Government to lower natural gas prices for domestic market

JAKARTA (JP): The government will reduce natural gas prices from an average of US$2.50/Million British Thermal Units (MMBTU) to around $1.50/MMBTU, a senior official at the Ministry of Mines and Energy said on Monday.

Natural gas prices currently range from $1.00/MMBTU to $3.00/MMBTU.

"The government is currently studying how to lower natural gas prices without reducing tax revenue," the director general of oil and gas at the ministry, Rachmat Soedibjo, said.

The rupiah's sharp depreciation against the U.S. dollar caused a 50 percent plunge in domestic consumption of natural gas over the past two years, he said.

"Many users found it very difficult to cope with the price of the U.S. dollar during the crisis," he said.

Rachmat said domestic natural gas consumption now accounted for between 30 percent and 35 percent of the annual total production of four trillion cubic feet.

The ministry also has to take into account the impact of the law on intergovernmental fiscal balance, which was approved by the House of Representatives in May, he said.

The new law, scheduled to take effect in 2001, will grant 15 percent of the government's oil revenue and 30 percent of gas revenue to local administrations in provinces where mining operations are located.

Under production sharing contracts, the government is entitled to 70 percent of gas output with the remaining 30 percent going to contractors.

Natural gas producers also must pay corporate taxes equal to 20.45 percent of their earnings and sell 44.50 percent of their gas output to state oil and gas company Pertamina.

Most of Indonesia's natural gas is liquefied for export and the remainder is used for fertilizer and petrochemical production and for firing power plants.

Rachmat said the government also was preparing a ruling, in the form of a presidential decree, to regulate domestic natural gas use.

"We have submitted the draft regulation to the state secretary, but the draft requires amendments after the House's approval of the intergovernmental fiscal balance law," he said. (02)