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Jakarta Post

BPH Migas supports slashing levies on PGN to lower gas prices

  • Norman Harsono

    The Jakarta Post

Jakarta   /   Thu, February 13, 2020   /   10:56 am
BPH Migas supports slashing levies on PGN to lower gas prices A state gas distributor PT PGN engineer checks on gas network in one of the company's mobile refueling unit (MRU) in Bandung, West Java, on Dec. 5, 2019. (Antara/Raisan Al Farisi)

A government agency official said on Wednesday that his office was comfortable cutting back levies imposed on Indonesia’s largest gas distributor for the sake of lowering industrial gas prices.

Downstream Oil and Gas Regulatory Agency (BPH Migas) head Fanshrullah Asa said state gas distributor PGN only earned 8.1 percent of the agency’s total non-tax state revenue of Rp 1.32 trillion (US$96.7 million) last year. The agency itself uses less than Rp 200 billion for annual operations and, thus, a levy cut would not affect its operations.

Fanshrullah said BPH Migas “100 percent supports" excluding PGN from paying gas distribution levies but noted that the levy's contribution to overall gas costs was “not significant”.

Such levies comprise around 7.2 percent of the total cost of industrial gas prices, Energy and Mineral Resources Ministry data show. The largest cost component is upstream gas costs, contributing a little over 66 percent, but the government is set to avoid touching this component for fear of creating a disincentive for upstream oil and gas activities.

Read also: PGN to lower gas prices ‘hopefully by April’

PGN requested the gas distribution levy cut on Feb. 3 as a means to lower industrial gas prices. The state-owned enterprise aims to lower prices, which hover at around US$8 per million British thermal unit (mmbtu), to $6 per mmbtu for eight key industries as promised by President Joko “Jokowi” Widodo four years ago.

Read also: Jokowi considers three solutions to lower industrial gas prices

However, as Fanshrullah noted, the levy was not set by BPH Migas but by the Finance Ministry through Government Regulation No. 48/2019 on levies for the distribution of oil and gas, meaning only the ministry could issue the levy cut.