Gas price cuts could result in Rp 31t in economic benefits: Minister

Posted on 06 October 2016

Source: The Jakarta Post

Industry Minister Airlangga Hartarto has said that based on an economic impact assessment conducted by the government, price cuts to natural gas would deliver Rp 31 trillion (US$2.38 billion) in economic benefits every year.

With the new prices, which will take effect on Jan.1, 2017, natural gas for 10 industries and an industrial area will sell at $6 per million British thermal unit (mmbtu), down from $9.50 per mmbtu.

“If the gas price is slashed to $4 per mmbtu [in the upstream sector], at the plumb gate it will amount to $6 per mmbtu. With distribution costs of between $1.50 and $2 per mmbtu, the economic benefits may amount to around Rp 31 trillion,” Airlangga said in Jakarta on Tuesday.

Airlangga said the production capacity of the 10 industrial sectors that would benefit from gas price cuts contributed 10.8 percent to Indonesia’s gross domestic product (GDP), roughly Rp 1.2 quadrillion.

“With a gas price below $6 per mmbtu, the contribution will significantly increase to 20 percent,” he went on to say.

The 10 industries are fertilizer, petrochemicals, food and beverages, footwear, gloves, pulp and paper, ceramics and steel. 

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