No possible return of supply. Upstream oil and gas regulator BPMigas says there is no more gas available to cope with the gas shortage being suffered by state power firm PT PLN. “The only available solution is that we must wait for the completion of the planned LNG [liquefied natural gas] receiving terminals,” BPMigas’ head of public relations Sulistya Hastuti Wahyu told reporters on Thursday. PLN’s Muara Tawar power plant in Bekasi, West Java, receives gas supply from state gas distributor PT Perusahaan Gas Negara (PGAS). But, since early March this year, the supply has dropped to 100 billion British thermal units of gas per day (BBTUD) from an average of 250 BBTUD in 2009. PLN said it had already spent as much as Rp 2.4 trillion (US$263 million) to buy oil-based fuels to replace gas for power plants. 1 BBTUD= 1 MMSCFD (Jakarta Post, Fri 26-03-2010)
Conoco-Chevron gas transportation agreement to be effective. Conoco will sign a gas transportation agreement (GTA) with Chevron. Volume gas to be supplied will be not far different from currently supplied that is 402 MMSCFD. (Bisnis Indonesia, Sat, 27-03-2010)
Minister of Industry asked PGAS to cancel plan ton raise tariff. Minister of Industry, MS Hidayat, is going to asked PGAS to cancel its plan to raise tariff by 15% and additional surcharge of 200% for excess gas usage, Previously PGAS planned to apply the new price formula from April 1, 2010. Theoretically, Minister has no executive power to cancel tariff plan as regulation stated that gas price of industry is set through a business-to business method. (Kontan, Mon, 30-03-2010)
These are sorts of bad news that we are expecting when we downgrade PGAS recommendation from Buy to Neutral. Although we still believe PGAS can execute its price formula, we are more concern on the short supply and potential price increase on its supply if PGAS can increase its delivered gas price. At Rp4,325, PGAS is trading at PER10F and PER11F of 20.3x and 19.1x, respectively.
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