The government threatens to cancel some contracts on gas pipeline construction since the projects are still being stalled, curbing efforts to cater to domestic fuel needs.
Vice President Boediono revealed gas supply was actually available, but it wasn't distributed to consumers.
"Some have already had rights to construct pipeline, but they have not realized the rights. Such projects will be better to be returned to the state, so we can seek other investors," he said when opening The 17th World Ceramic Tiles Forum in Jakarta yesterday.
The government, continued Boediono, was reviewing barriers in domestic gas distribution.
He asserted delay in gas infrastructure construction had made many parties find their interests held hostages.
According to him, it would be unfair for the government to maintain one or two private companies and state-owned enterprises (SOEs) that could not comply with their contracts.
Boediono added the government would also fix domestic gas price that would benefit all parties.
In principle, he said, domestic gas price should be lower than export one, but the former should not be far lower than the economic price in a bid to attract investors.
On the other hand, the Vice President appealed the domestic businesses not to ask for gas price to be sold below normal price since it would be equally unfair.
He reminded if the domestic businesses insisted on asking for gas price that was below the economic price, the government had to make a tradeoff in a form of subsidy from the state budget or additional concession for the gas contract holders.
"If we force this, it will mean the government provides disguised subsidy."
In response to Boediono's statement, the downstream oil and gas regulatory agency BPH Migas viewed the main barrier to the stalled pipeline projects was the uncertain gas supply.
Appropriate
Member of the BPH Migas Committee Jugi Prajogio disclosed it would be appropriate conceptually to cancel pipeline construction contracts if the contract holders didn't realize their commitments. However, the revocations of the rights should also put into account factors curbing the projects.
He explained when the pipeline projects were put to tender in 2006, the BPH Migas referred to data by the Ministry of Energy on the availability of gas supply that could be distributed to consumers, which was one factor that investors put into account in joining the tender.
However, when the tenders came up with the winner, the gas turned out to be unavailable. Under such a condition, he added, the one defaulting the contract was actually the government since it could not guarantee gas availability.
The BPH Migas had reported the condition, including the progress of the Kalimantan-Java (Kalija) pipeline project, to the Vice President.
As one alternative solution, continued Jugi Prajogio, the BPH Migas previously suggested gas from Petronas-owned Kepodang be distributed to Tambak Lorok under downstream scheme together with PT Bakrie & Brothers Tbk, the operator of the project.
The Kalija pipeline is expected to become the backbone to gas supply to Java. Around 1,000 MMscfd of gas are scheduled to be distributed from Bontang to Semarang before it was distributed to the West via the Semarang-Cirebon pipeline (PT Rekayasa Industri) and the Semarang-Gresik pipeline (PT Pertamina Gas).
President Director of Pertamina Gas Suharyanto disclosed gas availability was a key issue to the gas pipeline project. If gas pipeline projects were developed without gas supply certainty, investors would be injured.
As a solution, he inserted, Pertamina and State Gas Company PGN Tbk (Ltd) was planning to develop a LNG floating storage and regasification terminal (FSRT) in Jakarta Bay to create gas supply certainty.
Such a solution, he added, was an alternative to the previous plan that relied on gas supply from the Kalija pipeline. "It is not that we don't want to develop the pipeline. But, where is the gas?"
In the meantime, the ceramic industries association disclosed the industries would only have 61.16% or 63 MMScfd of the total real need of 103 MMScfd of gas fulfilled this year.
Director of Downstream Chemical Industry at the Ministry of Industry F. Toni Tanduk said with such a supply the utilization in the ceramic sector in 2010 would not hit its optimum level. (Bisnis/asd/yuw/raf)
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