Kuntoro calls on gas industry to be more competitive

JAKARTA (JP): Minister of Mines and Energy Kuntoro Mangkusubroto said on Friday the country's natural gas industry needed to review its marketing strategy to address growing competition in the regional market.

"The regional natural gas market has changed from a sellers market to buyers market. We have to adjust ourselves to the new situation," Kuntoro said in the weekly media conference.

He said the country enjoyed an edge over several other gas producing countries, especially Middle Eastern states, due to its close location to buyers.

But, he said, the country's natural gas industry should not rely on its location advantage but instead had to intermittently improve on its performance and quality controls to produce a better price formula than its competitors.

As part of the quality control improvement effort, Kuntoro said he had instructed state oil and gas company Pertamina, which monopolizes gas exploration in the country, to review transportation costs charged by shipping companies for the shipment of liquefied natural gas (LNG) to export markets.

Several companies ship LNG to foreign markets, including PT Humpuss Intermoda Transportasi and PT Samudra Petrindo, which are respectively controlled by two of former president Soeharto's sons, Hutomo Mandala Putra and Bambang Trihatmodjo.

Several analysts believe these companies charge transportation fees higher than the market rates.

Indonesia's traditional importers of natural gas in the region are South Korea, Japan and Taiwan.

Other countries, like China and India, have also lately turned their attention to gas use as a source of energy.

Indonesia exported between 24 million tons and 26.5 million tons of LNG to South Korea, Japan and Taiwan over each of the past five fiscal years and plans to export 28 million tons this fiscal year.

LNG is produced at two giant plants located in Arun, Aceh and Bontang, East Kalimantan.

Another LNG plant is planned for construction in Tangguh, Irian Jaya.

Indonesia has maintained its position as the world's largest LNG producer for years but several countries, including Qatar, Oman, Malaysia, Australia and Brunei, have begun to look for a larger share of the market.

India's decision to buy LNG from the Middle East instead of from Pertamina, its longtime supplier, has shown that Indonesia is facing fiercer competition.

South Korean state gas company Korean Gas (Kogas) has reportedly planned to reduce its importation of LNG from Indonesia as part of a retrenchment program to deal with the country's economic crisis.

Kuntoro, who had made a week-long visit to South Korea last week, denied speculation that Seoul was considering buying LNG from other countries.

He said the monetary crisis had forced the country to reduce the volume of LNG purchased from Indonesia.

South Korea offered to countertrade its commodities -- including medical equipment, medicines, petrochemical products, agricultural tools, shoe leather -- for Indonesian crude oil, LNG and mineral products, he said.

"South Korea strongly requested a boost in its trade relationship with Indonesia through countertrade measures," Kuntoro said, adding that he had passed the request to Minister of Industry and Trade Rahardi Ramelan. (jsk)