Understanding gas prices: an overview of regulations and components affecting the Indonesian natural gas prices

Abstract

Natural gas is the primary commodity of Indonesia’s energy supply and an important policy issue. Domestic gas demand is dominated by the industrial, power sector, and fertilizer. Over the past five years, Indonesia’s natural gas prices have increased significantly, which will undoubtedly affect the consumers. We summarized and analyzed policy, literature, and interviews with stakeholders to find the main factors of gas prices. This study concluded that the government has a more dominant role in determining gas prices. The increase in gas prices was mainly influenced by the upstream project’s economics, the tariff for transmission, and managing natural gas infrastructure. The application of indexation with ICP and the escalation price also contributed to the high price. The Government needs to consider gas price adjustments carefully because these commodities have a multiplier effect and affect industry competitiveness.