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Switching from Kerosene to LP Gas :Switching from Kerosene to LP Gas :Lessons from Indonesia
22nd World LP Gas ForumOctober, 7th-9th 2009
Hanung Budya - SVP MarketingHanung Budya - SVP Marketing
PT. Pertamina (Persero)PT. Pertamina (Persero)
BACKGROUNDHuge 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 IssueEnvironment Issue
SOLUTION SOLUTION Kerosene / LPG Conversion ProgramKerosene / LPG Conversion ProgramTo Convert residential fuel from kerosene to LPG To Convert residential fuel from kerosene to LPG
by distributing intial package (3 kg LPG Bottle, by distributing intial package (3 kg LPG Bottle, stove, and regulator set) for freestove, and regulator set) for free
Withdraw kerosene to replace by LPG (both Withdraw kerosene to replace by LPG (both subsidized) subsidized)
• Transportation : Mogas & Gasoil (~30% subsidy)Transportation : Mogas & Gasoil (~30% subsidy)• ResidentialResidential : Kerosene (~70% subsidy) : Kerosene (~70% subsidy)
+ +
1.1. Kerosene subsidy increases Kerosene subsidy increases eventhough the government reduce eventhough the government reduce its volume significantlyits volume significantly
5,04,23,82,01,61,5
0,71,3
7,99,910,0
11,411,911,811,712,3
02
468
10
1214
2001 02 03 04 05 06 07 2008
Volume (million KL)
Subsidy (Billion USD)
Conversion start Remarks Kerosene LPG
Volume based on calorific Value
1 liter 0.4 kg
Market Price 58 73
Retail Subsidized Price
25 42
Subsidized Price 33 31
Amount of subsidy
33 12.4
(Cents USD)
Saving per liter 20.6 cents
Target Converted 8,000,000 KL/year
Potential Subsidy Saving 1.65 Billion USD/year
22. LPG is cheaper and better. LPG is cheaper and better
THE FACT
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.
2007 - 2010
• 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• 2 Million KL of Kerosene has been withdrawn and 19 Million of Packages has been distributed in 2008.
• In 2009, 4.1 Million KL of Kerosene will be withdrawn and 23 Million of packages will be distributed.
2011 ~ ….
• LPG will be the main cooking fuel with estimated total volume 4.1 Million Ton/year.
• 8 Million KL of Kerosene will be withdrawn.
N anggroe Aceh D arussalam
Sum atera U tara
Sum atera Barat
R iau
Jam bi
BengkuluLam pung
Sum atera Selatan
Bangka Belitung
Kepulauan R iau
BantenJawa Barat
Jawa TengahD KI Jakarta
D .I. Yogyakarta Jawa T im ur
Bali
Kalim antan Barat
Kalim antan TengahKalim antan Selatan
Kalim antan T im ur
N usa Tenggara Barat
SulawesiBarat
Sulawesi Tenggara
N usa Tenggara T im ur
Sulawesi Tengah
G oronta loSulawesi U tara
M aluku U tara
M aluku
Papua Irian Jaya Barat
Sulawesi Selatan
Non-PSO
2007-2008 (19 Mio)
2009 (23 Mio)
2010 (10 Mio)
No Conversion
THE KEY ACHIEVEMENTS (as of Oct 1st 2009)
# Households & SME Converted
39 out of 52 Millions
Replacement Factor:
Kerosene vs. LPG
1 liter Kero ~
0.3 kg LPG
18,1
52,0
15,1
3,99,3
2007 08
5,623,7
09 2010 Total
Will be Converted
Converted
8.000
4.1683.261
2.116
121
2.9731.682
1.05659333
2007 08 09 2009 Target 2010 Target
Kerosene
LPG
State’s Gross Subsidy Saving
Up to 1.7 Bio USD
1 USD = IDR 10,431
1.727
1.218
792877
58
842
52741934777
884690
373530
-19
08 09 2009 Target Total
Gross Saving
Conversion Cost
Nett Saving
2007
THE KEY BENEFITS
Indonesia Government
*) Modified from GreenworksAsia Report on Emission Reduction from Conversion Program, November 2008
State’s GrossSubsidy Saving
Up to 1.7 Bio USD
Net Saving
884 Mio USD
BusinessEnvironment
# New Investor
529
Value of Investment
1.4 Bio USD
End Users
Energy Cost Saving)
42%(4 USD/Month)
% of program Supporter *)
89.9 %
EnvironmentCO2 Reduction
# of Trees saved *)
46.6 Mio
# of Cars taken Equivalent *)
2.8 Mio
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
AgentSub Agent
Retailer
End User
RetesterWorkshop
LPG Bottle Producers
CONVERSION’s IMPACT TO THE LPG DEMAND-SUPPLY
Demand - Supply 2009 2010 2011
A Demand
PSO (3 kg) /Conversion Program 1,682,234 2,973,342 3,484,159
non PSO 1,388,818 1,261,280 1,305,424
Total Demand 3,071,052 4,234,622 4,789,584
B Supply
Pertamina’s Refinery 952,740 1,020,816 907,024
Pertamina’s Upstream 47,000 47,000 47,000
Other Domestic Producers 918,847 1,292,787 1,292,085
Import *) 1,152,465 1,874,019 2,543,474
Total Supply 3,071,052 4,234,622 4,789,584
*) Import volume will decrease as production from domestic producers increase,
(MT)
LPG BUSINESS GROWTH VS INFRASTRUCTURE
InfrastructureInfrastructurePre ConversionPre Conversion
(Before 2007)(Before 2007)
Conversion PeriodeConversion Periode
(2007-2010)(2007-2010)
Post ConversionPost Conversion
(After 2010)(After 2010)
Storage * 136,000 Mton 267,000 Mton 345,000 Mton
Vessel6 Vessels
Pressurized @ 1,800 Mton
5 Vessels
Semiref @ 10,000 MT
6 Vessels
Pressurized @ 1,800 Mton
3 FSO Vessels
Refrigerated @ 45,000 MT
6-8 Vessels
Semiref @ 10,000 MT
10 Vessels
Pressurized @ 1,800 Mton
1 FSO Vessels
Refrigerated @ 45,000 MT
Filling Station Filling Capacity
5,000 Mton/day 9,000 Mton/day 17,000 Mton/day
Skid Tank
Transport Capacity5,000 Mton 9,000 Mton/day 17,000 Mton/day
1
2
3
4
Conversion Periode
/hari
2007 2008 2009 2010
* As per Government’s Requirement : LPG Stockpile 7.5 days for NPSO, 11 days for PSO
20112012
19951996
19972006
Pre Conversion
PostConversion
Infrastructure Pre Conversion Present Post 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 Okt’092, Gresik 10,000 MT: ~90%, Onstream Okt’09
Tank Capacity : On Shore Tank 205,000 MT Refrigerated Terminal:- West Java 60,000 MT- East Java 80,000 MT Total 345,000 MTThroughput : 17,000 MT/day
Pressurized Storage Development :Tg, Sekong, Bali, Medan, Makassar, Lampung total capacity 38,000 MT on progress, Onstream 2011-2012
INFRASTRUCTURE DEVELOPMENT OUTLINE
Semarang & Gresik LPG Pressurized Terminal @ 10.000 Mton Development Progress Tg. Priok LPG Depo 9.900 Mton
Infrastructure Pre Conversion Present Post Conversion
LPG Vessels 6 Vessels LPG Pressurized @1800 MT
6 Vessels LPG Pressurized @1800 MT5 Vessels LPG Semiref @11,400 MT3 Vessels VLGC (FSO) @45,000 MT
10 Vessels LPG Pressurized @1800 MT6-8 Vessels LPG Semiref @11,400 MT 1 Vessels VLGC (FSO) @45,000 MT
Filling Station 66 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/day 9,000 Mt/day. 17,000 MT/day
INFRASTRUCTURE DEVELOPMENT OUTLINE
Mill Reef VLGC 3 Kg’s LPG Filling Station 15.000 Kg LPG Skid Tank
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
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.
