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Indonesia’s gas companies, state-owned electricity company sign deals on cheap gas supply for power plants

The Lombok Peaker gas-fired combined cycle power plant (PLTMGU) in Lombok, West Nusa Tenggara. This 136MW peaker plant, which began operations in early 2020, supplies electricity during sudden spikes in local power consumption. (PLN/PLN). Sketched by the Pan Pacific Agency.

JAKARTA, Jun 29, 2020, The Jakarta Post. Four gas producers have inked deals to supply gas at below market price to several gas-fired power plants as part of the government’s plan to slash billions of dollars in energy subsidies, The Jakarta Post reported.

Producers Pertamina EP, Pertamina Hulu Energi, PT Kangean Energy and EMP Bentu Ltd. signed on Friday 11 deals with state-owned electricity company PLN to supply the gas, said the Upstream Oil and Gas Special Regulatory Taskforce (SKK Migas) in a statement.

PLN, the plants’ operator, is slated to buy the gas at US$6.09 per million British thermal unit (mmbtu), cheaper than what the company is currently paying at $8.21 per mmbtu.

“With lower gas prices, this will reduce PLN’s electricity supply cost [BPP] and thus, create a more efficient electricity supply,” PLN spokesman Agung Murdifi told The Jakarta Post via text message on Friday.

“Buyers should also increase gas consumption with the lower prices,” said Dwi Soetjipto, head of SKK Migas, an agency that often speaks on behalf of oil and gas producers in Indonesia.

With Friday’s deals, PLN has secured 213.73 billion British thermal units per day (bbtud) worth of cheap gas, which is 15.4 percent of the total receivable as stipulated by Energy and Mineral Resources (ESDM) ministerial decree (Kepmen) No. 91K/2020.

The Energy Ministry expects the incentive to save state coffers around Rp 20 trillion ($1.4 billion) in electricity and fertilizer subsidies each year between 2020 and 2024, which is the incentive’s lifespan.

Fertilizer producers, an equally heavy consumer of natural gas, are also slated to receive the cheap gas this year, but through a different ministerial decree.

A Pertamina EP official was not immediately available for comment.

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