Govt limits $13/MMBtu LNG price to selected industries in western Java

By Calvin Purba

The Ministry of Energy and Mineral Resources said the government's newly introduced liquefied natural gas (LNG) price cap of $13 per million British thermal units (MMBtu) will apply only to selected industrial users in western Java whose pipeline gas supplies have been disrupted.

Ministry spokesperson Dwi Anggia said the policy is limited to western Java because declining gas production from upstream fields in the region has reduced pipeline gas supplies to industrial consumers.

"It only applies to western Java because gas production has declined there," Anggia said on Tuesday.

She said the subsidized LNG price would not be available to all industrial users, but only to manufacturers that are not covered by the government's Certain Natural Gas Price (HGBT) program and have been affected by reduced pipeline gas supplies.

"The $13 per MMBtu LNG price does not apply to all industries. It is specifically intended for non-HGBT industries affected by declining pipeline gas supplies," she said.

The government will prioritize labor-intensive and export-oriented industries that rely heavily on natural gas both as a fuel and as a feedstock in their production processes.

The government announced on Monday that it would cap the LNG price for eligible industrial consumers at $13/MMBtu, replacing market-based prices of $20-$23/MMBtu that many companies had been paying because of limited access to subsidized pipeline gas.

Energy Minister Bahlil Lahadalia said the measure followed consultations with industry associations, labor unions and state-owned energy company PT Pertamina, and had received approval from President Prabowo Subianto.

Bahlil said Indonesia had sufficient overall gas resources, but declining production from several gas fields in West Java had reduced pipeline gas supplies to industrial centers in the region.

To make up the shortfall, distributors have increasingly shipped LNG from producing regions such as Papua and Kalimantan, regasifying it before delivering it through pipeline networks, significantly increasing supply costs.

"The problem is not gas availability. The gas is there. The issue is that LNG is expensive," Bahlil said.

Editing by Reiner Simanjuntak