Gas price formula for domestic market agreed: Official

The price of gas sold by producers in the domestic market will be capped at 95 percent of the export price of gas before being processed into liquefied natural gas (LNG), a senior official of the ministry of energy and mineral resources has said.

The director general of oil and gas, Luluk Sumiarso said in Jakarta over the weekend that the gas ceiling price had been approved by all the stakeholders including gas producers, distributors, buyers and the government as the regulator.

"The ceiling price is set at 95 percent of the export price of natural gas (before being processed into LNG)," he said.

Luluk said the new price formula would be submitted to the minister of energy and mineral resources for approval. According to Luluk, the ceiling price would be used as the basis for state gas distributor PT Perusahaan Gas Negara (PGN) to determine its gas prices. "But even if the minister has approved it, PGN needs to first socialize the new price formula with its customers before adjusting its gas price," he added.

At present, PGN sells its gas to industrial buyers at an average of US$5.5 per million British thermal unit (MMBTU). A source was quoted by Bisnis Indonesia as saying that the export price of gas before being processed into LNG is about $12 per MMBTU, meaning the ceiling gas price under the new formula is $11.4 per MMBTU.

Commenting on the new price formula, PGN's corporate secretary Heri Yusuf said the company would not immediately adjust its gas prices into the new formula.

PGN would introduce different prices depending on the nature of buyers' businesses, he said. For this purpose, the company would divide buyers into six categories, he said as reported by Kompas daily Monday.

Category I includes households and small-scale industries. Category II consists of specific industries such as small-scale roof producers with gas consumption of around 10,000 m3 per month. Category III comprises hospitals and offices with gas consumption of 10,000 and 100,000 m3 per month. Category IV includes hotels and restaurants with gas consumption of 10,000 and 100,000 m3 per month. Category V oncludes manufacturing industries consuming one million m3 per month. Category VI consists of power plants consuming more than one million m3 per month.

According to Yusuf, the prices for the Category I buyers will be determined by downstream oil and gas regulator BPH Migas, while the Category II buyers will be given semi-subsidized prices. Those of category III will buy at a semi-commercial prices, while buyers grouped in Category IV, V and VI will have to pay at full commercial (market) prices, he said. (*)