There is still room to reduce industrial gas prices. The government must give up the state's share of income tax (PPh) and non-tax state revenues (PNBP) at the upstream level to be cut.
The Directorate-General of Oil and Gas at the Ministry of Energy and Mineral Resources, Wiratmaja Puja, stated that the low gas price demands that the share of the government and the share of the cooperation contract contractors (KKKS) be reduced. Pruning the KKKS portion is difficult because it is bound by a contract.
Therefore, the Ministry of Energy and Mineral Resources proposes to cut PPh and PNBP to the Ministry of Finance and the Coordinating Ministry for the Economy. This method is able to reduce gas prices which currently exceed USD 10 per MMBTU for end users. As a result, state revenues fell drastically.
Wiratmaja explained that Malaysia also did not take the state's share so that gas prices could be reduced to USD 6.6 per MMBTU. If the Indonesian government decides not to take PNBP upstream, the price of industrial gas can be reduced to USD 5.01 per MMBTU.
However, the state has the potential to lose revenue of USD 544 million or Rp. 7 trillion per year. If the government does not take PPh and PNBB the price of gas upstream can immediately drop to USD 3.82 per MMBTU. As a result, the government must be willing to lose state revenues of USD 1.263 billion or Rp. 16.4 trillion.
The potential for reducing KKKS income in the form of capital expenditure (CAPEX) and contractor share is not easy to do because it is constrained by the existing contract. However, there is the potential to reduce transmission and distribution costs by up to USD 2.4 per MMBTU. Efficiency in the transmission is done by trimming depreciation.
The distribution sector demands the elimination of margin traders to be fairer. Another efficiency potential is operating expenses (OPEX). Pertamina plans to use PT Badak NGL's assets to support the New Grass Root Refinery (NGRR) project in Bontang, East Kalimantan.
The location of the Pertamina subsidiary which operates the LNG plant is adjacent to the new oil refinery. Pertamina's Director of Processing and Petrochemical Megaprojects, Rachmad Hardadi, stated that Badak NGL's facilities that can support NGRR are 21 units of high-quality boilers, power plants, and storage tanks. The use of Badak assets is also related to land.
That way, Pertamina does not need to acquire land, thus saving project time. Pertamina can start the project from point 5 on a scale of 0-10. The construction of the Bontang NGRR with a capacity of 300 thousand barrels per day (BPD) is still waiting for the appointment of a partner by the International Finance Corporation (IFC) as a government consultant.
The selection of partners has been accelerated to the end of 2017. Pertamina is preparing a bankable feasibility study (BFS) which is targeted to be completed in 2017. Another Pertamina project in Kalimantan is the Balikpapan Refinery Development Master Plan (RDMP), which is targeted to be completed in 2021.
In 2019, the refinery being built costs USD 2 .6 billion has been able to produce Euro 2 standard fuel. In that year, the processing capacity increased from 260 thousand barrels per day to 360 thousand barrels per day.
Jawa Pos, Page-6, Tuesday, Oct 25, 2016
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