State oil and gas producer, PT Pertamina and power producer, PT Perusahaan Listrik Negara (PLN) signed an initial deal to buy 167 billion British thermal unit of gas per day for 20 years to replace diesel fuel - Photo by Pertamina

JAKARTA (TheInsiderStories) – State oil and gas producer, PT Pertamina and power producer, PT Perusahaan Listrik Negara (PLN) signed an initial deal to buy 167 billion British thermal unit of gas per day for 20 years to replace diesel fuel, said the company.

The electricity company aims to reduce diesel consumption by more than 60 percent within two years. While Pertamina will supply the gas through its sub-holding, PT Perusahaan Gas Negara Tbk (IDX: PGAS)

The companies will supply liquefied natural gas (LNG) to PLN’ power plants in 52 locations in two years period with combined capacity of 1.87 gigawatt, said CEO of Pertamina, Nicke Widyawati, on Thursday (02/27).

She adds, in this year, both will start delivering gas to PLN’ five power plants with 430 megawatt combined capacity in the Krueng Raya, Nias, Gilimanuk, Tanjung Selor, Sorong and Jayapura areas. Widyawati revealed, Pertamina also will invest $1.3 billion in the regasification units owned by PLN’ that cannot be reached by pipelines.

Pertamina has assigned PGAS to supply the LNG supplies and infrastructure for the PLN power plant since February 2020. The program will be carried out in stages, starting from the first phase with a capacity of 430 Megawatts.

The gasification program will be carried out by clustering consisting of Bali, Nusa Tenggara, Pontianak, Sulawesi, Maluku, and Papua. The implementation of this program can provide benefits in the form of potential savings from high speed diesel to gas conversion of around Rp3 trillion per annum.

According to the CEO of PLN, Zulkifli Zaini, the company will cut fuel costs to around Rp12 trillion (US$857.14 million) per year from initially Rp16 trillion. Cutting diesel fuel imports is one of President Joko Widodo’ top priorities to reduce the current account deficit (CAD).

In the third quarter of 2019, Indonesia’ CAD decreased to $7.7 billion from $8.2 billion gaps a year earlier, equivalent to 2.7 percent of the country’ gross domestic product. The central bank noted the goods account surplus widened to $1.26 billion from $0.50 billion gaps a year ago, with exports falling 8.53 percent and imports decreasing 12 percent.

The decrease of CAD was supported by an increase in the goods trade balance surplus, which was accompanied by a decrease in the oil and gas trade balance deficit. The improving deficit in the oil and gas trade balance was affected by the decline in oil and gas imports in line with the positive impact of import control policies through the B20 program.

Meanwhile, the non-oil and gas trade balance surplus was stable amid a slowing world economy and falling commodity prices for Indonesian exports. The improving deficit in the current account is also supported by a decrease in the primary income account deficit due to lower repatriation of dividends and interest payments on foreign debt.

US$1: Rp14,000

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