Fertilizer producers propose new gas pricing scheme

Fertilizer producers have proposed the country?s gas companies to set two different prices for gas used as the raw material for the production of fertilizer for local farmers and those for the production of fertilizer for exports, Bisnis Indonesia reported Wednesday.

Zailanal Soedjais, the president of the country?s major fertilizer producer PT Pupuk Sriwijawa (Pusri), said that the fertilizer producers wanted the price of gas that would be used for the production of fertilizer for the local farmers be set at US$1.3 per MMBTU and $1.5 per MMBTU for those which would be directed for exports.

?We are ready to purchase gas at $1.5 per MMBTU but the price of gas which will be used as the raw materials for the production of fertilizer for local farmers should be about $1.3 per MMBTU,? he was quoted as saying.

Under the existing contracts, local fertilizer producers by natural gas at a range of between $1 and $1.8 per MMBTU. Some of the fertilizers want a change in the pricing scheme when the current contract ends.

About 7 percent of the country?s total gas production are used for the production of fertilizer, and the others are for the production of liquefied natural gas (LNG). Indonesia?s fertilizer exports fell to about 1 tons in 2001 from about two tons in the previous year due to the halt in the operation of two Aceh-based fertilizer producers PT PIM and PT AAF for several months late last year.

According to Zainal, the price of natural gas in Indonesia is far higher than those in Malaysia where the gas price is set at between $0.5 to $0.6 per MMBTU. But he said that although the price of the raw material is higher, the price of the fertilizer in the country is 30 percent lower than those in Malaysia. ?It is a really problem for fertilizer producers,? he said. (*)