PLN sets gas aside for industries

PLN sets gas aside for industries

Leony Aurora and Rendi A. Witular, The Jakarta Post, Jakarta

State power firm PLN will reallocate 10 million standard cubic
feet of natural gas per day (mmscfd), normally supplied to state
gas distributor PT Perusahaan Gas Negara (PGN), for industries
for one year, a minister says.

The natural gas will be temporarily replaced by petroleum,
which state oil and gas firm Pertamina has agreed to supply,
Minister of Industry Andung A. Nitimihardja said at the
presidential palace on Wednesday.

"PGN will compensate for the additional costs incurred by
(PLN) using petroleum instead of gas from its income," said
Andung, adding that the formula for the compensation was being
discussed.

"If after a year the gas supply is still insufficient, we will
ask (PLN) for more," he said.

Separately, PGN president director WMP Simanjuntak announced
after a meeting with PLN and the Ministry of Energy and Mineral
Resources that the gas redistribution would begin in mid-August.

Simanjuntak said that PGN was expecting to get additional
supply from the Lapindo Brantas and Rancak fields, operated by
EMP Kangean -- a subsidiary of the country's second largest
private oil company, Energi Mega Persada -- amounting to 20
mmscfd in total.

"We expect the additional gas to start flowing before the end
of this year," he said.

Meanwhile, PLN director of power plants and primary energy
generation Ali Herman Ibrahim said that the electricity firm
would suffer losses due to the gas reallocation.

However, the energy ministry's Director General of Electricity
and Energy Yogo Pratomo said that in addition to receiving
compensation, PLN would only spend as much on petroleum as it
would have on gas.

"If (the petroleum) needs to be subsidized, it will. PLN won't
be disadvantaged by the (gas) reallocation," he said.

PLN has said that it needs 11.44 million kiloliters (kl) of
petroleum to generate power this year, far more than the 8.35
million kl of subsidized petroleum determined by Pertamina.

The power firm has struggled to reduce petroleum usage as
Pertamina has said that PLN may have to pay market prices for the
additional supply.

Declining gas supply from Lapindo Brantas and EMP Kangean for
PGN customers in East Java, as well as Kodeco's less than
expected supply, has reduced the amount of gas available to
industries to only 73 mmscfd from the about 120 mmscfd needed.

PGN started to apply a quota-system on larger industries in
East Java in July, reviewing the allocation monthly. PGN will
stop gas flow to a company if it exceeds its quota.

A number of industry players, particularly ceramic
manufacturers, fear that the new quota system will further hamper
the ailing industry.

For August, as fertilizer plant Petrokimia Gresik undergoes
maintenance and reallocates 25 mmscfd of its supply for PGN's
use, the state gas distributor has set the quota at 85 percent of
the contracted amount.

PGN expects to resolve the gas shortage in East Java in July
next year, when Santos will start supplying 100 mmscfd of natural
gas from its field in the province.