Govt to issue decree setting 'higher' price for gas exports

The government is expected to issue a new policy to set the export price of gas "higher" than the selling price on the domestic market, according to a senior governmental official.

The issuance of such policy aims to push the existing foreign buyers of Indonesian gas to agree on the government's current efforts to renegotiate the prices of the fuel.

"The export prices of our gas, either through pipeline or in the form of LNG will thus be higher than the selling price on the domestic market. The government will issue a new regulation on this in the near future. As far as I know, the regulation will be in the form of ministerial decree," Kardaya Warnika, the former chairman of oil and gas upstream regulator BPMIGAS, said on Wednesday.

Kardaya has been appointed a special emissary to the Minister of Energy and Mineral Resources with the special task of renegotiating prices of Indonesian gas with foreign buyers.

Indonesian is trying to renegotiate prices with the foreign buyers of Indonesian pipeline gas and LNG, arguing the prices no longer reflect current high price of oil.

The price of gas pipelined by ConocoPhilips from its Natuna Sea Block B to Malaysia, for instance, capped on the maximum HSFO price of US$118 per tonne, or equivalent to $25 per barrel of crude, while the oil price now hovers above $130 per barrel.

Under the pricing formula that is tied to $118 per ton of HSFO, Block B gas only fetch $2.5 per MMBTU. That price is far lower than the current domestic gas price of $4-5 per MMBTU based on new contracts.

ConocoPhillips has a contract to supply some 250 MMCFD of gas to Petronas in Malaysia for 20 years starting 2002.

Kardaya said he just returned from a visit to China, where he expressed the government's request to renogitiate the price of LNG that Indonesia will send from the Tangguh LNG plant.

"They (The Chinese) understand what we want. But they stopped short of saying they are willing to renegotiate," he said, adding he planned to go to South Korea on a similar mission.

Under contracts, the Tangguh LNG plant will send gas to China's Fujian province on the crude ceiling price assumption of $38 per barrel and South Korea's steel company Posco and SK on $25 per barrel. (Bernard)