State Gas Company Seeks to Thwart Price-Rise Plan

By webadmin on 09:54 pm Aug 23, 2011
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Ririn Radiawati Kusuma

State-controlled gas distributor Perusahaan Gas Negara is resisting the regulator’s plan to renegotiate gas price contracts, fearing that its margins might be depleted, a company official has said.

The upstream oil and gas regulator, known as BPMigas, is trying to review gas sales price contracts so it can boost state revenue from profit-sharing contracts with producers amid rising prices for natural gas.

It is targeting several gas purchasers, including PGN, which distributes the gas that it buys from producers to its customers.

Wahid Sutopo, PGN’s director of investment, said the company was concerned the margin from gas distribution will be eroded if it has to buy gas at a higher price.

Wahid said the firm may find it difficult to raise the gas price to end-buyers, including retail customers, state-utility company Perusahaan Listrik Negara, and manufacturers.

PGN buys gas from several fields, including the Grissik block in South Sumatra province, operated by ConocoPhillip Indonesia. That contract was signed seven years ago. PGN receives delivery of up to 295 million cubic feet per day from the block, which is sold at $1.80 per mmscfd for a 17-year period.

Another 2004 contract requires the delivery of 250 mmscfd of gas from Pagardewa gas field in South Sumatra, operated by Pertamina EP, for $2.20 per mmscfd.

The head of BPMigas, Raden Priyono, this month said that the gas price should be about $5 per mmscfd because the oil price had increased since the contract was signed.

PGN was also concerned the return on investment from its substantial spending on gas distribution infrastructure could be hit. For example, PGN invested $1.2 billion on the South Sumatra-West Java pipeline. It expects to get a return on the investment within 20 years. “We couldn’t possibly achieve it if the gas price is increased,” Wahid said.

Furthermore, Wahid said the contracts did not spell out the terms of any future price review of the price.

However, BPMigas’ spokesman Gde Pradnyana urged the State Enterprise Ministry, which supervises PGN, to support BPMigas on the matter because “there is a bigger interest behind this — the state revenue.”

Pertamina EP spokesman Agus Amperianto said the increase in the gas selling price is needed to help cover its operational cost losses. “We would need to cut our budget on maintenance to cover our loss,” Agus said on Tuesday. “We urge the renegotiation contract to be completed by the end of this year.”

PGN delivered 780 mmscfd of gas to its customers in the first quarter. Last year, PGN increased its gas price by 15 percent after it signed new gas contracts for a more expensive buying price.