PGN said the company hopes the Upstream Oil and Gas Special Regulatory Task Force (SKK Migas) could soon provide clarity on the liquified natural gas (LNG) supply it could get from Tangguh Train 3 to compensate an expected decline in gas supply.

PGN president director Arief Setiawan Handoko said on Wednesday he was worried because gas supplies from Corridor Block to the company have recently declined by 23 percent to 400 billion British thermal units per day (bbtud) from the usual 520 bbutd.

“Even though PGN has yet to have [additional] allocation from SKK Migas, we truly hope we can get it to ensure gas supply availability to customers,” he said during the annual Indonesian Petroleum Association Convention and Exhibition (IPA Convex) in Tangerang, Banten.

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According to SKK Migas, Medco’s Corridor Block supplied 773 million standard cubic feet per day (mmscfd) last year, the second largest amount after BP’s Berau Block.

If the supply of gas to end buyers is insufficient, PGN had to mix gas from the pipeline with liquefied natural gas (LNG) in the floating storage and regasification unit (FSRU) in Lampung to cover a dearth in quota, it said.

“We hoped we could also get cheap LNG like PLN, hopefully, we can get similar treatment,” he said.

PGN’s gas sale agreement with Medco will end in September, but Arief is confident that the contract will be extended considering PGN’s status as a state company responsible for gas distribution to gas-intensive industries.

Medco Energi oil and gas production was up 30 percent year-on-year (yoy) to 165 million barrels of oil equivalent per day (mboepd) in the first quarter of this year.

Meanwhile, capital expenditure spending in the same period reached US$58 million, mostly allocated for the development of the Corridor Block in South Sumatra, Block B in South Natuna Sea and Ijen Geothermal in East Java.

Furthermore, Arief said the cheap gas incentives for seven gas-intensive industries hurt the upstream gas industry.

“Conversely, it appears that it helped the said industries as demand for cheap gas increased 15 percent this year,” he said when asked about the impact of the incentive on the gas production industry.

Manufacturers in seven industries, including fertilizer production, glassmaking and steelmaking, receive natural gas at the fixed price of $6 per million British thermal units (mmbtu) from 2020 to 2024.

This is in accordance with Energy and Mineral Resources Ministerial Regulation No. 15/2022, which the government uses to bring gas prices for the respective industry below the current market average of around $8 per mmbtu.

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As of May 19, the fixed price increased slightly based on the Energy and Mineral Resources Ministerial Regulation No. 91/2023, which stipulated a need to consider the availability of natural gas supplies and the adequacy of the state’s revenue in fixing the subsidized price.

For instance, the attachment of the regulation showed that the gas price sold to fertilizer producer PT Pupuk Kujang Cikampek by Offshore North West Java rose from $5.95 per mmbtu to $6.61 per mmbtu.

Meanwhile, the gas price sold to fertilizer producer PT Pupuk Iskandar Muda by PT Medco E&P Malaka was up to $6.9 mmbtu from previously $6.61 per mmbtu.