Indonesia Slashes Industrial LNG Price to $13 per MMBTU

Indonesia's Minister of Energy and Mineral Resources, Bahlil Lahadalia, has announced a significant reduction in the price of Liquefied Natural Gas (LNG) for industrial use, setting it at $13 per MMBTU. This decision, made after negotiations between the government, LNG producers, and PT Perusahaan Gas Negara (PGN), aims to support the sustainability of industries, especially in West Java.

The new price represents a substantial decrease from the previous rate of approximately $23 per MMBTU. The surge in LNG prices had placed considerable strain on industries, increasing the risk of widespread layoffs for thousands of workers. Bahlil explained that the high prices were initially due to declining gas production from fields in West Java, necessitating the use of LNG transported from Papua, Sulawesi, and Kalimantan.

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So we have decided on the price for industrial LNG at US$ 13 per MMBTU.

This reliance on transported LNG, coupled with the costs associated with regasification before pipeline distribution, significantly inflated the final price for industrial consumers. "Why is the LNG price high? Because it's taken from areas that require transportation costs, then regasified, before being distributed through pipelines. That's where the additional costs arise," Bahlil stated.

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Why is the LNG price high? Because it's taken from areas that require transportation costs, then regasified, before being distributed through pipelines. That's where the additional costs arise.

To achieve the price reduction, the government implemented cuts across the entire supply chain. This involved reducing margins for upstream contractors (KKKS), the government's share of revenue, and the margins of PGN, the downstream distributor. "Everyone is affected. So the government's share, from upstream, there is the government's share. Then downstream, we asked them to reduce costs. Pertamina's share was also reduced. So it affects the KKKS, the government, and PGN," Bahlil elaborated.

The new, lower LNG price for industrial use is effective immediately, signaling a concerted effort by the Indonesian government to stabilize energy costs for its manufacturing sector and mitigate potential economic disruptions.

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Everyone is affected. So the government's share, from upstream, there is the government's share. Then downstream, we asked them to reduce costs. Pertamina's share was also reduced. So it affects the KKKS, the government, and PGN.