Jakarta to Add 20 Natural Gas Pumps
By I Made Sentana
The Indonesia government announced plans Wednesday to install 20 natural-gas pumps at stations in its capital city, a step analysts say will make only a small dent in the huge part of the budget eaten by the Southeast Asian country’s energy subsidy at a time when consumers are buying more cars.
The 20 pumps to be installed this year will add to the two already providing natural gas to drivers at stations that also offer regular gas and diesel. The government hopes the move will encourage some motorists to switch to natural gas, which is about one-third cheaper than gasoline or diesel.
Indonesia heavily subsidizes the prices of gasoline and diesel fuel, but not of natural gas. If the government succeeds in getting drivers to move to natural gas, it could save around $10 billion a year in subsidies it otherwise would pay on the alternative fuels.
“We will start adding natural-gas filling pumps in a massive way this year, starting from Jakarta. And if we have more funds, we will build them also in other big cities,” Edy Hermanto, oil and gas director general at the Ministry of Energy and Mineral Resources, said at a news conference.
But analysts don’t expect the new policy to significantly reduce the fuel subsidy in the near term because only a small number of buses and taxis in Jakarta are ready to consume natural gas, while most subsidized fuels in the capital are used in private cars that aren’t yet equipped with natural-gas tanks.
“I think rationing subsidized fuels for private cars would have more significant impact,” said Aldian Taloputra, chief economist at Mandiri Sekuritas, a state-owned investment bank.
The clock is ticking for the government to find a solution to the huge cost of its energy subsidy. Indonesia relies on oil imports for around 40% of its fuel needs. The government has been sorely stretched as global oil prices have climbed, putting the country’s trade balance in deficit. That in turn has hurt the rupiah, one of Asia’s worst-performing currencies in 2012, even as the overall economy continues to expand at more than 6% a year.
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