PGN agrees to set new price after protests

JAKARTA. After days of tough negotiations, the government, state gas distributor PT Perusahaan Gas Negara (PGN) and gas-using industries agreed that the new gas prices for industrial customers would be implemented starting Sept. 1.

The agreement was reached after the government decided to delay the 55 percent price increase recently announced by PGN following protests from the gas distributor’s corporate customers.

Industry Minister MS Hidayat said within a week, the government would determine the fate of the price increase, which had been implemented by PGN for industries in May.

The government was still studying the best formula to determine the price and whether the price increase would be implemented directly or gradually, he added.

“The other thing we agreed upon was that under renewed contracts with industries, PGN would ensure sustainable gas supply. It will directly be guaranteed by the company’s president director [Hendi Priyo Santoso],” Hidayat said at a press conference after meeting with representatives of gas-using industries. Hidayat was accompanied by Hendi and Energy and Mineral Resources Minister Jero Wacik, at his office in Jakarta on Wednesday.

He continued there would be regular talks between associations of gas-using industries and PGN’s president director to discuss price adjustments. The price would be reviewed every six months and could be changed every year.

“We believe that PGN can find solutions for the price disputes. We don’t want the growth of industries to stall just because of gas shortages,” Hidayat emphasized.

PGN increased gas prices for industrial customers in South Sumatra, West Java, Jakarta and Banten by 55 percent, from an average of US$6.80 per million British thermal units (Btu) to $10.20, after it renewed contracts with South Sumatran suppliers ConocoPhillips and Pertamina EP.

Most of them principally agreed to the price increase but they wrote a letter to President Susilo Bambang Yudhoyono requesting that the price was increased gradually due to the heavy burden a sudden increase would place on their production costs.

The deputy secretary-general of the Indonesian Employers’ Association (Apindo), Franky Sibarani, hoped that PGN could ensure that the industrial gas supply would meet the amounts stipulated in the contracts.

“But we understand that to do that, PGN also needs a guarantee from the government to maintain supplies from gas producers,” he said.

The Deputy Energy and Mineral Resources Deputy Minister Rudi Rubiandini suggested that the government review PGN’s status as a gas transporter and trader, which was cited as the main cause of its high prices. “I know it will be difficult to change the company’s status to only a transporter because the company is no longer wholly owned by the government,” he said.

The deputy chairman of the House of Representatives’ Commission VII overseeing energy, Golkar’s Zainuddin Amali, agreed with Rudi that PGN’s dual status negatively affected gas prices.

He argued that the average price of $10.2 per million Btu was too high. “If PGN is only a transporter, the gas price will stand at between $7 and $8 per million Btu, not $10.2, because it buys gas from producers at between $5 and $6 per million Btu,” he said. (Rangga D. Fadillah, The Jakarta Post)