Indonesia Works On Gas Infrastructure and Special Gas Pricing For Industry
SKK Migas reported that most of the working areas with large gas reserves have not yet secured a gas sales agreement (GSA) amid excessive domestic gas supply this year. This situation has triggered the abandonment of a number of potential gas fields. The National Oil and Gas Company Association (Aspermigas) reported that several gas field development plans had to be postponed because a number of blocks had not yet found potential buyers for their production. Domestic gas consumption growth tends to be slower than supply volume, resulting in oversupply.
The Indonesia Gas Society (IGS) assesses that the addition of downstream natural gas infrastructure has not been optimal in the midst of oversupply conditions this year. Geographical problems are the main obstacle in addition to the project’s economics for the development of downstream domestic gas infrastructure. As a consequence, the pipeline network that connects the western and eastern regions of Indonesia has not been realized until now. Natural gas pipeline infrastructure only increased by 3,321 kilometers from 2010 to 2017, with a dedicated downstream pipeline of approximately 2,700 kilometers which was built mostly by the Pertamina Group through its own funding. The natural gas pipeline infrastructure is projected to increase by 3,183 kilometers according to the Infrastructure Master Plan National Natural Gas for the period 2017 to 2031.
The Indonesia Gas Society also asked the government to re-evaluate the special gas pricing of USD 6 per MMBTU for 7 industrial and electricity sectors. Chairman of the Indonesian Gas Society Aris Mulya Azof assesses that the determination of domestic gas prices no longer reflects the economics of gas development projects in the upstream industry and efforts to accelerate gas infrastructure on the downstream side. “This regulation needs to be reviewed again whether it really can make all players from upstream to downstream get a reasonable margin to accelerate the development of gas infrastructure in the country,” said Aris, Chairman of IGS. The government’s ability to cover the difference in the cost of gas network construction at the Cooperation Contract Contractors also did not last long and in the end the Contractors had to bear the loss because they had to adjust to the special gas price. The unavailability of infrastructure and the decline in production in a number of gas fields also caused the domestic industry to seek LNG imports in this oversupply condition.
A number of industries that receive special gas pricing of USD 6 per MMBTU hope that the Indonesian government will not change existing policies and reject the government plan to increase special gas prices. “Manufacturing industry continues to expand as seen from the Manufacturing Purchasing Managers Index which has exceeded 50 since October 2021. It is very logical that the special price of USD 6 per MMBTU is continued and expanded to other industrial sectors. The special pricing has proven to be very effective as capital development for a stronger economic foundation”, said the General Chairperson of the Natural Gas User Industry Forum, Yustinus H. Gunawan.
Similarly, the General Chairperson of the Association of Indonesian Ceramic Industries, Edy Suyanto said that the utilization of national ceramic products was previously stagnant at the level of 60% to 65% in 2015 to 2020. Given the special gas pricing, utilization has now increased to 75% in 2021 and to 82% in the first semester of 2022. This increase in performance is claimed to have helped boost investment interest. Until 2024 there will be several business expansion projects for the ceramic industry capacity of IDR 5 trillion and the sanitaryware of IDR 15 trillion.
