The new arrangement is outlined in Decree No. 4/2018 on downstream gas business, passed on Jan. 25, but only made public on Thursday. The regulation replaced Decree No. 19/2009 on gas pipe business.

The ministry’s secretary general Ego Syahrial said the decree was expected to improve the domestic gas distribution chain and benefit industrial users.

“By issuing this new decree, we expect to create efficiency in the management of downstream gas infrastructure and eventually reduce industrial gas prices,” he told The Jakarta Post on Friday.

Under Decree No. 19/2009, gas traders are obliged to transport gas through open access pipelines in certain distribution network areas (WJD).

However, if such open access pipelines do not exist in the areas, whether because of technical or economical issues, investors are permitted to construct downstream dedicated pipelines. They may transport their own gas using these pipelines after submitting their sales and purchase agreements with their suppliers and customers to the Energy and Mineral Resources Ministry.

Furthermore, gas distributors must use their own infrastructure in their operations and cannot trade gas with those facilities.

In a change to the previous decree, Decree No. 4/2018 introduces a bundling scheme that, among other things, obliges gas transporters to have a gas trade permit as well before delivering gas on their own infrastructure. They can also construct new pipelines to expand their existing facilities.

The new decree also annuls the previous dedicated pipeline mechanism, while requiring gas firms to obtain both transportation and trade permits before running their businesses.

Consequently, these gas firms will be granted exclusivity in certain gas trading areas (WNT) and WJDs for 30 years. In return, those gas firms must develop
new distribution pipelines in their operating areas under the supervision of the Downstream Oil and Gas Regulatory Agency (BPH Migas).

Within a year and a half after the enactment of the new decree, the Energy and Mineral Resources Minister will determine the WJDs that will be included in the National Gas Distribution and Transmission Networks Master Plan (RIJTDGBN).

During the same period, BPH Migas will auction the right to operate all existing gas pipelines in WJDs across the country, which will enable winners to secure 15-year exclusivity rights.

“With this exclusivity right, we will be able to develop the infrastructure and markets in certain areas without having to worry about the presence of any new competitors in the process,” said Adi Munandir, the marketing and product development head at state-owned gas company PT Perusahaan Gas Negara (PGN).

He added that the decree also permitted big players such as PGN to team up with existing smaller players in their WJDs and engage the latter in the gas trading business there. Meanwhile, the new decree also stipulates that gas traders can sell and transport compressed natural gas (CNG) and liquefied natural gas (LNG) in their operating areas as long as they possess supporting infrastructure.

Indonesian Natural Gas Trader Association (INGTA) chairman Sabrun Jamil Amperawan welcomed the issuance of the new decree as that would provide certainty for all gas players in the country.

“Investors of gas pipeline projects often have to wait for more than 15 years before they can reach a break-even point. So, the 30-year exclusivity right gives certainty for gas players,” he said.

However, Sabrun underlined that the benefit of the new decree by way of gas price reduction would only be felt more than 10 years after all rules were effectively implemented.

Popular

Decline in Indonesia’s press freedom alarming

Govt suspends Sam Altman’s biometric identity project over legal concerns

Jakartans rush to join ‘orange troops’ amid job scarcity