Gas pipeline project must be tendered out: Aburizal

Gas pipeline project must be tendered out: Aburizal

Leony Aurora, The Jakarta Post, Jakarta

The massive pipeline project connecting gas-rich Kalimantan to
Java must be tendered out, the Coordinating Minister for the
Economy says, negating an earlier agreement made by the Vice
President and a huge Chinese oil and gas company.

Putting his support behind the Downstream Oil and Gas
Regulatory Agency (BPH Migas), Aburizal Bakrie said on Wednesday
that the Committee for Policies on the Acceleration of
Infrastructure Construction (KKPPI), which he chairs, had decided
that the project would be tendered out last month.

"The tender will be conducted by BPH Migas and the person in
charge of the process is BPH Migas chairman (Tubagus Haryono),"
Aburizal said at an exhibition on alternative energy here.

Although Aburizal said the decision had been taken a month
ago, there has been a heated debate during the past two months
about whether the project would be tendered out or given directly
to state gas distributor PT Perusahaan Gas Negara (PGN), which
had offered to undertake the project in partnership with the
China National Offshore Oil Corporation (CNOOC).

The debate started in late August when PGN signed a memorandum
of understanding with CNOOC witnessed by Vice President Jusuf
Kalla to build the gas transmission line.

PGN said the Chinese company was ready to finance the US$1.2
billion project.

Later, Tubagus requested a letter from the Ministry of Energy
and Mineral Resources affirming that the agency would tender out
for the 1,200-kilometer long pipeline project.

"The energy minister (Purnomo Yugiantoro) sent a letter on
Oct. 17 to the coordinating economics minister in support of us
conducting the tender," Tubagus said.

Purnomo, who also attended the exhibition, said the
infrastructure acceleration committee would have the final say on
the project.

He said the ministry would give a recommendation based on a
feasibility study of the transmission line. The study, conducted
by BPH Migas, is expected to be completed late this year.

Critics have urged the government to reconsider whether the
pipeline would be the best means to bring gas from the aging
fields in Kalimantan to Java, where the use of the
environmentally-friendly fuel is low due to a lack of
infrastructure.

A liquefied natural gas (LNG) terminal might prove to be a
better option, they said, because if gas ran out in Kalimantan,
the terminal could still receive supplies from other areas,
whereas a pipeline would become a rusting hulk at the bottom of
the sea.

State power firm PT Perusahaan Listrik Negara (PLN) is
planning to construct an LNG terminal in West Java, which would
start operation in 2009.

Aburizal remained firm that the supply from Kalimantan would
be sufficient. "Gas contractors there now don't produce as much
because they cannot channel the output," he said.

Indonesia will have to cut LNG exports by 10 percent next year
due to lower production in Kalimantan and Aceh.

The government has been forced to cut supplies equal to 30
cargoes or 1.8 million metric tons of LNG to contracted buyers
from the country's plant in Bontang, East Kalimantan -- the
larger of the two plants operating here -- from the ordered 370
cargoes.

The Upstream Oil and Gas Regulatory Agency (BP Migas) said
last week that the nation's gas production was in decline and the
new reserves recently found in Kalimantan were not as big as
expected.