Ministry to limit gas distribution margin

Petromindo

The Ministry of Energy and Mineral Resources is currently in the process of drafting a new ministerial regulation that would limit profit margin in gas transmission via pipeline as part of efforts to help cut down gas price for industries, Koran Tempo reported on Tuesday.

The new policy is expected to be completed next year, a slight delay from the initial plan of late this year.

The paper quoted Acting Oil and Gas Upstream Development Director at the ministry, Suiyaningsih as saying the new regulation would be a revision of Ministerial Regulation No 19/2009 on gas transportation via pipeline.

According to the paper, Director General of Oil and Gas I Gusti Nyoman Wiratmaja said previously that a reasonable internal rate of return for gas trading business is 12 percent.

The government has recently decided to set a lower price of gas for three industries including petrochemical, fertilizer, and steel. The new price will not exceed US$6 per mmbtu, Minister of Energy and Mineral Resources Ignasius Jonan said in November.

Deputy Minister of Energy and Mineral Resources Arcandra Tahar said in November that the government decided to provide lower gas price for the three aforementioned industries first because they have large multiplier effect.

According Presidential Regulation No 40/2016 on the reduction of gas price, signed by President Joko Widodo (Jokowi) on May 3, the government will lower gas price for seven industries in a bid to help accelerate investment and economic growth.

But Minister of Industry Airlangga Hartarto said in October that the government has identified 10 industries and one industrial estate to be eligible to the lower gas price. It is still unclear as to when gas price for the other industries will be lowered.

Jokowi complained about the high gas price for domestic industries at between $9.5-11 per mmbtu, lower than $4-7 per mmbtu in neighboring countries.

Meanwhile, Koran Tempo quoted Andi Noorsaman Sommeng, Head of the oil and gas downstream regulator BPH Migas, as saying that the gas downstream business has been inefficient. He pointed out that gas price for manufacturing firm PT Torabika in Bekasi, West Java was set at US$14.5 per mmtbu, while the price charged by the upstream producer PT Pertamina EP was only $9 per mmbtu.

He said that to lower the gas price, transmission margin must be limited at not more than $1 per mmbtu, toll fee at 0.5 per mmbtu, and that there must only be a single trader in one distribution line. ?There shouldn?t be multiple traders,? he said.(*)