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)