Jakarta, May 26 (Antara) - The government has issued a new ruling in the form of Presidential Regulation (Perpres) No. 40/2016 on gas price adjustment to boost economic growth and increase the consumption of gas at home.
The new ruling is also expected to add to the national industry's competitive edge through effective and efficient gas supplies.
The Upstream Oil and Gas Regulatory Special Task Force (SKK Migas) welcomed the signing of Presidential Regulation No.40/2016 on Natural Gas Price.
SKK Migas Deputy Chairman Zikrullah said on Thursday (May 19) that the new regulation, facilitating price adjustments, is expected to increase downstream gas consumption.
"I have heard that the Presidential Regulation (Perpres) on gas pricing has been issued. This means that downstream gas consumption will increase as there will be a price adjustment," Zikrullah said.
The Perpres regulates that the prices of gas will be decided by the minister in charge of energy affairs (energy and mineral resources minister) which will be used as the basis for calculating the production sharing with the contractors (KKS) and to determine the sale price of gas which comes from the KKS.
The minister will decide the price based on the economic viability, the price of gas at home and abroad, the purchasing power of consumers at home and the added value obtained from the utilization of gas domestically.
In case the price is not commensurate with the economic viability of the gas consuming sector and the price of gas is over US$6 higher per million metric British thermal unit (MMBTU), the energy and mineral resources minister would be empowered to decide the gas price.
The prices decided by the minister will be designed for the gas consuming industry, covering fertilizer, petrochemical, ole chemical, steel, ceramic, glass and gloves.
The Perpres, which will help bring down the gas price and is effective retrospectively from January 1, 2016, regulates that the government cuts the prices of gas in the seven industrial sectors to accelerate economic growth and increase the competitive edge of the national industry.
Based on the Perpres signed by President Joko Widodo (Jokowi) on May 3, the initiative to lower the gas prices was implemented by reducing the state's component. The share of the product-sharing contractor companies (KKKS) will not be reduced.
With the new ruling, gas consumption at home is expected to increase and the production surplus could be absorbed by the industry at home. Gas exports have remained a subject of criticism on the ground that domestic demand for gas was being overlooked.
Earlier, Chief Maritime Affairs Minister Rizal Ramli had highlighted the importance of changing the exploit-and-export paradigm of the country's natural resources, that had been continuing for long in Indonesia.
According to the coordinating minister, the country needed to make a shift to a system wherein natural resources are managed in such a way that they bring added value to the country.
Ramli also emphasized that the country should not export the produced gas in the form of LNG as it only generated profits worth US$2.5 billion per year.
Ramli affirmed that President Joko Widodo's administration had a clear vision to use natural resources optimally for the benefit of the people.
"To this end, the paradigm of development must change, and it should no longer be mainly focused on exports. Instead, we must develop our processing industry," Minister Ramli stated while delivering a keynote speech to participants at the Indonesian Youth Speak Summit 2016 in West Java on Saturday (April 30).
Regarding gas exports, the SKK Migas clarified that the step to export gas was taken to capitalize on the surplus production and was not meant to overlook the domestic needs.
"We have surplus gas, which could not be used domestically. Are we going to allow the surplus gas to be stored and not be utilized? We should clarify to the public that gas is being exported not at the cost of the domestic demand," Deputy Head of SKK Migas Zikrullah stated at an event to highlight the achievements in gas exploration in Jakarta on Thursday (May 19).
The SKK Migas official was responding to the common public perception that a significant volume of natural resources, particularly gas, was being exported rather than catering to the domestic demand.
However, the surplus gas could not be absorbed by the country as the production exceeded the domestic requirement.
He said his side was always ready to fulfill the domestic demand. Moreover, Indonesia still has vast gas reserves, particularly in isolated areas. The nation's gas production, in the form of piped gas reserves and liquefied natural gas, including gas fields that were yet to be developed, will continue to be used to meet the domestic needs.
Therefore, Zikrullah hailed the issuance of the Perpress No.40/2016, which could increase domestic consumption.
As an example, several gas sales-purchase contracts which have the potential to contribute Rp7.4 trillion revenues to the state were signed in Jakarta on Wednesday (May 25).
All of the gas volumes under the sales-purchase contract agreements were designed to meet the domestic demand, Chief Spokesman of the Upstream Oil and Gas Regulatory Special Task Force (SKK Migas), Taslim Z Yunus, said.
"The gas will be used to meet the need of fertilizer production, electricity and industry. The government's income portion during the sales-purchase period accounts for US$544.66 million or Rp7.4 trillion," he said.
One of the contracts is between ConocoPhillips (Grissik) Ltd and state-owned fertilizer company PT Pupuk Sriwidjaja under a three-year term of contract. The gas supply to the fertilizer company will amount to 70 million metric standard cubic feet per day (MMSCFD). It is expected to contribute $470 million or Rp6.392 trillion to the state.
The second contract is between PT Medco E&P Indonesia and PT Meppo-Gen for the Gunung Megang gas-powered electricity plant (PLTG) in Muara Enim District, South Sumatra.
The duration of the contract is two years with a volume of gas supply of 10-16 billion British thermal units per day (BBTUD). It is expected to contribute $68.52 million or Rp931.87 billion to the state.
The other contract is between PT Medco E&P Indonesia and Perusahaan Daerah Petrogas Ogan Ilir for industry in Ogan Ilir District, South Sumatra. This contract will be valid until December 31, 2019 with a gas supply volume of 1.3 to 1.6 BBTUD and with a potential state revenue of $6.14 million or Rp83.5 billion.
Based on data at the SKK Migas office, since 2003, gas supplies to meet the domestic needs increased by about nine percent per annum. In 2013, the volume of gas for domestic supplies had exceeded the gas exports. Data in 2015 indicated that gas consumed domestically amounted to 3,882 MMSCFD (56 percent) while gas exports stood at 3,090 MMSCFD (44 percent). ***3***(A014/INE)EDITED BY INE(T.A014/A/BESSR/A. Abdussalam) 26-05-2016 20:45:4 |
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