The total LPG consumption in 2014 is projected to reach 6.11 million tons.
Jakarta (ANTARA News) - The state-owned oil and natural gas corporation, PT Pertamina (Persero), has forecast that the LPG (liquid petroleum gas) import volume in 2014 will reach 3.61 million tons, or 60 percent of the total domestic demand.

Marketing and Commercial Director of Pertamina Hanung Budya stated here on Wednesday that the total LPG consumption in 2014 is projected to reach 6.11 million tons.

"Of the total consumption, only 2.5 million tons will come from domestic manufacturers that have been absorbed by Pertamina. The remaining domestic requirement will be met by imports," he affirmed.

The total domestic requirement of 6.11 million tons comprises 5.013 million tons for the 3-kilogram subsidized LPG cylinder category, 907 thousand tons for the 12-kilogram non-subsidized LPG cylinder category, and the rest being other types of non-subsidized LPG cylinders.

According to Hanung, the average price of LPG at the contract price with Aramco between July and June 2014 was US$891.78 per ton or Rp10,214 per kilogram with the exchange rate of Rp11,453 per dollar.

After taking into consideration other components, including transportation costs, taxes, and margins, the economic price of a 12-kilogram LPG cylinder today should be Rp15,110 per kilogram, or Rp181.4 thousand per cylinder.

Hanung explained that with these levels of imports, and the high contract price set with Aramco, coupled with a weak exchange rate had led to burgeoning losses for the company.

The contract price of Aramco and the exchange rate are not in line with the companys budget projection for 2014, which has been set at US$833 per ton of LPG, where the exchange rate was assumed at Rp10.5 thousand per US dollar.

As of September 10, 2014, Pertamina has hiked the price of the 12-kilogram LPG cylinder by Rp1.5 thousand per kilogram in a bid to curtail its losses.

With this increase, the average selling price of Pertaminas 12-kilogram LPG cylinder is Rp7,569 per kilogram as compared to the earlier price of Rp6,069 per kilogram.

If other component costs are included such as transportation charges, margins for agents, and value-added tax, then the selling price for the agents is Rp9,519 per kilogram or Rp114.3 thousand per cylinder as compared to the earlier price of Rp7,731 per kilogram or Rp92.8 thousand per cylinder.

Hanung stressed that the hike is still far from its economic value.

"The price hike aims to reduce the business loss incurred in the 12-kilogram LPG cylinder category during 2014, which amounts to Rp452 billion," he explained.

Thus, the loss, which was previously projected at Rp6.1 trillion, would be Rp5.7 trillion for 907 thousand tons of LPG consumption.

However, the amount of loss is still higher than the companys 2014 budget projection at Rp5.4 trillion, assuming Aramcos contract price of US$833 per ton at an exchange rate of Rp10.5 thousand per US dollar.

Based on the roadmap delivered by Pertamina through a letter dated January 15, 2014, to the Minister of Energy and Mineral Resources and the Minister of State-owned Enterprises, the price hike of the 12-kilogram non-subsidized LPG cylinder will be carried out in stages.

As of July 1, 2014, Pertamina planned to increase the price of LPG in the 12-kilogram cylinder category by Rp one thousand per kilogram.

There will be a hike in price by Rp1.5 thousand per kilogram on January 1, 2015; July 1, 2015; January 1, 2016; and July 1, 2016.

After July 1, 2016, the price of LPG is expected to reach its economies of scale at Rp11,944 per kilogram or Rp180 thousand per 12 kilogram of LPG cylinder. (*)

Editor: Heru Purwanto
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