Crisis forces RI to delay natural gas pipeline projects
Crisis forces RI to delay natural gas pipeline projects
SINGAPORE (Reuters): Gas pipeline projects in Indonesia have been delayed as a result of the country's economic woes as would- be financiers hold off negotiations until the rupiah stabilizes, a senior official said yesterday.
"All the projects have been affected by the crisis at the moment," Qoyum Tjandranegara, President Director of state gas utility company PT Perusahaan Gas Negara (PGN), told Reuters in an interview.
"Projects have been postponed for at least one year."
He said a plan to build a natural gas pipeline network from South Sumatra to Cilegon in west Java, which would also connect with Asamera's Corridor Block and Palembang in South Sumatra, had been shelved as finances have not been firmed.
The whole project was expected to cost around US$590 million, he said.
"Negotiations with the World Bank for financing of the project was supposed to be in October last year, but it has been delayed by one year," Tjandranegara said.
He said other projects delayed included a pipeline from East Kalimantan province to east Java, and another from East Natuna to Java as talks with finance companies have also been postponed.
Talks with the finance companies for these projects were supposed to start last year, he said.
Most energy infrastructure projects in Indonesia are financed partly by the private sector, and partly by the government, although there is no fixed percentage of the breakdown, Tjandranegara said.
He was in Singapore for a conference on gas pipeline infrastructure in the Asia Pacific region.
The Asian crisis had affected PGN badly since it bought gas from state oil company Pertamina in U.S. dollars, but sold to the domestic market in rupiah.
Indonesia's economic woes were triggered by a sharp depreciation in the rupiah, which has lost 70 percent of its value against the U.S. dollar since July.
In February, Pertamina asked the government to assist PGN financially because of the fall in the value of the rupiah and the government responded with a Rp 75 billion loan to PGN, Tjandranegara said.
He said he expected that to last around three months, but was hopeful of a stabilized rupiah by that time.
Tjandranegara said the government was also trying to promote gas pipeline projects to make gas supplies readily available and reduce the country's dependence on imports of more expensive diesel for power generation.
"To import diesel, you would pay more than if you buy gas domestically," he said.
Indonesia is one of the largest spot buyers of diesel in Southeast Asia, taking around three to five million barrels per month on average.
For March, Pertamina attempted to stop diesel imports to save on foreign exchange, but was forced to resume purchases due to inadequate domestic supplies following an unexpected shutdown of its 125,000 barrels-per-day Balongan refinery.
Tjandranegara said that only 10 percent of power in Indonesia is obtained from using gas, with diesel making up the bulk.
This, he said, was mainly due to inadequate infrastructure and the inability of power stations to get easy access to gas.
He said supplies were ample and most power plants in Indonesia could switch easily from using diesel to gas.
By 2020, the government is planning to have adequate infrastructure and raise the usage of gas to for power up to 45 percent, he said.