INDUSTRIES COMPLAIN OF GAS SUPPLY, PLANNED PRICE INCREASE

By Andi Abdussalam

Jakarta, May 18 (ANTARA) - Industries have so far complained of a gas supply shortage at their factories, and now they are complaining about the government's plan to increase the price of gas, which will increase their operating costs.          The government is unable to meet the industrial sector's gas needs as it prioritises demand from the export market, said the chief of the Indonesian Chamber of Commerce and Industry (Kadin) Suryo Bambang Sulisto.          "The policy to export gas is wrong," he remarked recently. The government has taken the wrong step by exporting a large quantity of gas, he observed, adding that the policy will weaken the domestic industry.          According to Suryo, the lack of gas supplies to the national industries has made them unable to compete with foreign rivals.          "Gas supplies often fluctuate. Sometimes they increase, but at times they decrease and even stop. As a result, many companies turn to coal, which is costly and is not environment-friendly," he explained.          "It is impossible for the government to import gas because it is costly," he added.           Indonesia's gas lifting is estimated at 1,300 million barrels equivalent to oil per day (mboepd). According to Finance Minister Agus Martowardojo, the government has set a gas lifting target of 1,290-1,360 mboepd for next year's budget.          "For accountability and in order that the public know it, we will include the figure of gas lifting (in the state budget) from year to year, which will become part of the budget macro assumption," the minister stated.          In an effort to meet the domestic industry's gas requirements, the Indonesian government will review its gas sales contract with Japan in order to meet these requirements, particularly those of the industrial sector.           "We continue to respect the existing contract with Japan. Only after the contract expires will the government assess domestic gas supplies," remarked Industry Minister MS Hidayat in the meantime.           He confirmed that the government will prioritise gas supplies to the domestic industry.          "The government wants the demand for gas from the manufacturing sector fulfilled. Only if there is surplus gas can we export it to Japan," he pointed out.          According to the minister, gas supplies are one reason that investors are concerned about investing in the country.          "South Korean tyre manufacturer PT Hankook Tire Co Ltd plans to invest around US$1.1 billion in Indonesia until 2018, but the gas supplies to the company still fall short of its needs," he said.          Besides of the lack of gas supplies, industries have also complained of the government's plan to increase gas prices for industries. The state-owned gas distributor firm PGN has decided to increase the price of gas for industries by 55 percent from US$6.7 to US$10.2 per million British thermal units (mmbtu) beginning May 1, 2012, said the PGN secretary.           PGN Corporate Secretary Heri Yusup said that PGN had taken this decision because its price of purchasing from gas contractors had also increased since April 1, 2012.          In the meantime, state-owned power firm PLN also expressed its objection to the planned gas price increase of 55 percent - from US$6.7 to US$10.2 per mmbtu.          The head of the PLN fuel and gas affairs division Suryadi Mardjoeki declared that his company would ask for a special gas price, different from that for other industries. "Electricity is somewhat different from other industries," he asserted.          Industries, through their various associations, have filed complaints with the government and threaten to go on strike to protest against the planned gas price hike.         The leaders of the Association of Indonesian Food and Beverage Producers (Gapmi) and the Association of Ceramic Industries (Asaki) announced on Thursday that they would write to the government to protest the decision by PGN, adding that they would prefer it if the price increase were implemented in stages.         According to Heri Yusup, however, the planned gas price hike was still in the process of being made public. "We are still in the process of popularising the plan to increase gas prices for industries. We will make our evaluation based on inputs from the public," he remarked.         Meanwhile, Asaki chief Achmad Widjaya complained about the PGN's decision to increase the gas price when it was already unable to meet its quota of gas supplies. "It is strange. They raise the price, but the service remains poor. This is what has made industries send a strong message of protest to the government," he noted.         Heri of PGN pointed out that a number of associations and industry consumers had agreed to the plan to increase the price, on condition that gas supply would not decline or even increase.         He explained that the contractors who had increased the price of gas that they sold to PGN had promised to increase supplies.          According to Heri, the volume of gas supply from gas contractors has already begun to increase, with an average distribution of 800 million metric standard cubic feet per day (mmscfd).          The same view was expressed by Industry Minister MS Hidayat, who maintained that industries would actually agree to the price increase as long as they were guaranteed gas supply.          "Actually, industries will accept economically feasible prices. What becomes a problem is when the price rises but the supply declines, which obstructs production," Hidayat remarked.***2*** (T.A014/a/INE/a014/KR-BSR/A/A014) 18-05-2012 18:38