After introducing its domestic market obligation (DMO) policy for coal on March 12, the government is going forward with its plan to introduce a DMO for gas in an effort to reduce electricity prices.
Energy and Mineral Resources Ministry Electricity Director General Andy N. Sommeng said in Jakarta on Thursday that the DMO was expected to take effect by the end of this year.
He said that gas was the most efficient option for electricity production in outermost, frontline and disadvantaged regions, most of which are not connected to the main networks of state-owned electricity company PLN.
Andy said the government had considered the impact of the policy on the upstream gas sector.
He said the impact would not be too significant because many gas companies had operated for about 30 years and had by now reached breakeven point.
“[Currently], they only need to spend on the maintenance cost of gas wells and even if they need to conduct field drilling, the cost won’t be that high. Therefore, the electricity price should be lower than the current price,” he said.
He said the ideal gas price for power plants should be US$7 per million British thermal units (mmbtu), while the current prices ranged between $10 and $11 per mmbtu.
Under the DMO policy on coal that has been in effect since March 12, the domestic coal price is set at US$70 per metric ton. Coal-fired power plants (PLTU) contribute about 57 percent to national electricity production. (bbn)