Gas Firms hope for more incentives

State-owned firms Pertamina and PT Perusahaan Gas Negara (PGN) have called for more incentives, including higher gas prices, as the government plans to require all gas stations to build gas infrastructure. Under a new ministerial decree, set to be issued by the end of the month, gas stations will be required to have at least one dis penser of compressed natural gas (CNG) or liquefied gas for vehicle (LGV). 

This aims to help make CNG, widely recognized as cleaner than other fossil fuels, more accessible and encourage consumers to reduce the use of gasoline or diesel. However, the two gas giants recognize that the installation of gas dispensers in 5,000 gas stations nationwide will be not be economically feasible with the current prices and Internal Rate of Return (IRR). Pertamina City Gas and CNG manager Ryrien Marisa said on Tuesday that it would be difficult for the government to force gas station operators to set up gas dispensers without incentives. “We need prices that will help us compensate for our investment. 

For example, we need to be assured that the current IRR of 16 percent will be easily maintained,” she told reporters, adding that consumers might also want incentives to encourage them to install converter kits worth Rp 20 million (US$ 1,495) in their vehicles. The government has long been trying to convert consumers to gas with only little result. While gas is sold for half the price of subsidized gasoline, its consumption by vehicles is still not massive, partly due to the small number of CNG and LVG stations (SPBG) available across the country. 

Pertamina will start operating 53 SPBG by the end of the year, adding to the 34 units already in operation, including seven Mobile Refueling Units (MRU). Meanwhile, PGN operates 10 SPBG and five MRU. Most of the SPBG are located in Greater Jakarta, with several located in Palembang in South Sumatra, Semarang in Central Java and Balikpapan in East Kalimantan.For comparison, India, where CNG has been available since 1993, operates 1,010 CNG stations serving around 25,500 vehicles that can use dual fuel. China, meanwhile, supplies CNG to 1.5 to 2 million vehicles. 

Official data from Pertamina shows that consumption of gas fuel declined to 2.8 million standard cubic feet per day (mmscfd) in thefrst two months this year, from 3.8 mmscfd last year, because of the move by Transjakarta that allows its buses to use die- sel instead of CNG. Although Pertamina and PGN are supportive of the newly prepared ministerial decree, both have asked that the government increase the price of CNG. 

PGN commerce director Danny Praditya said ideally CNG would be sold at around Rp 4,600 per liter equal to gasoline instead of the current price of Rp 3,100. Pertamina’s Ryrien shared a similar view on the price level, but acknowledged that raising the price might deter consumers from converting to gas. “That is why Pertamina is waiting for this new policy as we would like to see whether the price will be increased or if there will be some sort of special subsidy to maintain the gap [with gasoline],” she said. 

However, Pertamina and PGN might and their expectations unanswered as Energy and Mineral Resources Minister Ignasius Jonan stands firm, holding that CNG prices must remain lower than gasoline or diesel to entice more consumers. “If the price is higher than Premium [subsidized gasoline], a RON 88 fuel, then it is unlikely anyone will be interested. There must be a significant gap of around 30 to 40 percent,” he said.

Jakarta Post, Page-13, Wednesday, March, 15, 2017