Facing O&G Trade Balance Deficit, BPH Migas Takes These Steps and Strategies

MINISTRY OF ENERGY AND MINERAL RESOURCES REPUBLIC OF INDONESIA

PRESS RELEASE

NUMBER: 670.Pers/04/SJI/2019

Date: 22 November 2019

Facing O&G Trade Balance Deficit, BPH Migas Takes These Steps and Strategies

Downstream Oil and Gas Regulating Agency (BPH Migas) has mapped out priority strategies and steps to be taken in order to face the challenge of O&G trade deficit next year. This is part of the efforts to reinforce the downstream O&G policy to make it on target.

First, BPG Migas will add the construction of gas networks (jargas) which will promote domestic gas use while lowering import of Liquefied Petroleum Gas (LPG). Moreover, jargas construction is considered cheaper.

"BPH Migas is ready to guard (construction of) jargas in order to support (the utilization of) gas to be more independent. Yes maybe up to 10 million connections of jargas and it will support reduction of import and BPH Migas is always ready to give competitive price," said Head of BPH Migas Fansurullah Asa in Jakarta a few days ago.

The sheer volume of LPG imports, in BPH records, reaches Rp85 trillion a year with Rp35 trillion from Pertamina and Rp50 trillion from State Budget (APBN). In a five year total, as much as Rp426 trillion has been spent on LPG imports. It is only reasonable, continued Fanshurullah, for the government to prepare strategies to use gas for domestic need. "If we can save this, there's no need to import LPG, we use jargas (because) we have plenty of gas, O&G balance deficit will get smaller," Fansurullah asserted.

Until the end of 2019, as many as 404,139 house connections (SR) are expected to have been built. Under the State Budget financing, jargas will be built in 18 locations, namely North Aceh Regency, Dumai City, Jambi City, Palembang City, Depok City, Bekasi City, Karawang Regency, Purwakarta Regency, Cirebon Regency, Bojonegoro Regency, Lamongan Regency, Mojokerto Regency, Mojokerto City, Pasuruan Regency, Probolinggo Regency, Kutai Kertanegara Regency, Wajo Regency, and Banggai Regency.

The plan to build a similar program has also been announced by the government for 2020, with as many as 293,533 SR to be built in 16 provinces, namely Aceh, North Sumatra, Riau, Jambi, Riau Islands, South Sumatra, Lampung, Banten, Jakarta, West Java, Central Java, East Java, East Kalimantan, North Kalimantan, Central Sulawesi, and South Sulawesi.

Second, BPH Migas will immediately complete the tender for 294 Distribution Networks Areas (WJD) of gas which is the mandate of Regulation of Minister of EMR Number 4 of 2018 on Natural Gas Undertaking in Downstream Oil and Gas Business Activities. Currently, there are 294 WJDs from 21 business entities to be put out to tender after the revision of Natural Gas Networks Master Plan (RIJGBN) is complete.

The presence of the WJD program will cut the investment cost for infrastructure from the state budget because the cost will be fully born by the company proposing the WJD. "We will complete the WJD tender immediately," said Fansurullah.

In the future, after a business entity has the WJD special right, it will be granted a Special Trade Area (WNT) right for 30 years which area matches its distribution area, as well as gas allocation according to the planning proposed in the tender documents and the available natural gas supply. "We will ask the WJD holder not to use diesel oil but instead use natural gas," confirmed Fansurullah.

Third, to optimize the use of natural gas-fueled transportation in Indonesia. In BPH Migas calculation, Fansurullah continues, the price of Liquefied Natural Gas (LNG) for motor vehicles is in the Rp6,000 range. "If this can be made a national policy, it will be exceptional," he explained.

Fansurullah does not concern himself about technological readiness of the LNG-fueled transportation because a number of countries have used it; for example, India and China already have LNG trucks. "No need for regasification," said Fansurullah.

If all steps run well, Fansurullah carries on, they will slowly help make up the gas trade balance deficit. "This will have an added value in overcoming the gas trade balance," Fansurullah affirmed. (IY)

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

Agung Pribadi (08112213555)

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