To reduce LPG's Price, Pertamina moves its Storage from Offshore to Onshore

KATADATA - PT Pertamina (Persero) is planning to move its liquefied petroleum gas (LPG), or more widely known in Indonesia as Elpiji, reserve from offshore (floating storage) to onshore. The act of moving the storage from ships to onshore is considered to be more efficient. 

Pertamina’s marketing director Ahmad Bambang said that the moving of Elpiji’s storage from offshore to onshore will cut operational cost. This efficiency is done in order to cut the Elpiji’s price by 10 to 20 percent. 

“Elpiji’s price [that Pertamina sells] will decline in 2016. Let’s just see the price later for each kilogram. We will cut the price,” Ahmad said. 

The first project to move the storage from the offshore (floating storage) to onshore is to occur in Semangka Island, Lampung. The gas storage will be moved to a project in Tanjung Sekong, Merak, which has an onshore storage facility that Pertamina built. The onshore facility in Merak has the capacity of 8,000 tons per year with total investment worth up to US$ 150 million. 

The second storage will be moved to Elpiji Storage Tank in Arun, Aceh. The facility in Arun needs to be revitalized first. Furthermore, the investment value is smaller than Tanjung Sekong’s, which is only at US$ 10 million. After it is revitalized, Arun storage facility can store Elpiji with the same capacity as Tanjung Sekong. 

Right now in Arung, there is only a liquefied natural gas (LNG) storage facility. There is actually an Elpiji Storage Tank in Arun, but it has been inactivated for a long time. But with revitalization, the storage can be active again and with a larger capacity. 

The third act of moving the offshore storage will be done by building storage tank in East Java. After the development is done, the facility will provide the Elpiji needs for the people in East Java, and, if it is being pushed, it can even reach out to the whole Eastern Indonesia. The capacity of the storage facility to be built in East Java is 8,000 tons, and it can even be more.

The building of the storage capacity will involve private parties, which are Elpiji’s producers or traders. And so, Pertamina will only have 10 to 20 percent of stakes in that storage facility. But right now, Pertamina is still evaluating which companies can be invited as its partner(s).

And to be able to realize the storage facility development, Pertamina is still waiting for the government’s certainty in issuing the Presidential Regulation regarding the Bonded Warehouse. Bonded Warehouse means that the storage tank is freed from tax, and so the foreign Elpiji suppliers can freely enter in order to invest. And after the storage is being used, then the tax can be applied. 

“The target [of the development] is that it will be finished in two years, so around by the end of 2017 or early 2018,” Ahmad said.