Govt seeking to cut gas price in North Sumatra

The government is mulling several options, including reducing its production share, in order to make natural gas prices more affordable for consumers in North Sumatra, which the Directorate General of Oil and Gas said in a statement on Tuesday.

The measure was taken in response to consumer complaint in Medan, North Sumatra over the high price of natural gas sold by IDX-listed state owned gas distributor PT Perusahaan Gas Negara (PGN). PGN reportedly charges buyers $14 per mmBtu for the gas it buys for PT Pertamina Gas (Pertagas), a subsidiary of state owned oil and gas firm PT Pertamina (Persero).

Director General of Oil and Gas IGN Wiratmaja said the government is seeking to cut the price by around $2.5 per mmBtu so that gas consumers may pay around $11 per mmBtu for the gas. Measures that will be taken include cutting the government?s production share, reviewing the taxes imposed for transmission and distribution. The government will also ask PGN and Pertamina to carry out efficiency measures.

The new price is expected to be effective in December 2015 or January 2016 at the latest, he said, adding that the reduction of the gas price would not affect PSC holders as their production share will remain unchanged.

In response to consumer complaint over its high selling price, PGN called on the consumers to protest Pertagas instead because the latter sets too high a price for its gas. PGN said the gas which it distributes to consumers was sourced from the Arun LNG Storage and Refassification Terminal (Arun Regas). PGN pays Pertagas $13.8 per mmBtu for the gas and distributes it to consumers at a very small margin.

Pertamina admitted that it charges PGN $13.8 per mmBtu for the gas from Arun Regas, but PGN also gets gas supplies from Pertamina?s gas field in Pangkalan Susu in North Sumatra at $8.31 per mmBtu. To be fair, PGN should blend the prices and sell the gas at volume-weighted average price. The gas from Arun Regas is sourced from the Donggi Senoro LNG plant in Central Sulawesi.

Editing by Johannes Simbolon