AAF may halt operation if gas subsidy is removed

PT Asean Aceh Fertilizer (AAF), a fertilizer company based in Lhokseumawe Aceh, might close down is fertilizer production if the government removes the subsidy of the gas sales to the company which exports a larger part of its fertilizer products, Bisnis Indonesia reported on Tuesday.

"It is quite possible that AAF which is jointly owned by ASEAN member countries will close its operation if the subsidy is removed," the company?s corporate secretary Amrul A.S. was quoted as saying.

He said that if the government and Pertamina raise the price of gas after the current contract ends in December it will be difficult for AAF to survive due to the higher operating cost to be resulted from the increase in the gas price.

Pertamina plans to increase the price of gas to between US$2.5 and US$3 per million British thermal unit (MMBTU) but Amrul said that the most feasible price of gas for AAF is between US$1.5 and US$1.8 per MMBTU because the price of fertilizer only ranges between US$100 and US$112 per ton. "If the gas price is higher than that, it will be fatal for AAF?s future operation,: he said.

AAF which is 60 percent by Indonesia, 13 percent by Malaysia, 13 percent by the Philippines and another 13 percent by Thailand produces about 330,000 tons of ammonia a year. Besides AAF, the state owned fertilizer plant PT Pupuk Iskandar Muda also operates in Lhokseumawe. (*)