Gas pipeline deal delayed to 2002: PGN

Gas pipeline deal delayed to 2002: PGN

SINGAPORE (Dow Jones): Selection of a new stakeholder in a natural gas pipeline linking Singapore and Sumatra, Indonesia, from more than a dozen contenders has been delayed to February 2002 - or just barely in time for construction of the pipeline to begin in April 2002, an official with pipeline developer PT Perusahaan Gas Negara said.

Final drafts of an information memorandum, prepared by N M Rothschild & Sons Ltd., will be distributed in mid-October, PGN Finance Director WMP Simandjuntak said Monday.

Due diligence should be conducted by January, and the investment agreement for a 25-40 percent stake in the pipeline company - dubbed Transco 1 - signed in February, he said.

PGN had earlier planned to finalize the stake sale by end- year.

Transco 1 will own and ultimately operate a pipeline linking gas fields in South Sumatra to Singapore, via Batam, and to crude oil fields operated by PT Caltex Pacific Indonesia, a joint venture between Texaco Inc. and Chevron Corp.

The capital injection is necessary to raise US$250 million for the $477 million pipeline, and as a condition for the release of $88 million in loans from the Asian Development Bank.

Simandjuntak held out hope that tenders for the pipeline construction will be awarded in time to begin construction. Some will be awarded before, and some after, the investment agreement with the outside stakeholder, he said.

State-owned PGN faces contractual penalties if gas transmission to Singapore doesn't start by November 2003. If it can't build the pipe by that date, gas supplier Singapore Power and its customers may face gas supply delays.

PGN lists among interested investors Conoco Inc., Williams Cos., Unocal Inc., Texaco Inc., and investment company AIDEC, all of the U.S., Simandjuntak said.

In Asia, potential stakeholders include Malaysia's Petroliam Nasional Bhd., or Petronas; Singapore conglomerate SembCorp Industries Ltd., Singapore Petroleum Co., and Singapore Power Ltd. unit PowerGas; Tokyo Gas Co., Nippon Steel Corp. and Korea Gas Corp.

PT Trans Nusantara Multi Construction, or Tranaco, which developed Indonesia's East Java pipeline, has also submitted an expression of interest, Simandjuntak said.

Singapore Power will import 150 million standard cubic feet a day of South Sumatra gas through the pipeline from mid-2003, ramping up to 350 million cf/d by 2009, for a total volume of 2.27 trillion cf/d over 20 years.