Keeping Electricity Tariffs Affordable, Govt also Sets Cheap Gas Price for Power Plants

MINISTRY OF ENERGY AND MINERAL RESOURCES

REPUBLIC OF INDONESIA

PRESS RELEASE

NUMBER: 170.Pers/04/SJI/2020

Date: 27 April 2020

Keeping Electricity Tariffs Affordable, Govt also Sets Cheap Gas Price for Power Plants

After setting out the regulation on natural gas price for certain industries at USD6 per MMBTU (Millions British Thermal Units), Minister of Energy and Mineral Resources (EMR), Arifin Tasrif, signed Regulation of Minister of EMR No. 10 of 2020 on Amendment to Regulation of Minister of EMR No. 45 of 2017 on Utilization of Natural Gas for Power Plants. The regulation sets the gas price for PT PLN (Persero) at USD6 per MMBTU.

Head of Bureau of Communication, Public Information Services, and Cooperation of Ministry of EMR, Agung Pribadi, explains that several provisions in Ministerial Regulation No. 45 of 2017 have been changed.

"For example, point 5 of Article 1. Previously, Electricity Generation Business Entities (BUPTL) are business entities holding the electricity generation business licenses. BUPTL has been changed into business entities holding the electricity generation business licenses which consist of Independent Power Producers (IPP) and holders of Business Area, having a power purchase agreement or an operation agreement (KSO) with PT PLN (Persero)," Agung explained.

Article 4 has also been changed so that it reads as follows: "In addition to the supplies obtained from Natural Gas allocation as referred to in Article 3 section (2), PT PLN (Persero) and/or BUPTL may obtain the supplies of Natural Gas from Business Entities who are Holders of Natural Gas Trade Business License receiving Natural Gas allocation in so far that the business entities provides the facilities or infrastructure for Natural Gas".

"Meanwhile, in terms of natural gas price, Article 8 of Ministerial Regulation No. 10 of 2020 states that PT PLN (Persero) and BUPTL may buy Natural Gas through pipelines at plant gate at US$ 6 per MMBTU maximum," added Agung.

If the price of Natural Gas at plant gate is higher than US$ 6 per MMBTU or if Natural Gas comes from LNG or Compressed Natural Gas (CNG), the Minister will set the Natural Gas price at plant gate by making an adjustment to the price of Natural Gas bought from the Contractor plus the distribution cost which is made up of transportation cost and midstream cost of Natural Gas.

"The adjustment to natural gas price will not affect the amount of revenue to be received by the Contractor. The price adjustment will reduce the amount of revenue to be received by the state from the production sharing according to the Production-Sharing Contract on a Work Area of the current year. The maximum reduction in the state revenue is the amount of revenue to be received in the current year," said Agung.

In applying the Natural Gas price at plant gate, Minister of EMR can assign State-Owned Enterprises (SOEs) and/or their affiliates that carry on the Natural Gas business to distribute Natural Gas to PT PLN (Persero) and/or BUPTL.

"State-Owned Enterprises and/or their affiliates that distribute Natural Gas to PT PLN (Persero) and/or BUPTL can be given incentives proportionally," Agung said.

The Downstream Oil and Gas Regulating Agency (BPH Migas) will coordinate and set the adjustment to the tariff of transporting Natural Gas through pipelines.

"When this Ministerial Regulation becomes effective, Natural Gas price at plant gate for power plant needs which had been set at US$ 6/MMBTU maximum, between PT PLN (Persero) or BUPTL and Contractors and/or Business Entities who are Holders of Natural Gas Trade Business Licenses are still valid," Agung concluded. (IY)

Head of Bureau of Communication, Public Information Services, and Cooperation

Agung Pribadi (08112213555)

Share This!