A prolonged delay in the formulation of domestic gas aggregation has been a major bottleneck in the current administration’s goal to provide affordable, industrial gas nationwide. Indonesia, a gas-rich country is struggling to lower its domestic gas price, which still stands at US$9 per million British thennal units (mmbtu) - more than double than that of some Southeast Asian neighbors, like Singapore and Malaysia - due to a lack of distribution infrastructure.
In recent years, the government and gas regulators have been designing a national aggregation scheme to boost efficiency in the sector and address this issue.
Sampe L. Purba, head of the Upstream Oil and Gas Regulatory Special Task Force’s (SKKMigas) gas commercialization division, said that the government must have an integrated infrastructure development scheme and this could be addressed with the presence of a national gas authority Such an authoritywould bridge the different interests of stake holders in key issues, such as gas procurement and infrastructure development across the country.
“Itfs like the chicken or the egg [dilemma]. Without infrastructure, there is no supply and demand,” Sampe said. “But if you just build infrastructure without supply and demand, you will end up with no economics. So, it’s not easy”
Under a model proposed by the Energy and Mineral Resources Ministry it would team up with SKK Migas to play the role of gas aggregator tasked with coordinating supply sold at different prices from various gas fields. It would then mix the gas and sell it under a price formula set by the government to customers, including industrial users, power plants and households.
At the same time, the body will collaborate with the Downstream Oil and Gas Regulatory Agency (BPH Migas) to develop gas infrastructures across the archipelago. Separately BPH Migas has also offered its own model, which includes the establishment of a buffer agency to manage overall gas supply and sell it at the same price to the gas aggregator, big consumers such as the fertilizer and petrochemical secrpts, power plants and natural gas filling stations (SPBG).
The aggregator would be in charge of distributing gas with some extra distribution costs to households and other small constuners. President Joko “Jokowi” Widodo instructed his Cabinet to cut gas prices to around $6 per mmbtu for 10 industrial sectors last year, but at present, only three sectors can enjoy the lower price.
Gas demand in the industrial sector reached 2,230 million standard cubic feet per day (mmscfd) last year, or 34.6 percent. of national gas production. Despite the significant demand, industrial Hrms must buy gas at an average price of $9.5 per mmbtu. State owned gas distributor PT Perusahaan Gas Negara’s (PGN) commerce director Danny Praditya acknowledged that infrastructure was the main stumbling block hindering the availability of sufficient and affordable gas supply in the country
Data from PGN shows that Indonesia will need to operate gas pipeline networks spanning 57,093 kilometers by 2025 in order to contribute 22 percent to the national energy. As of last year, the country needs pipeline networks stretching 14,382 km.
Jakarta Post, Page-13, Monday, July 17, 2017
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