Welcome Guest   |  Login   |   Signup
JG Logo
Fri, February 10, 2012
Archive Search

Money, National Reputation at Risk if Indonesia Limits Gas Exports, Regulator Says
Reva Sasistiya | February 07, 2010

Share This Page
1
0
0
0
Share with google+ :


Post a comment
Please login to post comment

Comments

Be the first to write your opinion!

Indonesia may be forced to compensate Japanese companies that have contracts to buy liquefied natural gas if the government proceeds with a plan to limit gas exports to boost supplies at home, the chief of the upstream oil and gas regulator said.

BPMigas chief Raden Priyono said Japanese companies hold contracts for 80 outstanding shipments of LNG and that the country may face a backlash if the government failed to deliver.

“On the political side, the energy supply is needed [at home],” he said.

“But failing to fulfill the contracts will have consequences.”

The outstanding LNG contracts are estimated to be worth more than $26 billion at current market prices.

Local companies, including fertilizer firms and state power company PT Perusahaan Listrik Negara, have long complained about gas shortages.

On Thursday, the government announced that a new presidential instruction was being drafted to limit LNG exports. If the policy is implemented, a contract for the supply of gas to Japanese buyers from the Mahakam block in East Kalimantan, operated by French oil and gas firm Total E&P Indonesie, would be among those affected.

Energy Minister Darwin Saleh said on Friday that the government would consider extending its LNG export contracts “after domestic needs have [been] settled.”

William Deertz, a technical analyst at PricewaterhouseCoopers, warned that the country’s credibility with international investors would be damaged if the government failed to honor the export agreements. “The reliable supply of LNG must be honored,” Deertz said.

He added that the country’s supply problems were largely the result of the government fixing the domestic price below market prices, thus encouraging producers to sell overseas.

Ron Aston, the head of the Indonesian Petroleum Association, which represents oil and gas producers, echoed this sentiment.

“Gas pricing should not be used to provide an indirect subsidy to the domestic market as this will deter investment if it is not competitive,” Aston said. “Competitive gas pricing is required to maintain the [domestic] gas supplies.”

Domestic demand for gas has surged since PLN began reducing the amount of oil and diesel it uses to fuel its power stations, replacing them with cheaper coal and natural gas.