Indonesian government officially set the gas prices for industry US$6 a millions british thermal units(MMBTU), said the energy and mineral resources (EMR) ministry on Tuesday (04/14) - Photo by PT Perusahaan Gas Negara Tbk

JAKARTA (TheInsiderStories) – Indonesian government officially set the gas prices for industry US$6 a millions british thermal units(MMBTU), said the energy and mineral resources (EMR) ministry on Tuesday (04/14). The adjustment prices including the needs of state-owned power producer, PT Perusahaan Listrik Negara (PLN).

The minister, Arifin Tasrif, has signed the ministerial decree Number 8 of 2020 concerning How to Determine Users and Prices of Certain Natural Gas in the Industrial Field to implement the policy. The gas price is intended for seven industry namely fertilizer, petrochemical, oleochemical, steel, ceramics, glass, and rubber gloves.

According to the ministry, this regulation is the result of coordination with various parties including getting input from the ministry of finance and industry. Its expecting with the new policy, the industries could adjust their upstream prices, transportation costs, and help the adjustment of certain industrial gas prices.

In accordance with article 5 paragraph 2, the minister considered recommendations for adjusting the calculation of the price of natural gas and the rate of distribution of natural gas from SKKMigas and the regulatory agency. The decree also regulated the obligations of business entities in the distribution of gas in transporting certain gases, as well as the obligations for industries.

Early of this year, Indonesian government has plan to regulate the domestic market obligation (DMO) of gas to drive down the price for local manufacturers. Since last year, the government has echoed to introduce the policy but the implementation is very slow.

President Joko Widodo has asked the ministers to lowering the gas price from $10 a MMBtu to only $6 a MMBtu in three months. He 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.

Widodo proposed three scenarios to reducing the price. First, the government allocates subsidy US$2.2 per 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.

Since 2019, 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. Basically, gas prices have been defined in the MEMR Number 45 Year 2017 on Natural Gas Utilization for Power Generation.

Written by Staff Editor, Email: theinsiderstories@gmail.com