Fertilizer producers required to buy natural gas at market prices

Beginning next year, prices of natural gas to be sold to Indonesia?s fertilizer produces will be based on prices on ammoniac, crude oil and urea in the international market, Koran Tempo daily reported on Tuesday.

Zaenal Soedjais, the president of PT Pupuk Sriwijaya ? the holding company of state owned fertilizer producers ? said in Jakarta on Monday that the change was made following the revision in the subsidy given to farmers.

With the new pricing system, the price of the natural gas sold to fertilizer will reach US$2.1 per million metric British thermal unit (MMBTU). At present the fertilizer producers buy natural gas at subsidized prices of between US1.3 and US$1.8 per MMBTU.

It is not certain yet whether the new gas price will only be applied to new contracts signed by fertilizer producers. The contract for the sale of gas to PT Pupuk Kaltim?s production unit I ended in December 30, 2001 and the contract extension is now being negotiated. The contracts for PT Pupuk Kaltim?s production units II and III will end in 2003 and 2007, respectively.

The contract for PT Asean Aceh Fertilizer will end this year while those for PT Pupuk Iskandar Muda will end next year, while those for PT Pupuk Sriwijaya will end in 2007 and 2013.

Zaenal said that the fertilizer producers would continue to receive a subsidy from the government. "Although the farmers will buy the fertilizer at subsidized price of Rp 1,150 per kilogram, the gap of the fertilizer prices and the production cost including distribution costs and profit margins for distributors and producers will be paid by the government.(*)