Minister of EMR Again Witnesses GSA Signing

MINISTRY OF ENERGY AND MINERAL RESOURCES

REPUBLIC OF INDONESIA

PRESS RELEASE

NUMBER: 195.Pers/04/SJI/2020

Date: 3 June 2020

Minister of EMR Again Witnesses GSA Signing

After 14 Agreements on Natural Gas Price Adjustment phase one were signed between 4 Production Sharing Contract (PSC) Contractors and 11 natural gas buyers for fertilizer, steel industry sector and industry sector via pipeline facility owners on 20 May 2020, today Minister of Energy and Mineral Resources (EMR), Arifin Tasrif, again virtually witnesses the signing of Side Letter of PSC and LoA between sellers and buyers, with a volume of 226.19 BBTUD, to implement EMR Ministerial Decision Numbers 89K/10/MEM/2020 and 91K/10/MEM/2020.

With today's signing, the gas volume committed to support natural gas price adjustment for certain industries and electricity generation totals 564.63 BBTUD.

On this occasion, Minister Arifin reiterates that the natural gas adjustment policy is expected to bring about positive impacts on the state, such as additional tax and dividend from industry sector, reduced government spending on fertilizer and electricity subsidies, improvement of industrial competitiveness, and absorption of workforce.

"Special in industry sector, competitive gas price is expected to increase industrial competitiveness, production capacity, and investment as well as to absorb more workforce, which will indirectly improve the investment climate in Indonesia," explained Minister Arifin in Jakarta, Wednesday (3/6).

As publicly known, gas is currently focused on meeting domestic demands. In 2019, gas consumption by domestic market reached 64.90% and is targeted to reach 68% in 2024. Power plants and industry sector are the two largest gas consumers in Indonesia, at 13.66% and 26.02%, respectively. Gas is also used as base material for fertilizer industry, domestic LNG, oil lifting, city gas, transportation as well as exported as LNG.

Ministry of EMR, continues Minister Arifin, expresses its highest appreciation to the management of PSC Contractors, Natural Gas Trading Companies, and industrial natural gas users that have supported the natural gas price adjustment policy for industry sector, particularly 9 PSC Contractors signing today's Side Letter of PSC, namely PT Pertamina EP, Minarak Brantas Gas Inc., PT Pertamina Hulu Energi NSO, PT Pertamina Hulu Energi Ogan Komering, PT Pertamina Hulu Energi Jambi Merang, PT Pertamina Hulu Energi OSES, Energi Mega Persada (EMP) Bentu Ltd., Kangean Energi Indonesia (KEI), and PT Pertamina Hulu Mahakam.

"We'd also like to express our appreciation for the signing of Letter of Agreement between Sellers and Buyers of Natural Gas with a volume of 226.19 BBTUD. The government will always offer full support to the efforts made by SKK Migas and PSC Contractors in facing the challenge of increasing national oil and gas production, particularly in order to meet domestic demand for energy," added Minister of EMR.

The minister expects the efforts that have been and will be made by SKK Migas to implement the natural gas price adjustment for industry sector and electricity generation will soon be realized.

"We hope to gain the support from all parties in implementing this natural gas price adjustment policy so that we can create accelerated economic growth and increase the competitiveness of national industries," Minister Arifin concluded.

On the same occasion, Minister Arifin also informs that on the coming Friday (5/6), Gas Sales Agreement (GSA) signing is scheduled between PT PGN Tbk. and 177 industrial gas consumers that have been granted price adjustment according to EMR Ministerial Decision Numbers 89K/10/MEM/2020 and 91K/10/MEM/2020.

Meanwhile, Head of SKK Migas, Dwi Soetjipto, explains that Side Letter of PSC is inseparable from PSC. The Side Letter of PSC details the production-sharing adjustment between SKK Migas and PSC Contractor by using provisional entitlement to the applicable natural gas price set by Minister of EMR. Calculation is made through a mechanism for reducing State's share in the revenue on a monthly basis in order to maintain PSC Contractor's share in the revenue. The mechanism and procedure for calculating the reduction in State's share will be made in Technical Guidelines which are an inseparable part of the Side Letter of PSC.

LoA, on the contrary, continues the agreement that has been signed by sellers and buyers of natural gas. The main items in the LoA include volume, initial price, adjusted price, and agreement period.

"With the signing of Side Letter of PSC and LoA, we hope PSC Contractors can continue to increase investment in Indonesia and meet national gas production target," said Dwi. (IY)

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

Agung Pribadi (08112213555)

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