1 / 13

Indonesia Kerosene to LPG Conversion Program The Story Behind

Indonesia Kerosene to LPG Conversion Program The Story Behind. Pre-Conference Workshop Clean Cooking Fuel Istanbul, 16 - 17 June 2008 Wahyudin Akbar –VP Fuel Marketing West Java Area timnas-konversi@pertamina.com. Agenda. Kerosene to LPG Conversion Program Jakarta Success Story

giulio
Download Presentation

Indonesia Kerosene to LPG Conversion Program The Story Behind

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Indonesia Kerosene to LPG Conversion ProgramThe Story Behind Pre-Conference Workshop Clean Cooking Fuel Istanbul, 16 - 17 June 2008 Wahyudin Akbar –VP Fuel Marketing West Java Area timnas-konversi@pertamina.com

  2. Agenda • Kerosene to LPG Conversion Program • Jakarta Success Story • Improvements to be Made

  3. INDONESIA KEROSENE TO LPG CONVERSION PROGRAMTHE SHIFTING JOURNEY 2010 onwards … …. 2007 backwards 2007 - 2009 • Kerosene is widely used by Indonesian Household (9.9 Million KL) and heavily subsidized by Govt. ( 4 billion USD/year). • LPG only 10%, much expensive than subsidized kero at retail price. • LPG will be the main cooking fuel with estimatedtotal volume 3.5 Ton/year. • 6 Million KL of Kerosene will be withdrawn. • Govt. Program: 42 Million LPG Conversion Packages will be distributed to eligible households. • 4 Million KL of Kerosene will be withdrawn. • Currently(June’08) 8 Million packages already distributed. Orange and part of Yellowarea will be converted on 2009 with 18 million packages will be deliver On 2007, 4 million packages have delivered to Java Island Green area are targeted to finish on 2008, for about 20 million packages

  4. THE JOURNEY HAS NOT BEEN SO EASYWE ARE FACINGDIFFERENT CONCERNS 2007 - 2009 …. Govt. concerns : Household & Small Middle Enterprise (SME) concern…. • 42 Million LPG Conversion Packages will be distributed to eligible households. • 4 Million KL of Kerosene will be withdrawn. • Currently(June’08) 8 Million packages already distributed. • Reduce Subsidyby 33 % : IDR 20 trillion (~ 2.2 billion USD) annually after program completion • Reallocating Kerosene to better/more profitable use such as jet fuel • Cleaner energy • Comfortable usage • Cheap energy • Always available Retailer’s concerns…. • Margin • Less investment Local business community & trade associations Local media senior editors Opposite Party Student Movement

  5. THE JOURNEY HAS NOT BEEN SO EASYTHE GAP POTENTIALLY MAKE THE PROGRAM GOES INTO FAILURE …. Govt. concerns : Household & Small Middle Enterprise (SME) concern…. • Reduce Subsidyby 33 % : IDR 20 trillion (~ 2.2 billion USD) annually after program completion • Reallocating Kerosene to better/more profitable use such as jet fuel • Cleaner energy • Comfortable usage • Cheap energy • Always available Already feel comfortable The Gap Unstable condition during transition period Many psychological barrier : Fear of explosion, lack of experience, expensive Retailer’s concerns…. One of the biggest stake • Margin • Less investment As single appointed public company to execute the program Less Margin and Financial Capability 2nd largest contribution to inflation Maintain the margin Lack of resource & Infrastructure capability Various interest to keep kerosene Various interest to support or against the Program The Gap The Gap Local business community & trade associations Local media senior editors Opposite Party Student Movement

  6. ACTION TAKEN TO MINIMIZE THE GAPTHE THREE MAIN VALUE CREATIONS Build our capabilities Distribution Process Marketing Activities 3 1 2 Understanding stakeholders Especially end user through research and govt. through involvement. Free Initial Package 3 kg LPG Govt. Leaders Endorsement • 4 steps • Survey : Determine area and eligible household. • Early Education: educate people, agents and retailers. • Distribution : Give one packages for free including first initial gas • Kerosene withdrawal : withdraw kerosene gradually start 50 % allocation and will increase later. Socialization & Product Activation Incentive and loan scheme for retailers Increase margin, cylinder consignment, provide loan through CSR

  7. Agenda Kerosene to LPG Conversion Program Jakarta Success Story Improvements to be Made

  8. JAKARTA AS LANDMARK OF INDONESIA BEFORE CONVERSION POST CONVERSION • Kerosene allocation for Jakarta was very high 3.200 KL/day (Top 5). Targeted 2.1 million HH and SME. • On May 2007, the program started with many refusal actions. Demonstrations arose everywhere due to asymmetry information. • While the distribution of the initial packages were running, the kerosene price hike up to 150 % as 2nd largest contribution to inflation during kerosene withdrawal period. • End of April 2008 Distribution is completed. 2nd week of May 2008 all the kerosene allocation in Jakarta have been withdrawn. • LPG Refill up to 6% HH & SME/day at the 1st week of June 2008 and getting increase. • For about 200 kerosene outlet are converted to LPG outlet. • Pertamina sell non-subsidized Kerosene on 2 and 5 liters bottle at Pertamina Gas Station. • The situation in Jakarta are very conducive, and the people are pleased to use LPG . What we do Build our capabilities 1 Distribution & Kerosene Withdrawal Process 2 Marketing Activities 3

  9. RECENT SURVEY* SHOWS LPG ADMITTED SIGNIFICANTLY AS BETTER FUEL We also gain more support to accomplish this program Agree / Support to the Program * Survey is conducted in Jakarta, June 1-2, 2008 involving 200 respondents, 100 HH, 50 Mobile SME, 50 Fixed SME two weeks after all kerosene withdrawn in Jakarta

  10. Agenda Kerosene to LPG Conversion Program Jakarta Success Story Improvements to be Made

  11. KEY LEARNING & RECOMMENDATIONS… Issues Details 1 Institutional Environment • Starting this program, Indonesia Govt. appoint directly capable public company/institutions who have capability to execute the program and avoid too much bureaucracy. They will perform as intermediary between Govt. and related target. • Understand your stakeholder e.g. involve related govt. both central and local to support the program. • If you are Regulator, support the executor with clear regulation. 2 Inflation stabilization • Withdraw current fuel (e.g. kerosene) gradually but faster to make the pain only in short period. • Still provide current fuel available but unsubsidized. 3 Issues in Market Creation • If you are an executor, build your own capability first to raise your confidence. • Create your landmark by choosing narrow area but give the most significant impact for quick win. • Understanding your target. Overcome their obstacles such as give them initial package for free to end user. • Communicate the program effectively using early education and an integrated Marketing Communication. Financing scheme for retailers 4 • Make the cylinder as the warranty to be offset by their margin. • Financing could use CSR. • .

  12. NEXT STEP… Initiative Details 1 Roll Out Plan • We will roll out this model of value creation in another area that has significant impact. 2 Understanding the lowest level income household • Build community kitchen, Yogyakarta as the pilot project • Build mobile filling station to serve lower volume purchasing e.g. 0.5 kg. • . 3 Understanding SME • We provide different stove for different kind of SME in upscale production • Bigger Stove • High pressure • Regular stove 4 Educate traditional kerosene stove • We intermediate high tech stove producer to educate traditional kerosene stove and give them new machine (through CSR) to produce gas stove.

  13. Thank you…

More Related