Fertilizer makers prefer buying gas from Pertamina

Fertilizer producers insist on buying natural gas from state oil and gas firm Pertamina, and not from production sharing contractors, because Pertamina could agree to sell gas to them at prices lower than international price levels, Koran Tempo daily reported on Friday.

Indonesian Fertilizer Association chairman Zaenal Soedjais was quoted as saying that fertilizer makers still needed to buy natural gas at lower prices so that farmers could buy fertilizer at reachable prices.

?Production sharing contractors will not think about helping farmers. They just want to make profit,? Zaneal said.

So far, Pertamina has sold natural gas to fertilizer producers.

But, the current oil and gas law which became effective early last year stipulates that BPMIGAS, the highest authority of the country?s upstream oil and gas sector, can ask production sharing contractors to sell gas to fertilizer makers.

Natural gas accounts for 60 percent of total raw materials needed for producing fertilizer.

At present, fertilizer producers buy gas at US$1.3-1.85 per million metric British thermal unit (MMBTU) for the production of fertilizer for local farmers? consumption, and at $1.85 per MMBTU for exports.

Koran Tempo said gas purchase contract of fertilizer producer PT Pupuk Kaltim had expired on December 31, 2001. So far, BPMIGAS has not yet named gas producers to supply the commodity to Pupuk Kaltim?s first fertilizer plant. The company is based in East Kalimantan.

Gas purchase contract of Aceh-based PT Asean Aceh Fertilizer will expire at the end of 2002, while PT Pupuk Iskandar Muda?s contract to buy gas will expire by the end of 2003. Pupuk Iskandar Muda is also based in Aceh.

Pupuk Kaltim?s contract to buy gas for its second and third fertilizer plants will expire in 2003 and 2007 respectively.

Meanwhile, South Sumatra-based PT Pupuk Sriwijaya?s contracts to purchase gas will expire in 2007 and 2013.

In the past, the government provided direct subsidy on the sale of fertilizer to farmers, but changed the system in 1998 due to pressures from the International Monetary Fund. (*)