BUSINESS STRATEGY OF PT BMI’S CNG/LNG TO SUBSTITUTE LPG IN THE INDUSTRIAL AND COMMERCIAL SECTORS

• Main Author: Omar, Alto
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/47610
• Institution: Institut Teknologi Bandung

The Government of Indonesia is trying hard to lower its natural gas (NG) price in several industries to boost their competitiveness in the world market and expecting the multiplier effects generated in the domestic economies; as well as replacing the expensive imported petroleum fuels and LPG with domestic NG in the gas, compressed (CNG) and liquid (LNG) state to lower Indonesia trade imbalance. PT BMI has entered the CNG production and distribution business since 2009 in west part of Java mostly to replace petroleum fuels. In 2017, PT BMI entered the retail CNG business replacing LPG in small scale energy consumers in the industrial and commercial businesses such as in restaurant, hotel, hospital and catering business. In 2018, PT BMI pioneered the LNG transportation and distribution business in Sumatra partnering with Pertagas Niaga. PT BMI experienced challenges in the CNG retail business and sees LNG as a more viable option, considering its current technology, price and availability of the small-scale LNG (SSLNG) equipment from China. This study analyses the appropriate PT BMI business and corporate strategy to replace LPG with CNG/LNG in the Industrial and Commercial Sectors. PT BMI only targets 8 MMscfd of NG equivalent (0.81% of total national LPG consumption) for businesses that are bold enough to convert in Sumatra and Java. Interviews, as primary data, with government official, regulator, expert, and NG stakeholders and business players were conducted to analyze PT BMI external environment. Whereas, interviews with PT BMI executives were conducted to gather primary data for the internal environment analysis. Tools such as Analysis, Formulation, and Implementation (AFI) Strategy Framework, PESTEL, VRIN and NG chains analysis were used to formulate the strategy. From the external and internal environment analysis, PT BMI is directed to follow wide differentiation business strategy by providing differentiated product in wide segments with premium service and focusing on economies of scope while leaving the fierce CNG business and entering the SSLNG business. In order PT BMI sustained its competitive advantages, the firm business have to expand to new geographic areas and diversify into new retail LNG business, build and operate its own Micro LNG Plant, as well as build strategic alliances to provide resources for the expansions by capitalizing the ever growing experience and expertise in the SSLNG business using economical but quite reliable technology from China.