Govt wants gas producers to ease LC requirement to PLN

The government has asked gas producers to reduce the amount of the standby letter of credit requirement imposed on state owned electricity company PLN to only about 30 percent of the overall contract, Minister of Energy and Mineral Resources Purnomo Yusgiantoro has said.

“It means that the L/C is issued to cover only the 30 percent production share allocated to gas producers,” Purnomo said in a statement, as reported by Bisnis Indonesia on Monday.

Under the standard production sharing contracts, gas producers take 30 of their output, while the remaining 70 percent goes to the government. However, several gas producers have required PLN to issue standby L/C amounting to 100 percent of its gas purchase.

PLN has proposed the gas producers to ease the L/C requirement that would cost the company hundreds million of U.S. dollars.

Purnomo said that a number of PLN’s gas suppliers have agreed with the government’s proposal to cut the L/C requirement to only 30 percent of the total contract. “Hopefully, this scheme could be used to cope with PLN’s problem,” he added. (*)