Minister to revise regulation on gas price for power plants

Petromindo|Lucky

Minister of Energy and Mineral Resources Ignasius Jonan will revise Ministerial Regulation (GR) No 11/2017 on gas utilization for power plants, which was issued earlier this year, as the gas price formula set under the regulation does not guarantee cheaper price for power plant operators including state-owned electricity firm PT PLN.

Deputy Minister of Energy and Mineral Resources Arcandra Tahar said that while GR 11 was intended to provide alternative gas sources for power plants including pipeline gas, domestic LNG, and imported LNG to help ensure cheaper price, the price formula set in the regulation does not include the cost of regasification and transmission if the LNG option is taken. As such, it does not ensure cheaper price of gas for power plant operators because sourcing the gas from domestic LNG or import, as alternative to pipeline gas option, will mean additional cost of regasification and toll fee for transmission of the gas to the plants.

?So it will be just the same, the pipeline gas option will be chosen. There?s no logic in the regulation (GR 11),? Arcandra said as quoted by Investor Daily.

According to GR No 11, natural gas allocation for power plants can be directly made to PLN or independent power producers (IPPs) under certain conditions. Gas price for power plants located near gas wells is limited at 8 percent of Indonesia Crude Price (ICP) per MMBTU. PLN and IPPs can buy natural gas at a maximum price of 11.5 percent of ICP per MMBTU if the power plants are not located at the wellhead.

In the case price of natural gas exceeds the 11.5 percent limit, PLN and IPPs can utilize LNG, the price of which is based on the economic value of the gas fields and using a formula at agreed free on board (FoB) price.

In the case of domestic LNG price exceeds 11.5 percent of ICP per MMBTU (parity to oil free on board), PLN and IPPs can import the LNG as long as the price does not exceed the 11.5 percent limit at the buyers? regasification terminal (landed price).

In the case the price of imported LNG is higher than the 11.5 percent limit, PLN and IPPs can buy pipeline gas at price more than 11.5 percent of ICP per MMBTU (parity to oil free on board).

Arcandra said that using the current price formula, the price of LNG including import will exceed the 11.5 percent ICP limit. He said that under the revised regulation, there?s possibility to change the 11.5 percent constant factor as gas price at some wellheads have already reached this level. ?We?re still discussing this, what must be looked into is the end price, not the landed price or FOB,? he said.

Meanwhile, Secretary of the Directorate General of Oil and Gas at the ministry, Susyanto said that the GR 11 will be revised also because the gas price set in the regulation does not truly represent the investment in the upstream sector. ?It does not match the interests of upstream oil gas (industry) and the power plant sector,? he said as quoted by Investor Daily.(*)