Industry Urges Gas Price Rise Caution

By webadmin on 07:22 pm May 16, 2012
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Dion Bisara

The Indonesian Olefin, Aromatic and Plastic Industry Association has asked state-controlled gas distributor Perusahaan Gas Negara to raise its prices incrementally, to give customers a chance to adjust.

Earlier this month, PGN raised its gas prices for industrial customers to $10.10 per million metric British thermal units, a 49 percent increase from $6.80 per mmbtu, following higher gas prices that PGN pays producers. The new price has been in effect since May 1.

The sudden increase has put pressure on manufacturers, especially petrochemical companies, which depend on gas in their production process.

“The increase will hurt, as many of us already operate on very tight margins,” Suhat Miyarso, deputy chairman of the industrial association, said on Monday.

He said the higher gas prices would translate into companies paying around $18 dollars more on average for each ton of petrochemicals produced. “That’s compared to a $10 to $15 margin that we make,” he said.

But Suhat was quick to say that the association understood the price increase was necessary, with gas prices rising globally, especially if it helped ensure a sufficient supply for domestic industry.

PGN’s gas now meets less than half the demand of association members.

“We are just proposing a 10 percent increase every three months,” Suhat said.

Heri Yusup, PGN’s corporate secretary, said the company was open to suggestions. “We are evaluating input from companies, which expect the gas supply to rise as well,” he said. “In fact, our main consideration with the price increase is that there are guarantees from suppliers.”

PGN buys gas from operators such as ConocoPhillips and Pertamina EP, which are only required to sell 25 percent of their product in the domestic market.

Additional reporting from Antara