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Apr 22, 2015 22:59:04
PGAS: Industry groups continue discussion on lowering gas prices. Glass and ceramics manufacturers, who see gas a 35% of their cost base, continue to ask for lower gas prices amidst slowing demand for their products. They are expecting lower prices from 2016. Industry also wants take or pay clauses removed from their contracts. The Ministry of industry has supplied scenarios of lower gas prices by 8-32.6% which it argues would actually increase taxation by Rp12.9-51.9t and economic output by Rp72.4t to 289.7t. Comment: At an event CLSA held this week with the President’s office, we noted a reticence to directly intervene in prices, instead support for infrastructure owners earning reasonable rates of return. It’s not clear how to us lower gas prices would automatically lead to higher Gov’t revenues or output – the upstream industry is the major contributor to the state budget (the state earns 70% from gas production) and c. 18% from every dollar PGAS earns in dividends and taxes. Ironically diesel prices remain 45-50% higher than gas and distributers of that form of energy (far more prevalent than gas) are earning higher margins than PGAS right now, yet this is not being discussed in the media by industry groups.
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