Optimizing Gas Utilization by Industries, Gas Sales Agreement Signed

MINISTRY OF ENERGY AND MINERAL RESOURCES

REPUBLIC OF INDONESIA

PRESS RELEASE

NUMBER: 183.Pers/04/SJI/2020

Date: 20 May 2020

Optimizing Gas Utilization by Industries, Gas Sales Agreement Signed

Ministry of Energy and Mineral Resources (EMR) ensures its commitment to boost the construction of infrastructure that support the development and utilization of natural gas. To optimize the utilization of natural gas, the natural gas share in the energy mix is targeted at 22% in 2025 and 24% in 2050. Natural gas is the future of clean energy besides renewable energy.

The statement was made by Minister of EMR, Arifin Tasrif, while virtually witnessing the Signing of Amendment to Gas Sales Agreement (GSA) and LoA between Sellers and Buyers of Natural Gas to Implement Decision of Minister of EMR No. 89K/10/MEM/2020, in Jakarta on Wednesday (20/5).

As many as 14 Amended Natural Gas Sales Agreement were signed by 4 Contractors of Production Sharing Contracts (PSC) and 11 natural gas buyers for fertilizer industry sector, steel, and industrial sector through pipeline facility owners. The total volume signed today is over 330 BBTUD or about 28 percent of the total volume 1,188 BBTUD regulated in EMR Ministerial Decision No. 89 of 2020 on Procedure for Determining Users and Certain Natural Gas Price in Industrial Sector.

"We're currently shifting from oil-dominant to gas-dominant. The government is making its best efforts to discover more gas reserve potential and to look for ways to turn the potential into proven reserves. Additionally, the government is increasing gas supply to meet the ever increasing domestic demands and trying to ensure that upstream business is still attractive to investors," said Minister Arifin.

Utilization of gas is presently focused on meeting domestic demands. In 2019, gas consumption by domestic market reached 64.90% and the percentage is targeted to grow to 68% in 2024. Power plants and industries are the largest consumers of gas in Indonesia, at 13.66% and 26.02%, respectively. Gas is also used as the raw material of fertilizer industry, domestic LNG, oil lifting, city gas, transportation as well as exported as LNG.

"According to the mandate of Presidential Regulation Number 40 of 2016, the government issued the policy on natural gas price adjustment in order to accelerate economic growth and to increase the competitiveness of national industries. Price adjustment is made by reducing the government's share from upstream oil and gas revenue, without reducing the income of Contractors of Production Sharing Contracts," Minister Arifin continued.

As publicly known, in the follow-up to the Presidential Regulation, Ministry of EMR issued EMR Ministerial Regulation Number 8 of 2020 and Ministerial Decision Number 89 of 2020, both adjusting gas price for 176 companies from 7 industrial sectors set out in Presidential Regulation No. 40 of 2016, namely fertilizer, petrochemical, oleochemical, steel, ceramics, glass, and rubber glove. The policy was issued after discussions are made with the stakeholders, among others state ministries (Coordinating Ministry for Economy, Ministry of Finance, Ministry of SOE, Ministry of Industry) and business entities (PGN, Pertagas, PLN, Pupuk Indonesia, and some private business entities); the policy was also discussed several times in Limited Cabinet Meetings with the President and Working Meetings with the House of RI.

"The gas price adjustment policy is expected to give positive impacts on the state, among others from additional tax and dividends from the industrial sector, reduced government spending on fertilizer and electricity subsidies, increased attractiveness of the industries, and absorption of workers," continued Minister of EMR.

Special for the industrial sector, competitive gas price is expected to increase industry attractiveness, production capacity, investment as well as to absorb additional workers so that it will indirectly improve Indonesian investment climate.

"The government will always try to fully support the measures taken by SKK Migas together with PSC Contractors to deal with the challenge of increasing the national production of oil and gas, particularly in order to meet domestic demand for energy. We hope through the measures that have been and will be taken by SKK Migas, the policy on natural gas price adjustment for industrial and electricity sectors will immediately be implemented," Minister of EMR concluded. (IY)

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