruition.

As a gas distributor, PGN currently has around 6,000 kilometers of gas transmission and distribution pipelines, which help the company deliver gas to its domestic buyers, including power plants, industry, commercial businesses, households and gas stations.

Meanwhile, Pertamina '€” which mostly operates in the upstream oil and gas sector, also has a gas distribution business through its subsidiary Pertagas. The subsidiary has a wide gas distribution and transmission network and is continuously expanding its infrastructure to tap the growing market.

Pertagas benefits from its status as a subsidiary of Pertamina as the parent firm'€™s ownership of a number of domestic gas fields means greater supply certainty.

On the other hand, PGN has become more aggressive in grabbing a share of the upstream business because it also wants to secure supply for its distribution activities. Through its subsidiary, PGN LNG the company has moved to acquire gas fields.

Pertamina president director Dwi Soetjipto said that his company was currently working with PGN to jointly operate their pipelines.

'€œFor the future, we will also jointly plan our development projects so that there will be no more overlapping projects,'€ Dwi said, adding that the plan would be realized as early as January next year.

The government has called on Pertamina and PGN not to compete with each other but rather build a synergy so that the country can accelerate development of infrastructure and boost domestic utilization of gas.

Indonesia is known for having significant gas reserves. However, poor infrastructure has hampered absorption by local buyers.

The poor infrastructure has also created high costs for the economy. Recently, industries in North Sumatra that use gas in their business called on the government to step in to reduce the price of gas sold in the province. As a result of depleted gas fields in Aceh, North Sumatra is currently receiving gas from other parts of the country.

On Wednesday, Pertagas and PGN agreed to reduce the gas price for North Sumatra to US$12.22 per million British thermal units (mmbtu) from $13.86 per mmbtu.

'€œThe reduction in the gas price that will be in place starting on Dec. 10, will ease industry players'€™ burden. However, it doesn'€™t mean that we are happy with the decision because the new price is still too far from our expectation,'€ said Johan Brien, the head of gas user association Apigas.
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Apriadi Gunawan contributed to this reporting

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