Govt reviews HGBT scheme after industry complaints over gas price surge

By Calvin Purba

The Ministry of Energy and Mineral Resources (MEMR) is reviewing Indonesia's Domestic Gas Price Policy (HGBT) following complaints from manufacturers over rising gas costs caused by declining domestic production and increasing reliance on more expensive liquefied natural gas (LNG) supplies.

The HGBT scheme, introduced in 2020, caps natural gas prices at $6-$7 per MMBTU for seven strategic industries—fertilizer, petrochemical, oleochemical, steel, ceramics, glass and glove manufacturing—to support competitiveness and economic growth. Since 2025, gas used as industrial fuel has been priced at $7 per MMBTU under the program.

Energy and Mineral Resources Minister Bahlil Lahadalia said the government is evaluating pricing mechanisms to ensure industries remain competitive while maintaining supply security.

“I have met with industry associations and labor groups. We are now conducting technical discussions with Pertamina to determine an ideal pricing level so that our industries can continue to survive,” Bahlil said during the Energy Forum on Thursday.

The review comes as industrial gas users complain that limited access to HGBT-priced gas has significantly increased production costs and threatened business sustainability. While Indonesia's overall gas supply remains adequate, Bahlil acknowledged that prices have risen for industries receiving supplies outside the subsidized scheme.

According to Bahlil, one of the main drivers of higher prices is declining output from several domestic gas fields, particularly those supplying West Java and other parts of western Indonesia.

“Some of our gas fields, particularly in West Java, are experiencing production declines,” he said.

To offset the shortfall, suppliers have increasingly relied on LNG shipments from producing regions such as Papua, Sulawesi and Kalimantan, raising supply costs.

“To cover the decline, we have to use LNG. LNG has to be transported from Papua, Sulawesi and Kalimantan, and that comes with additional costs,” Bahlil said.

Yustinus Gunawan, chairman of the Indonesian Industrial Natural Gas Users Forum (FIPGB), said state gas distributor PGN plans to charge $20 per MMBTU for gas consumption exceeding the Industrial Gas Allocation (AGIT) starting from June 2026 consumption.

Under the HGBT scheme, gas distributors allocate subsidized volumes to eligible industries, while consumption above the assigned quota is subject to market-based pricing.

Yustinus said the AGIT allocation currently covers only 27.5% of the industrial allocation stipulated under MEMR Decree No. 76.K/2025 governing the HGBT policy.

As a result, industrial users are effectively paying an average gas price of around $15 per MMBTU, more than double the HGBT price of $7 per MMBTU.

“PGN will apply a price of $20 per MMBTU for gas volumes exceeding the AGIT allocation. With AGIT at only 27.5%, industries are effectively paying around $15 per MMBTU, more than 200% of the HGBT price,” Yustinus told Petromindo.

He added that some companies have already begun laying off workers as a result of rising gas costs, although many manufacturers are trying to delay further workforce reductions while awaiting government intervention.

“Layoffs have already started, but industries are trying their best to hold back while waiting for government instructions to increase AGIT to at least 80% starting from June gas consumption,” he said.

According to Yustinus, the sharp increase in gas prices threatens the competitiveness of Indonesia's manufacturing sector, a key driver of economic growth with significant multiplier effects across the economy.

The government has yet to announce the outcome of its review, but Bahlil said discussions are continuing to find a solution that balances industrial competitiveness with the country's gas supply constraints.

Editing by Reiner Simanjuntak