EXCLUSIVE: Purnomo : "RI future lies in gas"

Minister of Energy and Mineral Resources Purnomo Yusgiantoro recently talked with Petromindo.Com's on the important role of gas industry as the main source of income for Indonesia in the future. He also divulged Indonesia's strategies to promote the exports of gas and the domestic use of gas. Following are the excerpts of the interview.

Question: Is there any plan to form an organization for all ASEAN (the Association of South East Asian Nations) gas sellers?

Answer: As a matter of fact, if we want to establish the organization of gas sellers, ASEAN countries are not enough, because ASEAN countries, including Indonesia, Malaysia and Brunei, do not have abundant gas reserves. If we want to form such an organization, it should include Middle Eastern countries, such as Qatar and Yemen. Thus if we want to establish an organization like OPEC (Organization of Petroleum Exporting Countries) for gas producers, it must include Australia, Indonesia, Brunei, Malaysia, Iran, Qatar, Yemen, Egypt and Algeria. It think time is ripe for the establishment of such an organization since there are already many gas sellers. This is to avoid competition that could weigh down the price. I support the idea and actually we are the originator of the idea. I brought the idea into surface when I served as OPEC governor.

Q: What is the basic thinking behind the idea ?

A: The basic thinking is the fact there will many gas sellers in the future That time I foresaw Indonesia would compete with Qatar. Indonesia has around 45 trillion cubic (TCF) of natural gas reserves in Natuna (in the South China Sea), while Qatar's gas reserves reach 350 TCF. That means seven times the size of Indonesia's gas reserves. There are two things in competition. We compete or cooperate. If we are not sure that we can win the competition, we would better cooperate.

Q: Indonesia has long planned to sell gas to India and China. But, thus far, the plan has yet to be realized. What is the obstacle?

A: The problem is that if we want to enter India, Qatar will do the same. We can't beat Qatar, because Qatar is closer to India in transportation terms. They have better price for terminal and transportation. They can gain a lot. One alternative we are thinking about is using the tanker (which is used by Qatar to transport its LNG to East Asia) to carry our LNG from (LNG plant in ) Bontang (East Kalimantan) The tanker will be empty on its return (to Qatar). For sure, India is interested in cooperating with us.

Q: How big is the LNG demand of India?

A: Between one and two trains. That is about five tons.

Q: Talking about Bontang, how is the preparation for the development of the Train I there?

A: We are now in the phase of preparing the FEED (front end engineering design). Next year, we shall (prepare) the EPC (engineering, procurement and construction). We are preparing it for the market in Taiwan, India and China. What is clear is that we have to compete. We can't easily get the markets. It seems that Indonesia's future lies in gas, both domestically and internationally. We need to boost it (its production and use).

Q: But, domestic gas is not cheap?

A: That's right. We have asked that the Domestic Gas Incentives program be fully implemented, but now the gas incentives program is are only partially implemented. But, we can understand this, because if it is fully implemented, the government's revenue will be cut down. On the other hand, we hope (an increase in) economic activities (due to the incentives program).

Q: Sorry ? which part of the government's revenue will be cut down?

A: Under the domestic gas incentives program, the government's take (from gas) should be cut down to lower the gas price. There are several components in gas price: that is cost component, the government's share in the gas output and the contractors' share in the gas output. For sure, the contractors' share can't be cut down. In order to lower the gas price, the government's share should be reduced. But if the government's share is reduced, the government will receive less revenue. If the gas price is low, business activities are expected to increase. Because it is cheap, gas will sell well. Because it sells well, people will be eager to look for gas. Thus, there will be a multiplier effect. The multiplier effect will be on the rise but the government will receive less revenue. On one hand, the government's revenue (from gas) will be decreasing, but gas output will be on the increase. People who look for gas will pay larger amount of tax. This reasoning should be well understood by our friends at the ministry of finance.

Q: How much will the government's share be reduced?

A: (Under the production sharing contracts), the government takes 70 percent of (the contractors' gas output). It can be reduced between zero to 70 percent. It depends. If we want to remove all the government's share, gas price will drastically drop. (godang)