Indonesian government has plan to regulate the domestic market obligation (DMO) of gas to drive down the price for local manufacturers - Photo by President Office

JAKARTA (TheInsiderStories) – Indonesian government has plan to regulate the domestic market obligation (DMO) of gas to drive down the price for local manufacturers, said the head of state on Monday (01/06). Since last year, the government has echoed to introduce the policy but the implementation is very slow.

In the limited meeting at his office, President Joko Widodo asked the ministers to lowering the gas price from US$10 a million British Thermal Units (MMBtu) to only $6 a MMBtu in three months.

The President also requested a report on the implementation of Presidential Regulation Number 40 of 2016 concerning the Determination of Natural Gas Prices, whether there are obstacles in the field, especially in the seven industrial sectors. 80 percent of Indonesia’ gas use for electricity generation, chemical industry, food industry, ceramic industry, steel industry, fertilizer industry, glass industry, he adds.

At the meeting, Widodo proposed three scenarios to reducing the price. First, the government allocates subsidy US$2.2 per million British Thermal Units (MMBtu). Secondly, the DMO for gas fully implemented. And third, free of imports for industry.

The President complained that since 2016 the price of industrial gas has not been settled, so a breakthrough must be sought. “Yes, those three are the choices,” the President said, adding, “If not immediately decided it would continue this way.

In 2019, state-owned power producer, PT Perusahaan Listrik Negara (PLN) has appealed to the government, the gas prices for DMO can be restricted at $6.5 per MMBtu for Java and $7/MMBtu for outside Java in an effort to reduce electricity prices. At present, PLN is still getting gas prices around $9 to $11 dollars per MMBtu.

Based on the Government Regulation Number 79 of 2014, there are four primary energy for electricity generation, namely, coal, gas, hydro and geothermal. Where, PLN get specialty treatment on the primary energy.

Director General of Electricity for energy and mineral resources (EMR) ministry, Andy Noorsaman Sommeng said, that the DMO was expected to take effect last year but so far there is no decision on it. Basically, gas prices have been defined in the MEMR Number 45 Year 2017 on Natural Gas Utilization for Power Generation.

He said, the ideal gas price for power plants should be $7 per MBTU, while the current prices ranged between $10 and $11 per MBTU. Currently, he stated, the ministry is still searching for the correct formula to bring down the price of the natural gas sold to industry players to a level acceptable for buyers.

But at the same time a price point that will not put producers in a disadvantageous position. Sommeng added, one of the efforts being undertaken by the ministry is to tear down the current inefficient gas cost structure, and instead pinpoint cost areas that the government can eliminate.

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