Infrastructure Issue Hampers National Gas Conversion Plan

 
Robert Sidauruk, Kartini L Makmur
 
The government’s plan to convert the nation’s energy consumption patterns from oil to gas seems to be getting nowhere, despite the fact that this has been planned for a decade. Many believe that a lack of infrastructure support has been the biggest obstacle, triggered by a concern of developer’s as to whether the market is ready for such a conversion.
 
The basis for this concern is the fact that there are only a few domestic businesses that use gas over oil. The government, however, remains optimistic about the conversion plan, saying that it is currently accelerating infrastructure projects for the gas conversion plan.
 
“We will accelerate several natural gas transmission pipeline projects in an effort to support the gas conversion program,” said Naryanto Wagimin, Acting Director General of Oil and Gas at the Ministry of Energy and Mineral Resources in Jakarta last Friday.
 
Mr. Wagiman was also commenting on the Kalimantan – Jawa (Kalija) Natural Gas Transmission Pipeline I project which was initiated in 2006 but is yet to show any sign of completion in near future.
 
Recently, however, PT Perusahaan Gas Negara (PGN) entered into cooperation with PT Bakrie & Brothers (BNBR) as the developer of the Kalija project, to speed up the completion of USD 200 million’s worth of infrastructure by taking up an 80 percent share in the project.
 
Mr. Wagimin said that to ensure infrastructure development can be effectively executed, PGN has asked the government to provide incentives for domestic businesses that use gas fuel. Part of the problem is that the current gas price for businesses, at USD 10 per MMBtu, means that gas the business in Indonesia is not feasible in the eyes of businesses.
 
To overcome this issue, Mr. Wagimin said that the government will initiate a meeting between developers of gas transmission pipelines and domestic businesses as potential consumers. In the meeting, the government will convince both parties of the security of national gas supply and demand. It is hoped that the meeting will reduce the concerns of both parties and accelerate the development of gas related infrastructure projects.
 
Unclear Policy and Regulations
Pri Agung Rakhmanto, Director at the Reforminer Institute, contends that the slow progress on gas infrastructure development in Indonesia has been caused by unclear policy on gas conversion by the government. Mr. Rakhmanto emphasized the importance of the two fundamental components of gas infrastructure, transmission pipelines and gas fuel stations, both of which are critical to implement the gas conversion program.
 
“The development of the infrastructure is stagnant as a result of unclear policy and regulations,” added Mr. Rakhmanto.
 
Mr. Rakhamto believes that the gas sector in Indonesia is a profitable business, considering the increase in industry in Indonesia and also the availability of the resource itself. Therefore, the primary remaining issues are only a matter of clear policy and regulations so that the infrastructure development can be boosted.
 
“Our industry is growing. The only thing needed are clear regulations on who will develop the infrastructure and who will supply the gas,” concluded Mr. Rakhmanto.
 
(hot/kc)