Gas demand surges amid rising fuel prices
Gas demand surges amid rising fuel prices
Rendi A. Witular, The Jakarta Post, Jakarta
Gas demand from industries has been on the rise since the
government announced plans to gradually eliminate subsidies for
fuel products in 1999, and it will reach its peak in 2005,
according to an industry official.
State-owned gas company PT Gas Negara (PGN) Agus spokesman
Dihardjo said demand from industries in Greater Jakarta and West
Java would overtake supply by 2005 if existing supply was not
increased.
He told The Jakarta Post on Thursday that the current supply
of about 200 million cubic meters per day (m3/day) in these areas
was more than enough to cover the demand of around 153.7 million
m3/day.
But he said demand was rising fast as manufacturers looked for
cheaper sources of energy amid the rising price of industrial
diesel, the main fuel product used by industries to run their
machinery.
The government earlier this month reduced fuel subsidies to
salvage the state budget. The government has said it would
completely cut subsidies on most fuel products, including
industrial diesel, by 2004.
As a comparison, industrial diesel costs an average of US$5.7
per million British thermal units (MmBTU), while gas only costs
an average of $2 per MmBTU.
The rising demand had in fact caused industries in Surabaya
and Medan, respectively the country's second and third largest
cities, to already suffer supply problems, Agus said.
He said that demand in Surabaya had reached 74 million m3/day,
while supply was only around 59.8 million m3/day. Demand in Medan
was about 13 million m3/day, compared to supply of 12.8 million
m3/day.
In a bid to avoid future supply problems in Greater Jakarta
and West Java, where most industries are concentrated, PGN is
planning to connect consumers to new gas refineries in South
Sumatra and Kalimantan by constructing new distribution
pipelines.
The country has an enormous volume of gas resources, but has a
lack of distribution infrastructure.
But industries could not easily switch their source of energy
to gas because of the huge investment needed to upgrade the
diesel-based machinery to gas-based equipment.
Indonesian Employers Association (APINDO) deputy chairman
Djimanto acknowledged one of the most serious problem was
financing.
Since the economic crisis hit the country in 1997, many
companies were facing cash flow problems, he said.
"The investment is so huge that it can reach 25 to 30 percent
of the asset value. Our difficulty is exacerbated as there are no
banks willing to give soft loans for machinery replacement."