Natural Gas - Policy

Widodo W. Purwanto
Departemen Teknik Kimia

Natural Gas Economic 2016

 Outline

Status Industri Gas Bumi

Tantangan Tata Kelola Gas Bumi
Langkah Aksi yang Diperlukan
 Status Industri Gas Bumi
“faces the challenge of a rapid increase in domestic oil
and gas consumption driven by rising economic growth,
declining its production, and poor market transparency”

3
 The natural gas value chain

Upstream Midstream Downstream

Status Industri Gas di Indonesia
Asset-driven industry dengan nilai tambah rendah
Telah mengalami peak produksi gas 7,500 MMSCFD
(2010) dan net gas exporter (% domestik >)
Struktur industri gas bumi - oligopoly (Stage I & II).
Harga gas domestik - regulation on a cost of service
basis (RCS) dan regulation on a social and political
basis (RSP)
Ketersediaan infrastrusktur gas terbatas/fragmented
market
Perlambatan permintaan gas
 Trade specialization index

Source: ABD, 2014

 Tantangan Tata Kelola Gas Bumi
“unclear policy objectives, delink problems-
actions, unclear price mechanism, fragmented
market, and lack gas infrastructures”

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Isu Utama Tata Kelola Gas Bumi
Legal certainty: UUD Migas?
Shift from net gas exporter to net gas importer
Harga gas di end user tinggi vs (social price?)
Permasalahan mendasar tata kelola gas bumi:
– mismatch tujuan kebijakan hilir dan hulu
– Kurang jelas role & responsibility actors dalam
pengembangan industri gas
– Keterbatasan physical supply chain
(infrastructure)
– No transparency of price signals/contractual
 UU Migas
UUD 1945 – pasal 33

UU Migas No. 22/2001 Draft RUU Migas

(lebih 13 tahun...)
Negara=Pemegang kuasa pertambangan  Pemerintah  Badan Pengusahaan

Pemerintah= regulator, SKK Migas&BPH

Keputusan Makamah Konstitusi = pelaksana pengawasan, Perush. migas
beberapa ketentuan bertentangan = operator, Badan pengusahaan (BUMN-K,
dengan UUD 1945  BPMigas BUP (agregator)
SKKMIgas Liberalisasi murni Liberalisasi
Kebangsaan
Permasalahan: (i)Tumpang tindih Perusahaan negara/swasta nasional 
fungsi kelembagaan, (ii) liberalisasi 1st priority
Migas, (iii) Migas tdk hanya pend. Unbundling  Ekslusif
Negara + pendorong pertumbuhan Harga BBM - mekanisme pasar
ekonomi ditetapkan pemerintah +DPR
DMO min 25%
 Resource Value through
State Budgetary Processes
Gas Aggregation

Gas End-
User

Business-to-business Gas End-

Gas Supply sales
User
Gas
Regulator
Supply
Gas
Drivers for Resource Rent
Supply
Redistribution

Resource Overall
Government Society
Rent
Higher price  more tax/non-tax revenues Rent Leakage?

Source:WB
 Resource Value through
Market Transfers & Capture

Gas End-
User

Rent Leakage?
Gas Gas End- Overall
Gas Supply
Aggregator User Society
Gas Drivers for Resource Rent
Gas End- Redistribution
Supply Regulator User
only for
Transport ?
Gas Supply

Resource
Rent

Source:WB
 Net gas importer

Source: Widodo, 2016, IGO, 2014

Unsur Utama Tata Kelola Gas Bumi
Struktur industri gas/pasar gas bumi
Harga gas bumi
Infrastruktur gas
Kelembagaan (gov., regulator, competition
authority) and players

Clear policy objectives  to facilitate gas value chain

development (integration & value creation)
Market design  how to redistribute responsitilities
amongts actors to achieve policy objectives
 Pengembangan Pasar Gas Bumi

The market maturation cycle: regulation, deregulation,

commoditization, value-added services
Kate et al, IEA, 2013
World price formation 2014

Oil price escalation (OPE)

Gas on gas competition (GOG)
Bilateral monopoly (BIM)
Netback from final product (NET)
Regulation on a cost of service basis
(RCS)
Regulation on a social and political
basis (RSP)
Regulation below cost (RBC)
No price (NP)

Source: IGU, 2015 16

Gas wholesales price by country &
Social price change

Source: IGU, 2015

Harga gas bumi dalam rantai nilainya

Source: Weijermars, 2011

Regime baru harga gas di China

Source: Paltsev & Zhang, 2015

 Langkah Aksi yang Diperlukan
“clear policy objective, focus on how to achieve
the targets: develop gas industry structure, gas
pricing and infrastructures”

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 Policy objectives -Tata Kelola Gas Bumi
Exploration & Wholesale Distribution
Value Chain Transmission
production trade & Marketing

Activities

Private companies
Key players Pertamina, IOCs holding trading licenses PGN, Pertagas PGN, Pertagas

etc
Regulators MEMR/ SKK Migas BPH Migas

New law? BUMN-K BUP

Policy - multi objectives

Max Netback Gas Max Social welfare
Balancing
Source: WB, Modified
 Kebijakan Harga Gas dan Alokasi Gas

Price Min Trade off Price Max

Gas price
Consumer Price mechanism Producer
Economy efficiency, Social equity, Finacial viability

Efficient gas allocation  Estimate economic value of gas in difference sectors

(consumer sector -WTP, production sectors-MVP)
 Max gas value chain for domestic
 Effiencient use of gas - Macroeconomic impact
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Pengembangan Kelembagaan Gas
Status: SKKMigas, BPH, UU Migas : Hulu <> Hilir
Dinamika sektor migas/sudah berubah –
ketergantungan akan impor tinggi (minyak), gas
(akan meningkat) perlu diantisipasi dalam UU
Konsep BUP: agregator - apa perlu?, agregator
supply/demand?
Lesson learned aggregator?, success stories?
Kajian saintifik yang lebih transparan

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 Pengembangan Harga Gas
Status: RSP & RCS
Tranparansi komponen harga gas dalam rantai
nilai gas bumi (produsen s/d konsumen) 
kurang, shg tidak memberi sinyal yang benar bagi
produsen dan konsumen
Pengembangan pasar hybrid: regulated and
market, mengembangkan wholesale price (cost-
reflective and transparent) terutama pusat
permintaan gas yang ada di Jawa dan
Sumatra/Kalimantan

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Pengembangan Infrastruktur Gas
Status
– Developing phase: Point to Point  limited infrastructures and less
developed institutions
– Growth phase: Hub and Spoke  Anchoring networks around large scale
supply and demand
– Mature phase: Multiple networks  Extensive networks, overlap
networks
Target (Rencana induk jaringan transmisi dan distribusi
nasional)  Sudah ada
How to achieve the target  unclear
 Gov. intervention >, PPP, clear insentive
but depending on price policy, gas allocation and
infrastructure
 Take Away
Finalisasi UU Migas segera sehingga memberikan kepastian
hukum bagi industri. UU migas perlu mempertimbangkan
perubahan industri migas baik nasional dan internasional
Kejelasan konsep BUP agregator untuk pasar gas oligopoly
Memperjelas tujuan kebijakan gas: trade off negara
konsumen dan negara produsen – reform pricing
mechanism
Transparansi prioritas alokasi gas pengguna domestik dan
menyelaraskan dengan rencana pengembangan
infrastruktur
Kejelasan peran pemeritah dalam mitigasi resiko
pengembangn infrastruktur yang tidak bisa ditanggung oleh
corporate
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Terimakasih
 Aggregation Functions
Potential functions/roles of aggregation include (but are not
limited to):
– Ensuring volume allocations to customer segments
(with or without differentiated pricing)
– Supply and price buffer: Offers pooling of upstream
gas from various sources, providing commercial risk
management for marginal producers (price/volume
predictability)
– Buyer of last resort: to guarantee that gas can be
evacuated from marginal producers
– Single buyer: all gas produced and/or imported goes
through one entity
– Supplier of last resort: Secure guaranteed gas
volumes for customers

Source:WB
 Benefits of Gas Aggregation

• Helps catalyze early development of a national gas

industry (for both upstream and downstream)
• Stimulates development of (small) marginal fields and
integration of diverse and/or high-cost supplies
• Provides a large creditworthy counterpart for gas sales
• Decreases the need to match demand profile exactly
against supply profile
• Facilitates priority allocation of gas to select end-use
markets
• In the short-term in other countries, aggregator has been
able to address some infrastructure gaps.

Source:WB
 Drawbacks of Gas Aggregation
• Increased risk of anti-competitive behavior and market manipulation
– If not tightly regulated, information asymmetry and lack of transparency
opens the door to market distortions via arbitrage and rent leakage
• Potential abuse of market position – selectively matching buyers and
sellers
• Increased investor uncertainty – prospect of monopsony (i.e. single
market buyer amid multiple suppliers) can deter prospective upstream
investments
• Higher costs due to insertion of middle-men – costs of maintaining
aggregation role puts pressure on state budget
• Self-perpetuation – bureaucratic inertia prolongs aggregator’s existence
and deters obsolescence, even when domestic market has developed
sufficiently to no longer justify it
• Irreversibility of state-sanctioned monopolies
• Removes incentives for cost-efficiencies and demand-side
discipline among customers
• Aggregation obsolesces in addressing the infrastructure gaps in the
long-term (conversely, the TSO does not perform an aggregator role well)

Source:WB
 Aggregator role review

• Acting on the proposed aggregator role requires a careful diagnostic of

core elements. The global experience underscores risks associated with
unwanted rent capture.
• The previously noted reforms and a TSO strategy, lessen the
underpinnings of the proposed gas aggregation function.

Brief Review of Aggregator Role based on Global Experience

Pros Cons
• Catalyzing early development • Potential predatory behavior among
• Creditworthy counterparty monopolies
• Facilitate integration of diverse/high-cost supplies • High cost due to insertion of middle-men
• Facilitate development of gas infrastructure • Hindering access to transportation capacity
• Enforce government policies regarding allocation • Non-commercial allocation of gas
• Ensures allocation to some end-use markets • Tendency to self-perpetuate
• Increased (price) uncertainty for producers

Source:WB