Earlier this year, Indonesia's Ministry of Energy and
Natural Resources issued a regulation to regulate the pricing
of gas fed into the country's electric generators. PLN, the
state's electricity company, is the largest operator of these
generators, although the regulation also applies to other
electricity producers supplying electricity to PLN.
Under the new regulation, development of generators running
off wellhead gas may be done without a tender if the agreed gas
price does not exceed eight percent of the Indonesia Crude
Price (ICP). If the wellhead gas price is higher than eight
percent of ICP, a tender is required.
PLN may also obtain gas from other sources, including
domestically sourced or imported LNG. The new regulation gives
preference to domestically sourced LNG, provided that the price
is not higher than 11.5% of ICP per million british thermal
units (MMBTU) - in other words, parity price to oil. If the
domestically sourced LNG is not available, imported LNG may
also be brought in. The price of the imported LNG may not
exceed 11.5% of ICP per MMBTU.
If the target price described above is not available, PLN
may source its gas needs from domestic providers (including
piped gas) at a price higher than the target price.
In all cases, the regulation stipulates that although price
escalation is discouraged, it is not prohibited.
The prices discussed above exclude any piping tariff, which
is also regulated, or other downstream transportation costs (if
the means of gas transport is not via pipelines).
The regulation was effective as of January 27 2017.
||Oene Marseille and Emir