GOVT NO LONGER TO RAISE FUEL OIL PRICES : MINISTER

Gresik, June 15 (ANTARA) - The government will no longer raise domestic fuel prices as a measure to reduce its fuel oil subsidy burden, Energy and Mineral Resources Minister Purnomo Yusgiantoro said here on Monday.

"If in the past the government raised domestic fuel prices, now it will replace fuel oil with other, cheaper energy sources," the minister said at the dedication of a liquefied petroleum gas (LPG) refinery in Gresik, East Java, on Monday.

According to Yusgiantoro, by substituting other cheaper energy sources for fuel oils, the government's subsidy burden could be reduced without raising domestic fuel oil prices.

Noting that next October it was possible there would be a change of government, he said the new policy (of not raising domestic fuel oil prices) was something worth maintaining by any government.
But at least during the few months the incumbent government would still be functioning, there would be no fuel price hikes, he said.

"The reason is that we have a fuel oil surplus, fuel subsidy funds, and increased income following the recent increase in the world crude price," Yusgiantoro said.

The LPG refinery dedicated by the minister was operated by Hess Indonesia Pangkah Ltd in Gresik, East Java.

Hess Indonesia Pangkah Ltd General Manager Steve McNally said the LPG refinery worth Rp10 trillion had a production capacity of 6,000 barrels per day.

"All liquefied petroleum gas produced by the plant will be used to meet domestic needs," McNally said.

He said the refinery that processed natural gas into liquefied petroleum gas would produce 327 metric tons of propane and 223 metric tons of butane per day.

According to McNally, the propane and butane would then be processed into liquefied petroleum gas to meet public demand for the fuel in Surabaya and Madura, East Java.

The LPG refinery is being fed with natural gas from the Ujung Pangkah gas field off the Surabaya's northwest coast operated by Hess Indonesia Pangkah Ltd.

The natural gas from the Ujung Pangkah field would be processed in two stages.

In the first stage, 100 million cubic feet of gas per day had been produced since April 2007 to supply gas to the combined gas- and coal-fired power plant (PLTGU) of state electricity company PT PLN in Gresik, and in the second stage, the field wpuld produce 25,000 barrels of oil and condensate, and 6,000 barrels of LPG per day.