Pertamina raises LPG price

Pertamina raises LPG price

Urip Hudiono, The Jakarta Post, Jakarta

State oil and gas company Pertamina announced on Sunday an
increase in the price of liquefied petroleum gas (LPG) by 5.3
percent, or Rp 150 per kilogram, to cover rising production costs
amid higher international crude prices.

The company also intends to raise the price again later this
year in order to break even.

The new price of Rp 3,000 (35 U.S. cents) per kilogram,
effective as of Monday, will therefore increase the price of the
widely used 12-kilogram LPG tanks from Rp 34,200 (US$4.02) to Rp
36,000 per tank.

Customers outside a 60-kilometer radius of Pertamina's main
LPG installations and refilling stations will also be subject to
additional transportation fees.

Pertamina deputy director for marketing and trade Rahmat
Drajat refused to say when the next hike would occur and merely
explained that Pertamina had decided to phase the hikes to reduce
the economic, social and possible political impacts, particularly
during the election year.

The government has decided not to increase fuel or electricity
prices this year for fear of severe social and political impacts.

Pertamina last raised the price of LPG in August last year
from Rp 2,700 to Rp 2,850 per kilogram in all areas except Batam,
which saw a higher price to discourage smuggling of the fuel to
neighboring Singapore. Customers in Batam will not be affected by
the new price as they have been paying a higher price of Rp 3,500
per kilogram, a price level Pertamina described as equal to those
in neighboring countries.

"Pertamina can no longer afford to suffer losses to subsidize
LPG, when the commodity is showing economic potential," Rahmat
said. "Its price should also be brought to a level where other
companies will be interested in becoming industry players."

As mandated by Law No. 22/2001 on oil and gas, Pertamina has
ended its decades-long monopoly in the sector.

But Rachmat explained that despite strong demand for LPG in
the country, private companies had been reluctant to enter the
LPG business as Pertamina kept subsidizing the price of its LPG
products.

Data from Pertamina shows that domestic LPG demand has seen an
annual growth of 15 percent to 20 percent over the past several
years. This year alone, the growth is estimated to be about 20
percent -- from 83,000 metric tons per month last year to about
100,000 this year.

However, since Pertamina's annual LPG production is only
80,000 metric tons, it will have to import the remainder.

Rahmat refused to disclose Pertamina's exact losses from its
LPG business, and only explained that its basic cost for
producing LPG was about $226 per metric ton, and that it needed
an LPG price of about Rp 3,500 to make a profit.

The Indonesian Consumers Foundation (YLKI) criticized the
hike, saying Pertamina had not been transparent with its
financial affairs, and that the company never improved its
services despite raising prices several times.

"Many customers have been complaining about the distributed
tanks, which are dangerously in poor condition or contain less
than they are supposed to," said YLKI member Daryatmo.

Last month, LPG customers in Greater Jakarta also suffered a
shortage of supply due to a delay in imported LPG.