y to analyze the marketcompetition and business environment

y sources2.3.2. Five Porter AnalysisIn this paper will be used Porter’s Five Forces analysis tools to analyze the marketcompetition and business environment at natural gas business. This Porter’s Five Forcesframework analyze by side of threat of new entrance, threat of substitution, bargaining powerof supplier, bargaining power of buyer, and also analysis the rivalry. Frame work fiver porteranalysis is figured at figure 2.8 below.17Figure 2.8. Five Porters Framework Business Analysisa. Threat of SubstitutionGas business is a part of energy business. Natural gas should to compete with coal, oil,renewable energy, and other energy sources. Every energy sources have its strength and alsoits weakness. Demand of natural gas is very sensitive due changing of prices another energysources. In example since 2014, there is a trend of start declining global oil prices. Due thistrend, demand of natural gas is also declined. at 2014, oil prices is relative high up to100USD per bbl. Ant currently oil price is about 50USD per bbl. Due the trend of decliningoil prices, several consumer of natural gas has shift to oil fuel. Figure 2.9 show thecorrelation between global oil prices to gas domestic consumption at Indonesia. The data isbased on trend volume gas sales PGN 2014-2016.Figure 2.9. Correlation of global oil prices to natural gas salesBeside of the threat of oil, natural gas is also can be substitute with another energy sourcesi.e.: coal, oil, renewable energy, etc. Threat of substitution for gas business is relatively highdue there is many option of available energy sources.18b. Bargain Power of BuyerCurrently gas customer is separated into several sector, that cover power plant, industries,commercial, house hold etc. The portion of gas consumption average 2014-2016 is below:Figure 2.10 Natural Gas End User (wood Mackenzie 2017)From the data above, the most significant sector gas demand is power plant and industries.Power plant sector here is almost dominated by PLN (Perusahaan Listrik Negara). PLN hasmany power plant that operate with different fuel sources, that is coal, oil, hydro, renewable,gas etc. PLN always choose the cheapest fuel sources to generate electricity.Industries is also have big portion of gas consumption. There are many types of industriesthat use gas. Other industries in example petrochemical industries use gas as a raw material oftheir product. For petrochemical industries, there is no other option of raw material, thatmeans for Petrochemical industries have no other option except to choose natural gas. Dueseveral consideration above, bargain power of gas buyer is relatively medium.c. Power of SupplierNatural gas business at Indonesia is highly regulated by the government. Gas prices inIndonesia are negotiated on a bilateral basis between the producers and the gas aggregators orend-users. However, contracts are subject to approval from SKK MIGAS, which has soughtto control prices.Gas prices of from producers are depending on investment to gather the gas. Gas fromoffshore fields is relatively more expensive than onshore prices. With this condition, it can beconcluded that bargain power of supplier can be considered medium.19d. Potential New EntranceGas businesses in Indonesia are highly regulated and also have many requirements to enterthis business. There are several examples that regulate gas business in Indonesia:a. PP 36 th 2004, and PP no 30 th 2009, that regulate transmission line, business permit,business privilege etc. if a company has privilege to build gas infrastructure (transmissionline) in one area, there is not allowed for other business entity to build the transmission gaspipeline on that areb. Permen ESDM no 6 th 2016, that regulate about gas allocation and gas pricing. In thisregulation, there is impossible the government give allocation for entity that not have gasinfrastructure.c. Etc.Beside of the regulation as a barrier to entry, a gas industry is an infrastructure business. Atinfrastructure business it needs more capital. For example investment at gas infrastructurethat are: Pipeline SSWJ (Grissik – Muara Bekasi) 796 Million USD, Pipeline Arun-Belawan420 Million USD, etc. Based on the two considerations above, it’s not easy to enter gasbusiness. Then the potential new entrance for this business is considered low.e. Industry CompetitionHigh rivalry between existing competitors can limit industry profitability depending on thecompetition intensity and basis. For Gas business at Indonesia there is a few companies as amarket player. There is two State Owned Companies that engage at gas business inIndonesia. That is PGN and Pertagas as major gas pipeline company at Indonesia. (PWC,2017)Beside of the two major gas player, there are several private companies that have small scaleof gas business i.e Bayu Buana Gemilang, Sadikun Niaga, Odira Energy, Rukun Raharja etc.based on that business condition, and industry competition at gas business is considered low