Pertamina wants PGN to renegotiate gas price for SSWJ pipeline

State-owned oil and gas company Pertamina has asked state gas distribution company PGN to renegotiate the price of gas that will be supplied to PGN's South Sumatra-West Java (SSWJ) gas pipeline, Kompas reported Friday.

Rony Gunawan, the manager for development of Pertamina EP, said in Jakarta on Thursday that the gas price should be renegotiated because PGN had delayed the operation of the gas pipeline which would receive a gas supply from Pertamina's Pagardewa gas field in South Sumatra.

The delay in the operation of the gas pipeline from June, last year to March this year had caused a great financial loss to Pertamina because the company had to pay higher interest payment on loans provided by Bank for International Cooperation (JBIC) for the project, Rony said.

Under the existing contract, Pertamina will sell its gas to PGN at a price of between US$2 and $2.54 per MMBTU, while PGN sells its gas to its customers at about $5 per MMBTU.

Meanwhile, PGN's corporate secretary Widyatmiko Bapang said that he saw no reason for the renegotiation of the price agreement. According to the existing supply contract, PGN is required to pay compensation to Pertamina if there is a delay in the operation of the pipeline.

He said that PGN should for example pay compensation of US$15,000 per day for a maximum of 60 days after the first day the gas supply should have been begun. After the period, PGN is only charged with "take or pay" obligation if it cannot receive at least 80 percent of the gas supply. (*)