Vice President Boediono hinted Tuesday the government would soon raise the price of gas sold on the domestic market to levels on par with international prices to encourage producers to sell gas to local buyers.

Boediono said the pricing policy revision was needed as the current domestic gas price was far lower than that in the international market.

“The pricing policy for domestic gas sales must be reviewed. It is impossible for us to [continuously] sell gas for between US$2 and $3 [per million British thermal units (mmbtu)], while overseas the gas price reaches between $13 and $14 [per mmbtu],” said Boediono when he opened the 34th annual convention and exhibition of Indonesian Petroleum Association (IPA).

Boediono added infrastructure development was also needed to secure gas supplies to the domestic market.

Although gas reserves are now available in Papua and Sulawesi, industry in Sumatra and Java is facing a gas shortage because of a lack of efficient infrastructure.

Ira Miriawati, head of oil and gas utilization at upstream oil and gas regulator BPMigas, said the domestic gas price varied from one field to another, but was far lower than in the international market.

“Current domestic gas price is somewhere between $1.2 to $6 per mmbtu, while exported liquefied natural gas [LNG] can fetch somewhere between $10 to $12 per mmbtu,” Ira said.

Boediono said the domestic gas price rationalization must be done in phases.

“This cannot be done all at once, but gradually. One day all gas prices must follow the economical prices,” he said, adding that an inter-government team would formulate the energy pricing policy.

IPA chairman Ron Aston welcomed Boediono’s statement, saying it was in line with industry expectations.

He said pricing was one of the key issues for gas developers to secure financing for their projects.

“The gas price must be market driven and must not be limited by producers providing indirect subsidies to end users,” he said.
IPA currently has 52 company members operating in exploration, production and services of oil and gas.

This year’s annual convention and exhibition, which will run until Thursday, is under the theme: “Investing Together for Future Growth”.

During the ceremony, contracts for 14 new oil and gas working areas were signed and, as reported earlier, the winning bidders of the 14 fields committed to spend a total  of $146.7 million in investment for the first three year of the exploration.

In addition to the contracts, eight gas sales agreements totalling $908.7 million have also been signed at the event.
Currently, there are 228 oil and gas contractors operating in Indonesia.

According to a Dec. 30 statement by BPMigas, those companies planned to spend around $15.99 billion in investments this year.

Energy and Mineral Resources Minister Darwin Zahedy Saleh said the contractors have spent $2.61 billion in the first quarter of this year.