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Switching from Kerosene to LP Gas : Switching from Kerosene to LP Gas : Lessons from Indonesia 22 nd World LP Gas Forum October, 7th-9th 2009 Hanung Budya.

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Presentation on theme: "Switching from Kerosene to LP Gas : Switching from Kerosene to LP Gas : Lessons from Indonesia 22 nd World LP Gas Forum October, 7th-9th 2009 Hanung Budya."— Presentation transcript:

1 Switching from Kerosene to LP Gas : Switching from Kerosene to LP Gas : Lessons from Indonesia 22 nd World LP Gas Forum October, 7th-9th 2009 Hanung Budya - SVP Marketing PT. Pertamina (Persero)

2 BACKGROUND Huge Fuel Subsidy (~USD 8.0 billion /year) Huge Fuel Subsidy (~USD 8.0 billion /year) Huge Kerosene Consumption (10~12 Mio KL /year) Huge Kerosene Consumption (10~12 Mio KL /year) Environment Issue Environment Issue SOLUTION Kerosene / LPG Conversion Program To Convert residential fuel from kerosene to LPG by distributing intial package (3 kg LPG Bottle, stove, and regulator set) for free To Convert residential fuel from kerosene to LPG by distributing intial package (3 kg LPG Bottle, stove, and regulator set) for free Withdraw kerosene to replace by LPG (both subsidized) Withdraw kerosene to replace by LPG (both subsidized) Transportation : Mogas & Gasoil (~30% subsidy)Transportation : Mogas & Gasoil (~30% subsidy) Residential : Kerosene (~70% subsidy)Residential : Kerosene (~70% subsidy) ++

3 1. Kerosene subsidy increases eventhough the government reduce its volume significantly Volume (million KL) Subsidy (Billion USD) Conversion start RemarksKeroseneLPG Volume based on calorific Value 1 liter0.4 kg Market Price5873 Retail Subsidized Price 2542 Subsidized Price3331 Amount of subsidy (Cents USD) Saving per liter20.6cents Target Converted8,000,000KL/year Potential Subsidy Saving1.65 Billion USD /year 2. LPG is cheaper and better THE FACT

4 THE SWITCHING JOURNEY …. Before 2007 Kerosene is widely used by 90% of Indonesian Household (9.9 Million KL) and heavily subsidized by Govt, ( 4.2 billion USD/year). LPG only 10%, more expensive than subsidized kero at retail price Govt, Program: 52 Million LPG Conversion Packages will be distributed to eligible households. 2 Million KL of Kerosene has been withdrawn and 19 Million of Packages has been distributed in In 2009, 4.1 Million KL of Kerosene will be withdrawn and 23 Million of packages will be distributed ~ …. LPG will be the main cooking fuel with estimated total volume 4.1 Million Ton/year. 8 Million KL of Kerosene will be withdrawn. Non-PSO (19 Mio) 2009 (23 Mio) 2010 (10 Mio) No Conversion

5 THE KEY ACHIEVEMENTS (as of Oct 1 st 2009) # Households & SME Converted 39 out of 52 Millions Replacement Factor: Kerosene vs. LPG 1 liter Kero ~ 0.3 kg LPG ,6 23, Total Will be Converted Converted Target2010 Target Kerosene LPG States Gross Subsidy Saving Up to 1.7 Bio USD 1 USD = IDR 10, TargetTotal Gross Saving Conversion Cost Nett Saving 2007

6 THE KEY BENEFITS Indonesia Government *) Modified from GreenworksAsia Report on Emission Reduction from Conversion Program, November 2008 States Gross Subsidy Saving Up to 1.7 Bio USD Net Saving 884 Mio USD Business Environment # New Investor 529 Value of Investment 1.4 Bio USD End Users Energy Cost Saving) 42% (4 USD/Month) % of program Supporter *) 89.9 % Environment CO 2 Reduction # of Trees saved *) 46.6 Mio # of Cars taken Equivalent *) 2.8 Mio

7 KEY SUCCESS FACTORS 1. Strong Government Policy 2. Strong & Effective Implementation 3. Readiness of Logistic & Infrastructures LPG Producers Terminal LPG Refrigerated Land Terminal (Tg Uban) Floating Storage Offloading (FSO) LPG Pressurized Depot Filling Station Agent Sub Agent Retailer End User Retester Workshop LPG Bottle Producers

8 CONVERSIONs IMPACT TO THE LPG DEMAND-SUPPLY Demand - Supply ADemand PSO (3 kg) /Conversion Program1,682,2342,973,3423,484,159 non PSO1,388,8181,261,2801,305,424 Total Demand3,071,0524,234,6224,789,584 BSupply Pertaminas Refinery952,7401,020,816907,024 Pertaminas Upstream47,000 Other Domestic Producers918,8471,292,7871,292,085 Import *)1,152,4651,874,0192,543,474 Total Supply3,071,0524,234,6224,789,584 *) Import volume will decrease as production from domestic producers increase, (MT)

9 LPG BUSINESS GROWTH VS INFRASTRUCTUREInfrastructure Pre Conversion (Before 2007) Conversion Periode ( ) Post Conversion (After 2010) Storage *136,000 Mton267,000 Mton345,000 Mton Vessel 6 Vessels 1,800 Mton 5 Vessels 10,000 MT 6 Vessels 1,800 Mton 3 FSO Vessels 45,000 MT 6-8 Vessels 10,000 MT 10 Vessels 1,800 Mton 1 FSO Vessels 45,000 MT Filling Station Filling Capacity 5,000 Mton/day9,000 Mton/day17,000 Mton/day Skid Tank Transport Capacity 5,000 Mton9,000 Mton/day17,000 Mton/day Conversion Periode /hari * As per Governments Requirement : LPG Stockpile 7.5 days for NPSO, 11 days for PSO Pre Conversion Post Conversion

10 InfrastructurePre ConversionPresentPost Conversion LPG Depo/ LPG Terminal/ Floating Storage Tank Capacity : On Shore Tank : 136,000 MT Throughput : 3,700 MT/day Tank Capacity : On Shore Tank 147,000 MT* Floating Storage 120,000 MT Total 267,000 MT Throughput : 9,000 MT/day Pressurized Storage Construction Progress : 1, Semarang 10,000 MT: ~90%, Onstream Okt09 2, Gresik 10,000 MT: ~90%, Onstream Okt09 Tank Capacity : On Shore Tank 205,000 MT Refrigerated Terminal: - West Java 60,000 MT - East Java 80,000 MT Total 345,000 MT Throughput : 17,000 MT/day Pressurized Storage Development : Tg, Sekong, Bali, Medan, Makassar, Lampung total capacity 38,000 MT on progress, Onstream INFRASTRUCTURE DEVELOPMENT OUTLINE Semarang & Gresik LPG Pressurized Mton Development Progress Tg. Priok LPG Depo Mton

11 InfrastructurePre ConversionPresentPost Conversion LPG Vessels6 Vessels LPG MT 5 Vessels LPG MT 3 Vessels VLGC MT 10 Vessels LPG MT 6-8 Vessels LPG MT 1 Vessels VLGC MT Filling Station66 stations (12 kg) Capacity 6,000 MT 127 stations : Total Capacity 9,300 MT 439 stations: total capacity 21,900 MT/day Skid Tank 5,000 Mt/day9,000 Mt/day. 17,000 MT/day INFRASTRUCTURE DEVELOPMENT OUTLINE Mill Reef VLGC 3 Kgs LPG Filling Station Kg LPG Skid Tank

12 CONCLUSION 1.Reduce subsidy on fuel 2.Improve quality of life 3.Reduce CO2 emission 4.Create more job and investment 5.Increase World LPG additional demand

13 DISCLAIMER : The information in this presentation is general in nature and it is not intended to be relied upon for any specific purpose. All information provided by Pertamina in connection to this material, whether oral or written, represents the current view of Pertamina, and will be subject to change, completion or amendment without notice. No part of it may be circulated, quoted, or reproduced for distribution outside Pertamina without prior written approval from Pertamina. None of Pertamina or any of its employees can be held directly or indirectly liable for any consequences of reliance upon or use of the information herein.


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