Gas pipeline tenders open in 2 weeks
Leony Aurora, The Jakarta Post, Jakarta
The government will open the tender on a pipeline project connecting gas-rich Kalimantan and densely-populated Java within two weeks, a top official of the Oil and Gas Downstream Regulatory Agency (BPH Migas) says.
BPH Migas chairman Tubagus Haryono said on Monday the project, spanning 1,200 kilometers from East Kalimantan to Central Java and estimated to be worth US$1.2 billion, would be tendered out in mid-September.
"We expect to announce the winner early next year," said Tubagus.
The winner of the tender will hold a special right on the route, meaning that no other companies will be allowed to build pipelines connecting the same areas.
The agency was currently studying the supply and demand balance for gas between the two islands.
Based on BPH Migas' rough calculations, some 7.7 trillion cubic feet of gas will be available, taking into account the proven reserves and assuming they get half of the probable reserves.
"We estimated that (the pipeline) will reach break-even point in 15 years," said Tubagus, without elaborating. "We're studying (suitable) contract terms," he added.
Indonesia is seeking to speed up the construction of its gas infrastructure to reduce domestic oil-based fuel consumption. The country is facing ballooning subsidies as global oil prices soar, threatening to widen the state budget deficit to Rp 26.2 trillion ($2.53 billion) or 1 percent of gross domestic product (GDP).
Tubagus further said that the agency would only consider companies that participate in the tender as candidates to carry out the project.
He was commenting on a memorandum of understanding (MOU) signed between state gas distributor PT Perusahaan Gas Negara (PGN) and the China National Offshore Oil Corporation (CNOOC) last Wednesday in Beijing on building the gas transmission line.
"If (PGN) is not selected as the tender winner, the MOU is off," said Tubagus.
PGN president director WMP Simanjuntak said through a text message that under the MOU, the Chinese enterprise would assist PGN in funding the pipeline project.
The pipeline is part of the so-called Integrated Indonesian Gas Pipeline (IIGP) projects, which will distribute gas from production points in East Kalimantan, South Sumatra, Riau and East Java to industrial and household consumers in Java and Sumatra.
The projects, which are estimated to cost some $3 billion with a combined transmission length of over 2,000 kilometers, are expected to be completed by 2009.
BPH Migas is currently conducting tenders for two segments to connect Gresik in East Java with Semarang, and Semarang with Cirebon, West Java.