Gas Price Policy Analysis for Fertilizer Industries in Indonesia Based on Netback from Final Product

Abstrak

The industrial sector has an important role in the Indonesian economy. The
problem facing the fertilizer industry is the price of gas as a raw material that
tends to be expensive for the lower prices of crude oil since 2016. To overcome
this problem the government issued Presidential Regulation No. 40/2016 on
setting gas prices for the fertilizer industry but this regulation only sets floor
gas prices at USD 6/MMBTU to secure revenues of gas producers.
Meanwhile, the current sale gas contract for fertilizer applies an escalation.
The objectives of this study are to evaluate the netback value of each fertilizer
plant and assess the current gas price policy. The netback value is calculated
based on the long-run marginal cost of urea production. The result shows that
PKT 04 and PKT 05, Pusri 1B, 2B, 3, and 4, PKC 1A and 1B, and PKG have
lower netback value than gas price contract, except for PKT plant based on
average has the highest netback value, because they use pricing mechanism
that linked to oil and product price. From this calculation the current gas
price policy needs to be adjusted to keep the fertilizer industry profitably.