Ministry to issue implementing regulation on gas prices

The Ministry of Energy and Mineral Resources will soon issue a ministerial regulation to implement the newly-issued Presidential Regulation No. 40/2016 on lower gas price for certain industries including fertilizer, petrochemical, oleo chemical, steel, ceramics, gloves, and glass.

?The ministerial regulation will be issued next month. The sooner the better,? Director General of Oil and Gas IGN Wiratmaja said during the 40th IPA Convention & Exhibition on Thursday.

He said the government revenue will significantly decrease as a result of the presidential regulation, but lower gas prices will cause multiplier effects three or four times larger. The industry will grow at a faster pace.

Aside from cutting the government?s gas take which as a consequence causes lower gas prices, the government will also control the midstream sector so that the business sector can?t freely set the prices but have to follow the formula set by the government, he said.

The formula will be set based on various indicators, including territories, difficulty levels, pipeline length and gas volume. ?Thanks to this regulation, it is expected that the gas prices will be fairer,? he said.

The President signed the new regulation on May 3, but the lower gas price is retroactive as of January 1, 2016. The new policy is expected to help accelerate growth of the industries, it added.

According to the new regulation, the minister of energy and mineral resources will determine the new gas price if the current price is deemed not economically feasible for the aforementioned industries or exceeds US$6 per mmbtu.

The policy will not affect contractors? revenue as the government will only cut its production shares to allow for lower gas prices

Editing by Johannes Simbolon