Deputy Energy and Mineral Resources Minister Arcandra Tahar said the ministry, as of Friday, had resolved 12 cases of multilayered gas trading based on the ministerial regulation, which stipulates that “only firms with pipe infrastructure are allowed to obtain gas allocation”.

Currently, the firms involved in the cases are in the process of reallocating their gas to those who have infrastructure under a business-to-business scheme. The process is targeted to be completed in June next year.

“All of them [12 cases] have been solved and are set to divert their gas allocation to those who have [pipe] infrastructure, just as the regulation stipulates,” he said in Jakarta recently, adding that the cases occurred in Java and Sumatra, but declining to mention further details.

The regulation is Energy and Mineral Resources Ministerial Regulation No. 6/2016, which was issued by former minister Sudirman Said on the provisions and procedures to determine the allocation, utilization and price of natural gas.

Article 33 of the regulation stipulates that business entities that obtain natural gas allocations must possess or control the infrastructure of the distribution and/or the utilization facilities.

Previously, gas traders that did not own pipe infrastructure could obtain an allocation of gas, which then caused higher gas prices as a result of multilayered trading in just one gas pipeline. The traders range from private firms to local administrations.

“We don’t set any requirements for how long or big the infrastructure they build is. […] If they build gas infrastructure, they will get a gas allocation,” Arcandra said.

Arcandra may have hinted that the government is not prohibiting more than one company supplying gas in one pipeline, but rather emphasizing infrastructure building to improve gas distribution.

Komaidi Notonegoro, executive director of Jakarta-based energy think-tank ReforMiner Institute, concurred with the government that the policies could lower gas prices, but he pointed out the importance of a follow up measure to maintain the achievement.

“The government should oversee that gas prices at the end-user remain in accordance with the existing regulation,” he told The Jakarta Post on Monday.

President Joko “Jokowi” Widodo has ordered the Energy and Mineral Resources Ministry to cut gas prices in seven industries, namely petrochemical, fertilizer, steel, oleochemical, glass, ceramics and rubber gloves, to below US$6 per million British thermal units (mmbtu) in order to create multiplier effects in the industrial sector. However, some industries, such as ceramics, have said that the price is even as much as $9 per mmbtu, higher compared to Indonesia’s neighbors.

Aside from expecting the policy to reduce gas prices, Arcandra said the ministry would start implementing another ministerial regulation in June next year that would control gas prices nationwide, called the “7-11” policy.

The policy refers to Energy and Mineral Resources Ministerial Regulation No. 58/2017, which limits the selling cost of gas traders at a maximum of 7 percent and sets a cap on the internal rate of return (IRR) for gas infrastructure projects, including transmission and distribution pipelines, at 11 percent.

“It [lower gas price] can be realized as we have cut the gas business chain and we are in the process of implementing the 7-11 policy,” Arcandra said.

The regulation, which was enacted in December last year, also stipulates that the selling price of gas in the downstream sector, specifically for power generation and industries, should take into account the cost of infrastructure management and trading.

By implementing the “7-11” policy, the government hopes it can at least prevent surging fees triggered by a larger return sought by businesspeople in the midstream sector.

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