Indonesia‘s Manufacturers Squeezed by Natural Gas Supply Disruptions
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jakarta, Indonesia – A surge in complaints from private companies relying on Indonesia’s fixed natural gas price (HGBT) program is raising concerns about the stability of the nation’s manufacturing sector. Supply disruptions and escalating surcharges are impacting energy-intensive industries, potentially hindering investment and economic growth.
Rising Costs and Supply concerns
Industry Ministry spokesperson Febri Hendri Antoni Arief confirmed the ministry has received numerous reports of difficulties. State-owned gas company PGN’s current tariff of $16.77 per million metric British thermal units (mmbtu) is a key driver of the problem, squeezing manufacturers in sectors like ceramics, glass, steel, fertilizer, petrochemicals, and oleochemicals.
“Energy costs represent a considerable portion of production expenses for these industries,” Arief stated on Thursday. “Increases in prices or reductions in HGBT supply directly erode profit margins, reduce factory capacity, and ultimately discourage investment, notably in energy-intensive manufacturing.”
Did You Know? Indonesia’s industrial gas demand currently exceeds the available supply of the HGBT program, creating a notable imbalance for manufacturers.
Presidential Decree Under Pressure
The current issues are particularly troubling given the existence of a presidential decree intended to fix natural gas prices and ensure a consistent supply. Arief emphasized that no entity should attempt to circumvent this presidential order by increasing prices above $6.50 per mmbtu or restricting supply. This echoes concerns previously voiced by industry groups denouncing supply shortages and high prices in the program.
Supply and Demand Imbalance
Indonesia’s total industrial gas demand is estimated at 2,700 million standard cubic feet per day (mmscfd). Though, the HGBT program currently provides only 1,600 mmscfd, with approximately 900 mmscfd allocated to state-owned enterprises (SOEs).This leaves a substantial shortfall for private sector manufacturers.
| Metric | Value |
|---|---|
| Total Industrial Gas Demand | 2,700 mmscfd |
| HGBT Supply | 1,600 mmscfd |
| HGBT Allocation to SOEs | 900 mmscfd |
| PGN Tariff (Current) | $16.77/mmbtu |
| Fixed Price (Presidential Decree) | $6.50/mmbtu |
Pro Tip: Understanding the dynamics of Indonesia’s energy market is crucial for businesses operating in energy-intensive sectors. Proactive engagement with government stakeholders can help mitigate risks associated with supply disruptions and price volatility.
What long-term strategies can indonesia implement to ensure a stable and affordable natural gas supply for its manufacturing sector? How will these disruptions impact foreign investment in energy-intensive industries?
Context and Future Outlook
Indonesia’s reliance on natural gas as a key energy source for its industrial sector is a long-standing trend. The HGBT program was initially implemented to provide a competitive advantage to domestic manufacturers,fostering economic growth and job creation. However, the current challenges highlight the need for a complete review of the program’s structure and implementation. Factors such as increasing domestic demand, declining gas production from existing fields, and the global energy market volatility all contribute to the current situation. Future solutions may involve diversifying energy sources, increasing investment in gas exploration and production, and improving infrastructure to enhance gas distribution efficiency.
Frequently Asked Questions about Indonesia’s Natural Gas Supply
- What is the HGBT program? The HGBT program is a government initiative designed to provide a fixed price for natural gas to select industries in Indonesia.
- Which industries are most affected by the gas supply issues? energy-intensive industries such as ceramics, glass, steel, fertilizer, petrochemicals, and oleochemicals are most significantly impacted.
- What is the current price of natural gas from PGN? The current tariff from PGN is $16.77 per mmbtu.
- What price was set by the presidential decree? The presidential decree fixed the price of natural gas at $6.50 per mmbtu.
- What is the difference between demand and supply of industrial gas in Indonesia? Demand is estimated at 2,700 mmscfd, while the current supply is only 1,600 mmscfd.
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