Tuesday, October 23, 2007

Skeptical Indonesians turn their backs on liquid petroleum gas

Published: October 22, 2007

JAKARTA: Siti Chairoh earns her living selling liquid petroleum gas. But she will not cook with the fuel.

"I'm afraid to use it," said Chairoh, who runs her business from the home she shares with her son, his wife and two grandchildren in Jakarta. "I don't care if people say I'm old-fashioned. I'm too scared the cylinder will blow up."

Fear is hindering Indonesia's drive to persuade poor people to use liquid petroleum gas, or LPG, instead of kerosene, a switch that would save them money and cut government fuel subsidies by 23 trillion rupiah, or $2.5 billion - almost half the Indonesian education budget next year.

After six months of marketing and education campaigns in Jakarta, the plan has stalled because of the inability of the state energy company PT Pertamina to persuade people that LPG is safe. Protests erupted in Jakarta, the capital, in August, when kerosene supplies ran short after Pertamina cut deliveries because of an expected drop in demand. The government plans to convert the entire nation to LPG by 2011.

"The idea is brilliant," said Fauzi Ichsan, chief economist at the Indonesian unit of Standard Chartered. "Implementation is the problem."

Money is also an issue, even though Pertamina is providing free stoves and three-kilogram, or seven-pound, LPG canisters to every household.

In a country where half of the 235 million people survive on less than $2 a day, consumers need as little as 1,500 rupiah to buy a half-liter of kerosene, enough for the typical family to cook a single meal. It costs about 13,000 rupiah for a canister of liquid petroleum gas, which lasts a family about a week.

"There will be cash-flow problems," said Ibnu Bramono, senior consultant in Singapore at Facts Global Energy, a consulting firm. "It was even difficult in Jakarta. In remote areas it will be worse."

In the long run, households switching to LPG will save at least 24,000 rupiah a month, Pertamina estimates.

While Indonesia subsidizes all fuel for nonindustrial use, the switch will save money for the government because subsidies for LPG are lower than those for kerosene. State aid reduces the price of LPG by 53 percent, compared with 68 percent for kerosene, according to Pertamina. In 1998, demonstrations against fuel price increases helped topple the 32-year dictatorship of President Suharto.

Indonesia, a member of the Organization of Petroleum Exporting Countries, is the world's biggest exporter of liquefied natural gas, though it is a net importer of oil products like kerosene.

Educating new liquid petroleum gas users is not easy, said Marwan, an LPG retailer who uses just one name. While conducting demonstrations at his kiosk in south Jakarta, Marwan places LPG cylinders in buckets of water to prove they do not leak. Even so, many customers return asking for kerosene, frightened because they cannot replicate some aspect of the lessons, he said.

The transition might have been smoother if the government had been more involved, said Huzna Zahir of the Indonesian Consumers Association.

The ministries of energy, women's affairs and small business could have helped educate consumers, Zahir said. Those ministries and Pertamina should place advisers in communities until people adjust to the new fuel. "That way people will have someone to turn to when they have questions," she said.

Pertamina was chosen to implement the switch because it successfully ran a pilot program in 2006 and maintained a distribution network of agents and retailers, said Energy Minister Purnomo Yusgiantoro. The company will continue to lead the effort, although government ministries will now help, he said.

Chairoh, the LPG retailer, is not budging. A former kerosene seller, she keeps gas stoves out of her kitchen and stores about 100 LPG canisters in a shed away from her brick house.

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