Low gas prices will stifle new investment
Low gas prices will stifle new investment
JAKARTA (JP): Current domestic gas prices are not conducive to
new investment in natural gas exploration, an official of state-
owned oil company Pertamina said yesterday.
Suwarsyah Kusuma, chief of the gas division at Pertamina's
exploration directorate, said that currently the company sells
its gas within the government-set price range of US$0.65 to $3
per million British thermal units (MMBTU).
"These price levels are absolutely not attractive for new
investment. A reasonable price level would be at an average of
$3.20 per MMBTU, or at least at $3 per MMBTU," Suwarsyah told
reporters after presenting a paper at a seminar on the
petrochemical industry organized by the University of Indonesia.
He explained that the production cost per MMBTU of gas ranged
from $1.40 to $2, depending on the availability of infrastructure
in the gas fields.
Currently Pertamina sells its gas as fuel at a range of $2 to
$3 per MMBTU. The buyers include state-owned PT Krakatau Steel
which pays $2, state-owned electricity company PT PLN in Medan
which pays $3, PLN in Gresik which pays $2.53, PLN in Muara
Karang which pays $2.45, PT Indocement Tunggal Prakarsa which
pays $3, PT Semen Cibinong which pays $3 and PT Tri Manunggal
Perkasa Cement which pays $2.70.
Pertamina sells its gas as feedstock for petrochemical
industries below $2 per MMBTU. The buyers include state-owned
fertilizer companies which pay $1 per MMBTU, state-owned PT
Petrokimia Gresik $2, PT Aceh Pulp Plant $1.30 and PT Hendrison
Iriana $0.97.
"Actually, we have been subsidizing the buyers, but most of
them never feel that way," Suwarsyah said. "And I think it would
be better for the government to give the subsidy directly to
farmers rather than to fertilizer companies."
He indicated that the ratio of gas prices to fertilizer prices
is one to six. "If this indication is true then it is still
possible for the petrochemical industry to buy gas at higher
prices."
Last year, Indonesia produced an average of 8.06 billion
standard cubic feet per day (SCFD), of which 4.56 billion SCFD
were exported in the form of liquefied natural gas and 550
million SCFD were utilized by the petrochemical industry.
This year, the petrochemical industry is expected to use 684
million SCFD, or 12.4 percent of the total domestic gas
utilization.
Indonesia has an estimated 115 trillion standard cubic feet of
gas reserves, of which 69 trillion are proven reserves, while the
rest are potential.
"Some 12 percent of the total reserves have been allocated for
the petrochemical industry," Suwarsyah said. "Thus, we need to
find more reserves, especially in the eastern parts of Indonesia,
to meet the increasing domestic demand for gas." (rid)