FOSSIL FUEL
The government will issue soon a regulation that allows power plants located at wellheads to enjoy lower gas prices in hopes of boosting electricity procurement from the cleaner fossil fuel. The regulation, which will be issued in the form of an energy and mineral resources ministerial decree, is in the finalization stage, the ministry’s oil and gas business guidance director, Budiyantono, said. “We are finalizing the decree on the wellhead gas-fired power plants. We hope this [regulation] will be able to lighten the load if the source [of gas] is far away from the user,” said Budiyantono.
The ministry, Budiyantono continued, had previously decided to set the price of wellhead gas at 8 percent of the Indonesian Crude Price (ICP), lower than that of piped gas, which is pegged at 11.5 percent of the ICP. Based on December’s ICP of US$51.09 per barrel, gas prices for wellhead power plants would cost $4.08 per million British thermal units (mmbtu), whereas piped gas would cost $5.87 per mmbtu.
According to state-owned electricity firm PLN’s 2016-2025 electricity procurement business plan (RUPTL), electricity procured from gas is expected to make up 24.3 percent of the national energy mix. This percentage could increase to around 29.4 percent if PLN is incapable of procuring 25 percent of all electricity from new and renewable energy sources.
Furthermore, PLN data shows that 15,141 megawatt (MW) of electricity had been procured from gas-fired power plants by last November, making up 28.03 percent ofthe total national electricity capacity. PLN corporate planning director Nicke Widyawati said the firm planned to include the construction of wellhead gas fired power plants in this year’s RUPTL to decrease electricity supply costs and increase efficiency of electricity rates. “We hope that by building power plants close to the energy source, the electricity supply costs can also be slashed,” she said.
This is not the first time the government has sought to increase efficiency by encouraging more power plant development close to the energy source. The Energy and Mineral Resources Ministry issued last year a ministerial decree that allowed the price of coal to be negotiated business-to-business between mining and electricity companies, as opposed to the fixed pricing mechanism implemented before.
The government also recently mulled over the option of importing liquefied natural gas (LNG) to cut gas prices, which remain one of the highest in the region. The high gas prices in Indonesia are mostly attributable to a lack of infrastructure and a lengthy supply chain. Nicke said so long as there were regulations allowing PLN to import gas, then it would strongly consider doing so in order to slash costs. “We still hope to prioritize domestic supply, but it all comes down to the regulations and also whether we get a good price. If the domestic gas does not have a good price then we’ll just buy it from abroad,” she said.
Although Indonesia is touted to have a large supply of natural gas, domestic production is barely absorbed into the country due to the high prices. Data from the Upstream Oil and Gas Regulatory Special Task Force (SKK-Migas) shows that only 39 of 64 LNG cargoes allocated for the domestic market were absorbed in 2015.
Jakarta Post, Page-13, Thursday, Jan, 26, 2017
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