Pertamina sells gas to Pupuk Kaltim at higher price

The Jakarta Post, Jakarta

State-owned oil and gas company PT Pertamina has signed a contract with fertilizer firm PT Pupuk Kaltim to sell gas to the latter at a higher price.

Pupuk Kaltim president Omay K. Wiraatmadja said last week that Pertamina would sell gas at US$1.97 per mmbtu (million British thermal unit) to two of the company's plants Pupuk Kaltim I and IV, compared to $1 per mmbtu under the previous contract.

"The draft of the sale and purchase contract for Pupuk Kaltim I and IV has been signed ... The contract of Pupuk Kaltim II has not been finalized yet," he was quoted by Tempo Interaktif as saying.

He explained that the sale price was based on a new price- regulating formula used by Pertamina, which linked the new rate with prices of urea, ammonia and oil international markets.

He said that the price would be reviewed every three months.

Previously, Pertamina sold gas to the fertilizer firm at a price set up by the government, which also sets the price of fertilizers sold to farmers.

It is not clear whether Pupuk Kaltim will also ask the government to raise the price of its fertilizer products to compensate the higher raw material cost.

Elsewhere, Omay said that Pupuk Kaltim had agreed to purchase gas at 265 million cubic feet per day.

"With such a huge gas supply, the company's production levels could be increased to 90-95 percent," he said, adding that this year, Pupuk Kaltim had also managed to obtain around 180-212 million cubic feet of gas supply.

The lack of gas supply (due mainly to production problems at one of its gas suppliers) has forced Pupuk Kaltim to shut down one of its plants, and caused output to drop by 100,000 tons per month, creating a loss of potential revenue of around $14 million.

Pupuk Kaltim is the largest fertilizer firm in this country with a production capacity of 2.98 million tons per year. Some 90 percent of the output is sold in the domestic market mostly in the eastern part of Indonesia. Kaltim controls 60 percent of the domestic fertilizer market.