Govt drops gas price formula proposal

The government drops the proposal to impose price formula for gas that bars producers from setting too high price for the fuel. Instead, it will allow producers and industrial consumers decide on the price based on business-to-business deal, a senior governmental official said on Tuesday.

Director General of Oil and Gas Evita Legowo said the new policy would be applied only for non-subsidized gas.

The government provides subsidy for the sale of gas to state owned electricity firm PT Perusahaan Listrik Negara but industrial customers have to buy the fuel at non-subsidized price.

"The government is preparing a ministerial decree for the non-subsidized gas. It (the price) will be decided based on business-to-business deal," Evita said.

Evita however said the government would keep watching the business-to-business deal to ensure that gas producers and sellers will get a fair margin and consumers will not pay too high a price for the fuel.

State owned gas company PT Perusahaan Gas Negara (PGN, the country's largest gas distributor, tried several times to raise the price of its product but the plan faced opposition from industrial consumers. The government has also told to delay the plan until after the issuance of a gas price formula.

Under the gas price formula agreed upon by PGN, industrial consumers and the government early this year, the price of non-subsidized gas will be capped at 95 percent of the export price of gas before being processed into liquefied natural gas (LNG),

At present, PGN sells its gas to industrial buyers at an average of US$5.5 per million British thermal unit (MMBTU). 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.

Until now, however, the government has yet to approve the price formula. (Godang)