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State Distributor: Govt Price Increase Of Natural Gas Will Hurt Consumers
Ririn Radiawati Kusuma | June 27, 2011

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State gas distributor Perusahaan Gas Negara opposes the government’s proposed price increase on natural gas, saying it will harm the country’s customers because it will have to pass on the higher cost to them.

“We regret the government’s proposal, which asked us to raise the gas purchase price,” Hendi Prio Santoso, president director at PGN, said after a shareholders meeting in Jakarta on Monday. “The gas sales contract is long-term, which is sacred and has to be respected.”

The government is working on a mechanism to renegotiate gas sales in a bid to increase the country’s revenue. Upstream oil and gas regulator BPMigas and the Energy Ministry have asked PGN to make its gas purchase according to market prices.

According to BPMigas, the market price to purchase natural gas from a wellhead is approximately $5 per million standard cubic feet per day (mmscfd), while PGN only purchases gas at $2 to $3 per mmscfd.

“We are a publicly traded company,” Hendi said. “We have to calculate everything, including our relation to consumers, in terms of the gas sales price.”

Evita Legowo, director general of oil and gas at the Energy Ministry, said last week said that the government would renegotiate the gas sales contract to boost gas revenue.

For PGN, the proposed renegotiation may dampen its future expansion plans.

The firm is trying to build a floating storage regasification unit in Belawan, North Sumatra. Currently, PGN is still waiting for the gas supply commitment from from the Tangguh LNG plant in Papua to fill its upcoming FSRU with 1.25 to 1.5 metric tons per annum of LNG.

“We are waiting for the discussion between BPMigas and directorate general of oil and gas at the Energy Ministry about the supply assurance for the Belawan FSRU,” Hendi said.

The FSRU project is expected to begin operation in mid-2012.

PGN is expected to invest as much as $250 million to build the unit. Hendi said PGN was still deciding which company to appoint for the construction.

PGN fell 1.2 percent to Rp 3,975 during Monday trading on the Indonesia Stock Exchange. Its shares have fallen 10 percent so far this year.