Ministry of Finance turns down Exxon?s gas price formula

The ministry of Finance has turned down the price formula proposed by PT ExxonMobil Indonesia for the sales of gas to local fertilizer producers for not describing the actual cost of its fertilizer production, Koran Tempo reported on Tuesday.

The ministry?s director for oil, gas and other non-tax revenues, Sahala Lumbanggaol, confirmed on Monday that the price formula had been returned to PT Exxon and the government?s oil and gas implementation agency BPMIGAS for revision.

"The proposal was turned down because it has yet to reflect the actual price requested by ExxonMobil," he was quoted as saying.

ExxonMobil is required to sell its gas to the fertilizer producers PT Pupuk Iskandar Muda and PT Asean Azeh Fertilzier at US$1.5 per million metric tons (mmbtu), or only a half of the international price which reached about US$3 per mmbtu.

The government through the ministry of finance will pay the price difference so that the actual price of the gas sold to the fertilizer producer would be equal to the price level in the international market.

At present, all of the gas production of ExxonMobil is only enough to meet LNG export commitment. The government?s request to supply the two fertilizer producers has forced the company to switch some of its export contracts to the Bontang LNG plant in East Kalimantan beginning 2004 to 2007.

ExxonMobil agrees with the request as long as the government will compensate the difference of the prices of the gas sold to local fertilizer companies and its foreign LNG buyers. (*)