Medco opposes govt plan to lower gas prices

Oil and gas business group Medco Corporation has opposed the government's plan to lower the prices of natural gas sold to fertilizer producers, saying the price reduction could damage the Indonesian image overseas.

Hertriono Kartowisastro, the chief commissioner of the publicly listed PT Medco Energi International, said in Jakarta on Tuesday that giving an exclusive price to certain parties could incite a negative reaction from foreign competitors.

He said the foreign companies especially those which are involved in fertilizer production could charge Indonesia with giving subsidies to its fertilizer companies.

"We could be charged with breaking international trade rules and the foreign fertilizer companies could file a complaint through the World Trade Organization," he was quoted as saying by Berita Buana on Wednesday.

Minister of Mines and Energy Susilo Bambang Yudhoyono said last week that the government would reduce the price of natural gas for fertilizer plants in the country to US$ 1,3 - US$ 1,5 per million British thermal unit (mbtu) to enable the fertilizer producers to cut their fertilizer prices in the domestic market.

Before this, fertilizer plants purchased their natural gas from the government at US$ 1 to US$ 2 per mbtu, compared to US$ .50 to US$ 1.20 per mbtu in other countries.

But according to Medco, which sells a larger part of its natural gas to local buyers including fertilizer producers, the new prices would be lower than the international price levels,

Besides the fertilizer industry, the state-owned electricity company PLN has also asked for a reduced price of natural gas, he said, adding that his office will consider the request but could not make a decision yet. (*)