Krakatau Steel suffers shortage of gas supply

State-owned steel company PT Krakatau Steel, the country?s largest steel producer has said that the shortage of the natural gas supply from its main supplier Pertamina has caused a decline in the company?s steel production.

Koran Tempo reported on Tuesday Pertamina?s gas supply is only between 90 and 100 million metric standard cubic feet per day (mmscfd), while under the contract which will last until 2003, Pertamina should supply 137 mmscfd.

Marketing director of the steel company Daenulhay said in Jakarta on Monday that the decline in the gas supply had taken place since early this year. "They (Pertamina) prefers to sell the gas in the form of liquefied natural gas (LNG) to overseas buyers," he was quoted as saying.

Daeunulhay said that the high price charged by Pertamina on the gas supply had also made the company?s steel products less competitive in the overseas market. Krakatau has to buy the gas at US$2 per million metric British thermal unit (mmbtu) from Pertamina while gas producers in other countries such as Malaysia sells their gas at only US$0.52 per mmbtu, he said. (*)