PGN to renegotiate gas prices with gas suppliers

State owned gas company PGN said that it would renegotiate prices of gas sold by Pertamina?s production sharing contractors to the company?s operation unit in East Java, the company?s president director W.M. Simanjuntak said as reported by Bisnis Indonesia on Wednesday.

Simanjuntak said that the price of gas sold by PT Lapindo Brantas and BP Indonesia which reached US$2.80 per million British Thermal Units (MMBTU) had been too high, making it difficult to sell the gas to its customers.

"If added with a margin of US$0.80, the selling price of the gas will reach US$3.60 per MMBTU. It is almost impossible (to sell)," he was quoted as saying.

According to him, PGN is currently renegotiating the purchasing prices with both Lapindo and BP Indonesia.

East Java and surrounding areas have suffered an acute shortage of gas supply during the past several months. This has caused a major blow to PGN?s industrial users and some of them have been forced to reduce their activities due to the lack of the gas supply.

Trijono, the manager of PGN?s East Java unit, said he hoped the customers in the province would not object the company?s plan to raise the gas price to US$2.35 per MMBTU by the end of this year. "Although there is an increase, gas is still relatively cheaper than other energy," he added.

Meanwhile Lapindo Brantas said that the company would invest another US$6.4 million to develop four new gas wells in Sidoardjo, East Java. The new gas wells will increase its gas production by 100 percent to 42 million standard cubic feet per day (MMSCFD).

The company said the development of the gas wells were underway. "At present, the company is installing a 7 kilometer pipeline for the distribution of the gas," the company?s manager Nanang Sudiro said. (*)