Minister of EMR Witnesses Signing of Gas Price Adjustment

MINISTRY OF ENERGY AND MINERAL RESOURCES

REPUBLIC OF INDONESIA

PRESS RELEASE

NUMBER: 219.Pers/04/SJI/2020

Date: 26 June 2020

Minister of EMR Witnesses Signing of Gas Price Adjustment

Minister of Energy and Mineral Resources (EMR) Arifin Tasrif witnessed the signing of 20 agreements, consisting of 13 Letters of Agreement between gas sellers and buyers, and 7 PSC Side Letters between Special Task Force for Upstream Oil and Gas Business Activities (SKK Migas) and Production Sharing Contract (PSC) Contractors.

These agreements are signed to implement Regulation of Minister of EMR Number 8/2020, Decision of Minister of EMR No. 89K/10/MEM/2020, and Decision of Minister of EMR No. 91K/10/MEM/2020 about gas prices and users in industry and electricity sectors.

"We'd like to express our appreciation, particularly to 7 PSC Contractors that today signed Side Letters of PSC, namely PetroChina International Jabung Ltd, PT Medco E&P Indonesia, PT Medco E&P Lematang, PC Ketapang II Ltd, PT Pertamina Hulu Energi Offshore North West Java, Ophir Indonesia (Madura Offshore) Pty Ltd, and Ophir Indonesia (Sampang) Pty Ltd. We'd also like to express our appreciation for the signing of Letter of Agreement between gas sellers and buyers for the volume of about 260.03 BBTUD," said Minister Arifin.

The 13 LoA's signed between gas sellers and buyers consist of 2 agreements to implement EMR Ministerial Decision Number 89K/2020 on Procedures for Stipulating Certain Gas Users and Prices in the Industry Sector at the total volume of 46.3 billion British Thermal Unit per Day (BBTUD), while 11 agreements are signed to implement EMR Ministerial Decision Number 91K/2020 on Natural Gas Price for Power Plants (Plant Gate) at the volume of 213.73 BBTUD.

Arifin also expressed his appreciation to the executives of PSC Contractors and natural gas trading enterprises, PLN, and natural gas consumers who have supported the policy to adjust gas price for the industry sector. The policy is expected to boost interest in industrial investment while supporting the development of upstream gas in the future.

Arifin also expected the continuous support from all parties involved in implementing the policy in order to accelerate economic growth and to increase the competitiveness of national industries. "The gas price adjustment policy is expected to bring positive impacts to the state, among others, in forms of additional taxes and dividends from the industry sector, reduced government spending for fertilizer and electricity subsidies, and creation of employment," said Minister Arifin.

Until recently, the price of 1,223.03 BBTUD of natural gas, for both certain industries and electricity sector, has been adjusted.

Minister Arifin went on to explain the price adjustment for certain industries was made for the gas volume of 822.3 BBTUD. This volume is made up of 300 BBTUD under the current Gas Sales Agreement (GSA), 476 BBTUD under previously signed LoA, and 46.3 BBTUD under today's LoA.

"Meanwhile for electricity, the price of 400.73 BBTUD has been adjusted, consisting of 102 BBTUD under the current GSA, 85 BBTUD under previously signed LoA, and 213.73 BBTUD under today's LoA," said Arifin on Friday (26/6).

Head of SKK Migas Dwi Sutjipto said the signing is expected to give certainty to gas buyers from the industry and the electricity sectors as well as to downstream industries about the supply of gas according to the volume agreed in the contracts. "Buyers should also increase their volume absorption because the price is now lower," said Dwi.

Until recently, 25 LoA's between sellers and buyers have been signed to implement Ministerial Decision 89K/2020 with the total volume 522.3 BBTUD or 43.3% of the total gas volume for 2020 set in the ministerial decision. Additionally, 300 BBTUD or 24.9% of gas volume does not need additional agreement between the sellers and the buyers because the price is set according to the current price policy. Thus, total 822.3 BBTUD or 68.2% of gas volume has been priced according to Ministerial Decision 89K/2020.

Meanwhile, total 13 LoA's between sellers and buyers in the electricity sector have been signed with total gas volume of 298.73 BBTUD or 21.4% of the total volume for 2020 set in Ministerial Decision 91K/2020. There is an addition of 102 BBTUD that does not need agreement adjustment. In total, 28.7% of the gas volume for the electricity sector in 2020 has been priced according to Ministerial Decision 91K/2020.

Moreover, there are 16 side letters of PSC signed, including 7 that were signed today. Dwi explained that side letters of PSC have the same legal force with PSC or PSC Amendment, so these side letters guarantee Contractors' investment. The side letters also regulate the mechanism to reduce the government's share in the revenue in order to maintain the Contractor's share. (IY)

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

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