Reviewing Import Discourse to Prepare Cheap Industrial Gas Price

By : Ridwan And Aldo Bella Putra | Wednesday, September 13 2017 - 18:00 IWST

INDUSTRY.co.id - Jakarta - President Joko Widodo (Jokowi) again asked for the realization of the reduction of gas prices to the Cabinet of Work Ministers to cut the cost of industrial production in Indonesia.

Since promising a decline in gas prices in 2014, Jokowi's new government can provide cheap prices for three of the seven industry groups namely fertilizer, steel, and petrochemical industries. While four other industry groups namely oleo chemicals, glass, ceramics, and rubber gloves still bite the fingers.

Yet according to Jokowi, if the government can provide gas price below US $ 6 per Million British Thermal Units (MMBTU), then it could be a capital to strengthen national industry and boost the competitiveness of industrial products in the world market.

But what happens in the field, the majority of industries still have to redeem the fuel production at a price of US $ 10-11 per MMBTU.

Instruction Jokowi then translated by Coordinating Minister for Marine Affairs Luhut Binsar Panjaitan by giving green light of LNG import from Singapore consortium at US $ 3.8 per MMBTU. According to him, the price is much cheaper than having to carry LNG from the gas field in eastern Indonesia.

The policy discourse that raises the pros and cons considering Singapore is not a gas producing country, plus the Ministry of Energy and Mineral Resources (ESDM) has predicted up to 2035 there will be 60 LNG cargoes of gas field production in the country that has not had a buyer.

Agus Pambagio, Public Policy Observer and Consumer Protection questioned import discourse as an instant way of government in suppressing gas prices for industrial customers.

Quoting data from the Ministry of Industry, Agus mentioned that in 2017, the industry's demand for natural gas will reach 2,280 MMSCFD. The gas is mostly absorbed by the fertilizer industry of 791.22 MMSCFD and petrochemicals 295 MMSCFD.

"Meanwhile, according to the Ministry of Energy and Mineral Resources, gas production until 4 September 2017 was about 7,756 MMSCFD." Then why import? “ Agus said last weekend in Bogor, West Java.

Agus said that the government should focus on improving the high gas price margin when it reaches the customers' hands as many through the brokerage company aka traders who take high margin.

"This gas trader is very big and has very big power so it is difficult to be controlled," he said. "Hopefully the revision of the Regulation of Minister of Energy and Mineral Resources Number 19 of 2009 on Gas Business Activity through the pipeline can be completed quickly, so the price can be lowered," he said.

Former Vice Chairman of the Indonesian Consumers Foundation (YLKI) said, after the revision of the regulation issued Minister of Energy and Mineral Resources Ignatius Jonan will not allow traders to get a contract extension of gas supplies unless the trader builds shelter and gas pipelines to consumers.

"Coordinating Minister Luhut should also have known that Indonesia has a 1.5 MTPA gas import contract with US Corpus Christi Company from 2019 until 2941. Then there is the discussion of the purchase agreement with African company Mozambique LNG 1 MTPA from 2022 until 2041. If still import also from Singapore, then gas from this contract who will buy? " specifically.

Therefore, Agus assessed the option of importing gas in order to pursue low prices for industrial customers are not done by the government. He considered, the government should optimize the supply of existing gas while continuing to build gas transmission and distribution infrastructure while curbing traders who benefit themselves. "Do not let the policy of import gas would damage the upstream and downstream oil and gas industry in Indonesia," he said.

On the other hand, Head of Marketing and Product Development Division of PT Perusahaan Gas Negara Tbk (PGN), Adi Munandir added that the government needs to clarify the cheap gas price offered by a consortium from Singapore at US $ 3.8 per MMBTU.

Because if the price mentioned is new upstream prices, later to get to Indonesia and can be utilized industrial customers the price can be more expensive than domestic gas prices.

Adi detailed that the contract price of LNG in the United States is about US $ 3 dollars for upstream gas only. The gas then needs a liquification process, shipping by tanker, regasification, transmission, and finally distributed to industrial customers in Indonesia.

"Up to end users the price can be more than US $ 11 per MMBTU, even can be more expensive than domestic prices," he explained.

According to Adi, the problem of high industrial gas prices cannot be found easy solution by opening the gas import tap.

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