Indonesia Slashes LNG Prices to $13/MMBtu to Combat Industrial Crisis and Mass Layoffs

JAKARTA, Investortrust.id — The Indonesian government has officially slashed industrial liquefied natural gas (LNG) prices to $13 per MMBtu, a strategic move designed to blunt the impact of global energy volatility and prevent a wave of industrial layoffs. The intervention follows a period where market prices surged to as high as $23 per MMBtu, placing immense pressure on the nation’s manufacturing competitiveness.

This move serves as a critical stopgap against the fallout from geopolitical tensions in the Middle East. By capping prices, Jakarta is attempting to protect labor-intensive sectors—such as ceramics, textiles, and glass—that have been struggling with rising operational costs. However, the policy highlights the country's vulnerability to global supply shocks, as a significant portion of its industrial energy still relies on regasified LNG.

A Multi-Tiered Energy Strategy

Energy and Mineral Resources Minister Bahlil Lahadalia confirmed the decision came directly from President Prabowo Subianto, who prioritized the protection of the national workforce. Under the new framework, the government is maintaining three distinct price tiers to balance state budget constraints with industrial needs. While HGBT rates are fixed at $6.50 to $7.00 per MMBtu, the new $13 per MMBtu price point specifically addresses the industrial deficit in West Java, Banten, and Jakarta, where domestic gas pipeline production has lagged.

"We have taken the view that ensuring the sustainability of jobs is part of the government’s responsibility," Minister Bahlil stated during a press conference in Jakarta on Monday, June 29, 2026. He admitted that while the decision to balance these costs is not comfortable for all parties, it is a necessary measure to force efficiency and protect employment.

Beyond the Gas Crisis

Beyond the immediate relief offered by the government's intervention, industry experts and officials are emphasizing that a sustainable strategy for national industrial health requires addressing several systemic challenges beyond energy costs.

While energy prices are a primary concern, the ReforMiner Institute highlights that gas, fuel, and electricity are not the sole determinants of industrial cost competitiveness. According to BPS data cited by the institute, energy components represent approximately 6.35% of total industrial input costs.

In contrast, raw materials and supporting components constitute the bulk of the expenditure, ranging from 64.60% to 96.76% depending on the specific industry. Consequently, experts argue that even if energy burdens are mitigated, structural pressures will persist unless there is a concerted effort to address issues involving raw material availability, market demand, currency fluctuations, and logistics.

Labor Market and Macroeconomic Pressures

The narrative surrounding mass layoffs has also been corrected by government officials. Said Iqbal, the President’s Special Advisor on Labor Affairs, explicitly denied rumors that 55,000 workers would face termination. He noted that while layoffs have occurred, they are localized—primarily in the granite sector—and stem from a complex mix of global conflict impacts, high fuel prices, and, significantly, weakened domestic purchasing power.

This decline in consumer demand has led to reduced production volumes, forcing companies to seek efficiencies that ultimately result in job losses. Furthermore, the depreciation of the Rupiah against the US dollar has created a difficult environment for industries reliant on imported raw materials, as these companies must bear high dollar-denominated input costs while selling finished goods in a weakening local currency.

Geopolitical Volatility and LNG Dependence

The domestic energy landscape is currently tethered to a volatile global market. The Japan Korea Marker (JKM) index—a critical benchmark for LNG—has surged over 60% due to infrastructure damage in major gas-producing hubs like Iran and Qatar. This volatility directly impacts entities like PGAS, where approximately 21% of the supply is currently sourced through LNG regasification. Because LNG entails higher logistical and processing costs compared to pipeline gas, PGAS faces increased procurement expenses that threaten to strain its capacity to keep prices stable for the industrial sector.

A Shift Toward Long-Term Competitiveness

Moving forward, the government is expected to evolve its approach from short-term price interventions to long-term structural reforms, ReforMiner Institute suggested. Key priorities include reducing the reliance on volatile LNG imports by increasing the availability and reach of domestic pipeline gas is viewed as a fundamental solution to lowering costs.

Officials and analysts suggest that the government must evaluate the current HGBT recipient list to ensure that subsidized gas is allocated to industries where it generates the most impact.

Experts argue that tax incentives may provide more effective and direct support for industrial performance than energy price caps alone, as demonstrated during the recovery periods surrounding the COVID-19 pandemic.