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IPA Convex: In search of affordable natural gas price

Panelists discussed natural gas prices at the last session of the IPA Convex. (Photo: RambuEnergy.com/RK)

JAKARTA (RambuEnergy.com) – In a special session of the third of the 42nd Indonesian Petroleum Association and Exhibition (IPA Convex) on Friday (May 4), a panel of experts comprised of industry executives discussed the prospect of natural gas in the country and how to make the price to be more affordable to domestic industries.

One effort needed is streamlining bureaucracy as well as improve gas infrastructure, the panelists noted.

“All industry players acknowledge that our reserves potential is still huge. However, the way to extract natural gas is getting more and more difficult with many potential reserves being located offshore and at the eastern part of Indonesia, which is far from the traditional market of natural gas users,” Budi Aguswidjaja, Vice President Finance Sales and Commercial of BP Indonesia, said. Budi was the moderator of the special session.

According to the Energy and Mineral Resources Ministry’s data, the country’s gas lifting reached 6,386 mmscfd in 2017 and is projected to reach 7,611 mmscfd by 2020, thanks to several upstream gas projects expected to go on-stream during the period.

In order to speed up the development of major gas projects, the government has declared four gas projects in the list of National Strategic Projects (PSN) namely Tangguh Train 3, Jambaran Tiung Biru, Indonesia Deepwater Development (IDD) and Abadi-Masela.

These projects are expected to boost natural gas output further as they are expected to produce first gas within 10 years, while one PSN, which is Jangkrik, has been on stream since 2017, adding to the country’s current gas lifting.

Those mega projects require an investment to the tune of 592 trillion rupiah or US$ 42.9 billion (exchange rate Rp13,778).

In order to speed up these gas projects, a new contract model is being drafted, Waras Budi Santosa, Head of Oil and Gas Monetization Division The Special Taskforce for Upstream Oil and Gas Business Activities (SKK Migas), said.

SKK Migas is currently using a sales and purchase agreement which allows for four separate delivery destinations in a single contract.

He added that the government and regulator had also removed 186 rules, which would reduce the period between Plan of Development and production to less than five years from the currently average of eight to fifteen years.

However, Komaidi Notonegoro from the think-tank Reforminer Institute said the government needs to do more in removing extra layers in natural gas distribution, thus making the price more affordable for end-users.

He added that better infrastructure is also required to connect gas producers and buyers and bring them closer together. Infrastructure is certainly one issue that will be addressed by the establishment of the oil and gas holding company through the merger of PT Pertamina and PT Perusahaan Gas Negara.

“The holding company will ensure that there will be no duplication in infrastructure development,” Jobi Triananda Hasjim, Perusahaan Gas Negara’s President Director, said.

For users like Achmad Safiun, Head of the Forum for Natural Gas-Using Industries, he said the government has stipulated regulations to make natural gas more affordable, but the implementation is lacking.

At present, natural gas prices purchased by domestic buyers are still hovering over US$9 per MMBTU. The government has issued stipulation to push down gas price to US$6 per MMBTU, however, it has to be realized given complexity of gas price structure. At present, there is still huge gap between the price of gas at the well-mouth and the end-consumer price. (*)

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