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Switching from Kerosene to LP Gas : Lessons from Indonesia

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). 1,360. BACKGROUND. Huge Fuel Subsidy (~USD 8.0 billion /year). Transportation : Mogas & Gasoil (~30% subsidy)

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Switching from Kerosene to LP Gas : Lessons from Indonesia

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

  2. 1,360 BACKGROUND • Huge Fuel Subsidy (~USD 8.0 billion /year) • Transportation : Mogas & Gasoil (~30% subsidy) • Residential : Kerosene (~70% subsidy) • Huge Kerosene Consumption (10~12 Mio KL /year) • 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 • Withdraw kerosene to replace by LPG (both subsidized)

  3. 1. Kerosene subsidy increases eventhough the government reduce its volume significantly THE FACT 2. LPG is cheaper and better (Cents USD) Conversion start Volume (million KL) Subsidy (Billion USD) 04 05 06 07 2008 2001 02 03

  4. THE SWITCHING JOURNEY 2011 ~ …. …. Before 2007 2007 - 2010 • 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 • 2 Million KL of Kerosene has been withdrawn and 19 Million of Packages has been distributed in 2008. • In 2009, 4.1 Million KL of Kerosene will be withdrawn and 23 Million of packages will be distributed.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 • 8 Million KL of Kerosene will be withdrawn.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 2007-2008 (19 Mio) 2009 (23 Mio) 2010 (10 Mio) No Conversion

  5. THE KEY ACHIEVEMENTS (as of Oct 1st 2009) 786 # Households & SME Converted Will be Converted 23,7 39 out of 52 Millions Converted 5,6 2007 08 09 2010 Total Replacement Factor: Kerosene vs. LPG Kerosene LPG 1 liter Kero ~ 0.3 kg LPG 2007 08 09 2009 Target 2010 Target Gross Saving Conversion Cost State’s Gross Subsidy Saving Nett Saving Up to 1.7 Bio USD 2007 08 09 2009 Target Total 1 USD = IDR 10,431

  6. THE KEY BENEFITS 786 Indonesia Government Business Environment End Users Environment CO2 Reduction State’s Gross Subsidy Saving Up to 1.7 Bio USD # New Investor 529 Energy Cost Saving) 42% (4 USD/Month) # of Trees saved *) 46.6 Mio Net Saving 884 Mio USD Value of Investment 1.4 Bio USD % of program Supporter *) 89.9 % # of Cars taken Equivalent *) 2.8 Mio *) Modified from GreenworksAsia Report on Emission Reduction from Conversion Program, November 2008

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

  8. CONVERSION’s IMPACT TO THE LPG DEMAND-SUPPLY (MT) *) Import volume will decrease as production from domestic producers increase,

  9. LPG BUSINESS GROWTH vs INFRASTRUCTURE 1,360 Post Conversion /hari Pre Conversion Conversion Periode 1995 1996 1997 2006 2007 2008 2009 2010 2011 2012 1 2 3 4 * As per Government’s Requirement : LPG Stockpile 7.5 days for NPSO, 11 days for PSO

  10. INFRASTRUCTURE DEVELOPMENT OUTLINE Semarang & Gresik LPG Pressurized Terminal @ 10.000 Mton Development Progress Tg. Priok LPG Depo 9.900 Mton

  11. INFRASTRUCTURE DEVELOPMENT OUTLINE Mill Reef VLGC 3 Kg’s LPG Filling Station 15.000 Kg LPG Skid Tank

  12. CONCLUSION • Reduce subsidy on fuel • Improve quality of life • Reduce CO2 emission • Create more job and investment • Increase World LPG additional • demand

  13. Abrigado ! 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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