Indonesia: Cut gas prices for petrochemical, fertilizer industries in 2017

Indonesia: Cut gas prices for petrochemical, fertilizer industries in 2017

Indonesia on Tuesday told energy companies to cut natural gas prices for
fertilizer, steel and petrochemical industries starting Jan. 1, 2017, in a
renewed effort to bring down domestic gas prices.

Earlier this year, the government had introduced regulations to cut domestic
gas prices to help to spur economic growth and improve the competitiveness
of domestic industry.

But some contractors have continued to sell natural gas above the price the
government had planned for, according to government data.

New rules from the energy ministry published on its official website on
Tuesday, require gas contractors like PT Pertamina EP and Kangean Energy
Indonesia Ltd, among others, to use new price formulas for contracts with PT
Krakatau Steel Tbk, PT Petrokimia Gresik and several fertilizer makers.

Based on the new formulas, gas buyers would only pay around $6/MMbtu,
compared to a range of prices they currently pay of between $5.73 to $7.54.

There will be no change for companies with contract terms already below
$6/MMbtu.

Suryaningsih, a senior official at the ministry's directorate general of oil
and gas, said the new formulas would mean less revenue for gas producers as
well as the government, but "all contractors have agreed."

There were no more details available on how much revenue gas companies and
the government could expect to lose.

"(Gas) contractors are asked to make their operational costs more efficient
in order to maintain their businesses' viability and their return of
investment," the energy ministry's spokesman Sujatmiko said.

In addition to cheaper gas prices, Krakatau Steel and Petrokimia Gresik will
also get a reduction in transport fees for their gas purchase.

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Link to Original Article:
http://www.hydrocarbonprocessing.com/news/2016/12/indonesia-cut-gas-prices-f
or-petrochemical-fertilizer-industries-in-2017

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John Diecker
APT Consulting Group Co., Ltd.

www.aptthailand.com