Minister wants gas price to be renegotiated

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)