Witnessed by Minister of EMR, MoU between PGN and 177 Certain Industry Customers Signed

MINISTRY OF ENERGY AND MINERAL RESOURCES

REPUBLIC OF INDONESIA

PRESS RELEASE

NUMBER: 199.Pers/04/SJI/2020

Date: 5 June 2020

Witnessed by Minister of EMR, MoU between PGN and 177 Certain Industry Customers Signed

Minister of Energy and Mineral (EMR) Arifin Tasrif witnessed the signing of Memorandum of Understanding to Implement EMR Ministerial Decision No. 89K/10/MEM/2020 between gas distribution company Perusahaan Gas Negara and certain industry customers. The commitment includes 177 certain industry customers and was symbolically represented by Heads of PGN Sales Area for Jakarta, Bogor, Tangerang, Bekasi, Surabaya, and Medan with several representatives of industry customers.

Additionally, PGN is completing the technical agreement and further Letter of Agreement (LoA) with upstream producers. PGN has signed 5 (five) LoAs out of total 14 LoAs to implement EMR Ministerial Decision No. 89K/10/MEM/2020.

"The document forms the basis for amending the provisions in Gas Sales Agreement with upstream producers for a volume of 125.9 BBTUD out of total 328.6 BBTUD," said Minister of EMR.

So far, explained Minister of EMR, PGN and Group have completed discussions with natural gas user association, Ministry of EMR, and Ministry of Industry about the commercial review of Gas Sales Agreement (GSA) with industry customers, according to the period set out in EMR Ministerial Decision No. 89K/10/MEM/2020.

"Ministry of EMR expresses its appreciation to PGN and Group, also to natural gas user industry that have supported the policy to adjust natural gas price for the industry sector," he said.

Minister Arifin also expressed his expectation that the natural gas price policy would bring about positive impacts on the country.

"Among others, additional tax and dividend from industry sector, reduced government spending on subsidies for fertilizer industry and electricity, increased industry competitiveness, and absorption of manpower," he continued.

Particularly in the industry sector, the Minister added, competitive gas price is expected to increase industry competitiveness, production capacity, investment as well as to absorb additional manpower, so it will indirectly improve Indonesia's investment climate.

In line with the mandate of Presidential Regulation Number 40 of 2016, the government issued the natural gas price adjustment to speed up economic growth and increase of national industry competitiveness. Price adjustment is made by reducing state revenue from upstream oil and gas without reducing the revenue of PSC Contractor.

To follow up the Presidential Regulation, Ministry of EMR issued Ministerial Regulation Number 8 of 2020 and Ministerial Decision Number 89K/10/MEM/2020 which adjust gas price for companies from 7 industry sector set out in Presidential Regulation 40 of 2016, namely fertilizer industry, petrochemical, oleochemical, steel, ceramics, glass, and rubber gloves.

Gas is currently used to meet domestic demands. In 2019, 64.90% of gas was consumed by domestic market and the share is targeted to reach 68% in 2024. Electricity generation and industries are the two largest gas consumer sectors in Indonesia, consuming 13.66% and 26.02% respectively. Gas is also used as the base material of fertilizer industry, as domestic LNG, in oil lifting, city gas, and transportation, plus exported as LNG. (IY)

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