BPMIGAS defends PGN gas price increase, as KPPU calls it illegal
Monday, May 21 2012 - 10:16 AM WIB
Upstream authority BPMIGAS was coming to the defense of gas distributor firm PT Perusahaan Gas Negara (PGN) on Monday following a statement by the Commission for Business Competition Supervision (KPPU) that the state firm had breached the existing law by raising gas prices.
?We don?t know where the breach of law is,? BPMIGAS? Chief Spokesman I Gde Pradnyana told Petromindo.com.
Earlier, as quoted by Kontan in its Monday headline, KPPU?s Chairman Tadjuddin Noer Said said the gas price increases imposed by PGN ran counter to the Oil and Gas Law No. 22/2001 which, according to Tadjuddin, requires gas price be determined by the government.
?The amendment to the law stipulates that the government, rather than market mechanism, would determine gas prices,? he said.
Tadjuddin made the statement amid growing protests over PGN?s move to raise its selling price by around 50 percent, effective May 1, for the so-called SBU 1 zone, which covers western Java and southern Sumatra. PGN took the measure after signing agreements on May 8 to raise its purchasing prices for gas from its biggest suppliers, ConocoPhillips and Pertamina. Some industry consumers said the price increase was too much, while PLN has announced its rejection of the new price, calling for the government to intervene to determine the price.
Rudi Rubiandini, BPMIGAS? Operational Control Deputy, is also puzzled over the statement by the KPPU chairman.
?I wonder which article of the law has been breached,? he said on Monday.
He insisted the gas price increases were necessary to encourage gas producers to boost exploration and thus ensure sustainability of gas production and supplies to the domestic market. Prior to the price increases, the gas price hovered around US$2-$3 per mmbtu, which was too low to attract more investment in the sector. Now, the prices have been increased to between $5 and $6 per mmbtu, which is still too law compared to the international average price of $12 per mmbtu or the international peak price of $18 per mmbtu.
Meanwhile, PGN?s Investment and Risk Management Wahid Sutopo insisted that the right to set gas price lies with the firm rather than the government.
?Gas is just like Pertamax and Pertamax Plus gasoline. Since they are not subsidized by the government, it is companies that (hold the rights) determine their prices,? he said.
Editing by Johannes Simbolon