Apr 15, 2015 10:00:04
Ministry of Industrial Estate is urging the government to intervene and reduce gas price again, giving a few scenario that the additional tax revenue from industrial players will be more than enough to offset the reduction of government’s revenue from the gas industry. Industrial estate also complains that Perusahaan Gas Negara (PGAS) selling price of USD11/mmbtu to industrial is much more expensive than gas price is Singapore (USD4/mmbtu) and Malaysia (USD3/mmbtu). PGAS admitted it will be hard to reduce natural gas price as its gas supplies are tied by long term contracts and any negotiation will be difficult. Comments: We wish to highlight that natural gas in Malaysia and Singapore are subsidized by the governments whereas Indonesia is not, hence the disparity in natural gas price. PGAS does have a point that its gas supplies are tied to long term contracts so price reduction from upstream is quite unlikely. This leave us with three possible option, 1) government begin subsidizing natural gas price of Indonesia, 2) PGAS to reduce its selling price and bear the costs, 3) no reduction in natural gas price (industrial will still have to use natural gas as it is 40% cheaper than fuel oil).