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Jakarta Post

PGN opens options for imports to lower gas prices

  • Norman Harsono
    Norman Harsono

    The Jakarta Post

Jakarta   /   Wed, January 22, 2020   /   12:45 pm
PGN opens options for imports to lower gas prices PGN president director Gigih Prakoso (seated third left) at a press conference in Jakarta on Tuesday. (JP/Norman Harsono)

Indonesia’s largest gas distributor is keeping its options open to import cheaper gas to bring down prices and create a more supportive business environment for top-consuming industries as mandated by President Joko “Jokowi” Widodo.

State gas distributor PGN president director Gigih Prakoso said the publicly listed company was keeping an open mind about importing gas for specific industrial sectors. Seven industrial sectors consume 80 percent of Indonesia’s gas supply, namely rubber gloves, ceramics, glass, steel, fertilizer, petrochemicals and oleochemicals.

“This is an option to balance [high domestic gas prices] if a more competitive price is needed from LNG sources in the future,” Gigih told a press briefing on Tuesday.

High domestic gas prices have been blamed for hampering business expansion for industries as Indonesia’s economic growth stagnates. Jokowi in 2016 issued Presidential Regulation No. 40/2016 to bring down gas prices to US$6 per million British thermal unit (mmbtu) but today they remain at $8 per mmbtu. As a comparison, Brunei is selling LNG at around $4.4 per mmbtu as gas prices are tumbling globally, according to Reuters.

In response, Jokowi announced earlier this month three possible solutions to reduce prices that were either a domestic market obligation (DMO), fiscal incentive or import relaxation.

“Our hope is that this can be achieved through a DMO with a special price,” said Gigih.

The government implements such a ‘special price’ DMO for coal that requires miners to sell 25 percent of their product domestically at $70 per ton.

PGN has estimated that the company would need to supply 320 million standard cubic feet of gas per day (mmscfd) for the seven industries to bring down prices. The figure represents one-third the production rate of last year’s most productive gas company, BP Berau, which yielded 1,034 mmscf of gas per day in 2019.

“We really need a special allocation to fulfill domestic gas needs, particularly in the industry sector,” Gigih added.