Minister wants gas price to be renegotiated

JAKARTA (JP): Minister of Mines and Energy I.B. Sudjana has asked the state's electricity company PLN and distribution company PGN to renegotiate the gas prices with state oil and gas company Pertamina and its production sharing contractors.

Sudjana said the monetary crisis had made it difficult for companies like PLN and PGN to continue buying natural gas from Pertamina in dollars at the current rate.

Both companies earn revenue in rupiah, but the currency has lost 75 percent of its value against the U.S. dollar since the middle of last year.

"Thus, I have given an order to all parties concerned to negotiate a new pricing scheme for natural gas so they can jointly share the impact of the crisis," Sudjana said.

Renegotiation talks started Thursday at the ministry's office.

PLN and PGN have complained to the government about the severe impact of the monetary crisis, asking it to allow them to buy gas from Pertamina in rupiah instead of dollars to alleviate their financial burden.

But, Pertamina said the request was difficult to meet because it also bought gas from its contractors in dollars.

PLN projects are expected to suffer losses of Rp 1.31 trillion ($0.4 billion) this year for several reasons including that it has to purchase fuel in dollars, while its selling power to the public remains in rupiah.

Pertamina data indicates that the company charges PLN between $2.45 and $3 for one million British thermal units (MMBTU) of natural gas.

Pertamina has two different pricing schemes for PGN, in rupiah and dollar.

The natural gas produced by Pertamina -- which accounts for 65 percent of PGN's gas -- is sold to PGN in rupiah. But the natural gas produced by the company's contractors -- accounting for 35 percent of PGN's gas -- is sold in dollars.

Pertamina sells the rupiah-denominated gas to PGN for between Rp 2,500 and Rp 4,150 per MMBTU and the dollar-denominated gas for between $2.16 (about Rp 20,000 at the current rate) and $2.85.

PGN sells gas to small industries, companies and households in rupiah.

Pertamina also sells natural gas in bulk to industries in dollars.

It sets the price of natural gas at $1 to $2 per MMBTU for fertilizer and petrochemical industries, while the price can reach $3 for other industries. (jsk)