BP Migas urges PGN to raise its gas purchase prices

Upstream oil and gas regulatory agency BP Migas has formally asked state owned gas distributor PT Perusahaan Gas Negara (PGN) to raise the purchase prices of gas it buys from local producers, saying that most of the prices of gas sold to the company are below the market prices, Kontan business daily reported Wednesday.

The head of BP Migas, Priyono, said in Jakarta on Tuesday that the purchase prices of gas bought by PGN from the local gas producers were still below $2 per million british thermal unit (mmbtu) because no price adjustment had been made since the signing of the contracts several years ago.

The cheap gas is mostly supplied from oil gas fields in Sumatra operated PT Pertamina and PT Conoco, he said, adding that the price should be increased to at least $6 per mmbtu to meet their market level. At present, PGN buys gas from Pertamina at between $2.5 and $3.5 per mmbtu.

Priyono said the agency would not dictate the new price to PGN but the company should be ready to negotiate its gas purchase contracts with its suppliers. ?The price adjustment is needed in order to reduce the disparity of prices of gas sold at home and overseas,? he said, adding that with the price increase, local gas producers would have a stronger bargaining position in the negotiations with foreign buyers.

At present, prices of gas sold to foreign buyers are still below the level in the international market because the low level of prices of gas sold in the domestic market. (*)