Govt invites investors to build gas pipeline
The Jakarta Post, Jakarta
The government is wooing investors to build gas pipelines across the country to boost domestic gas distribution amid rising demand from industrial plants in Java.
"The relatively stable exchange rate of the rupiah and lower interest rates will generate profit for investors who want to build gas pipelines from outside Java to Java," Coordinating Minister for the Economy Dorodjatun Kuntjoro-Jakti announced on Tuesday.
Indonesia's gas reserves are mostly located outside Java, such as in Aceh and East Kalimantan, while industrial plants are mainly in Java.
Although developing underwater gas pipelines involves huge financial resources, Dorodjatun failed to spell out what incentives the government would offer to investors.
The government is struggling to meet increasing gas demand on densely populated Java island as well as to reduce the country's dependence on oil-based fuel.
Several projects to build a gas pipeline network are scheduled to commence in the future.
For instance, state gas firm PT Perusahaan Gas Negara (PGN) plans to build a gas pipeline linking Grissik to Jakarta via Pagardewa in South Sumatra and Cilegon in West Java. The 399- kilometer pipeline is expected to be completed in 2006.
The pipeline will transmit gas from South Sumatra to industrial plants in West Java, as well as to the Muara Karang power plant in Jakarta, which is run by state electricity company PT PLN.
Another planned project is a 380-kilometer gas pipeline from Duri in Riau to Belawan in North Sumatra, which will be capable of transporting 250 million standard cubic feet per day (MMSCFD) of gas.
In addition, PGN will build gas receiving terminals in West and East Java to supply Java with liquefied natural gas from the Tangguh LNG complex in Papua and Donggi in South Sulawesi. The LNG will ensure uninterrupted gas supplies to the provinces.
Meanwhile, the fertilizer industry has called on the government to provide gas for the industry at no more than US$1 per million British Thermal Unit (MMBTU).
Zaenal Soedjais, president of state-owned fertilizer firm PT Pupuk Sriwijaya, said the gas price for the fertilizer industry had increased from $1.80 per MMBTU to $2 per MMBTU. The condition has reduced the competitiveness of the fertilizer industry in the international market and put pressure on production.
"The gas price for the fertilizer industry should be lower as the industry only utilizes 7 percent of total natural gas production," he said.
According to Zaenal, Gulf states sell gas to the fertilizer industry at 0.6 U.S. cent per MMBTU. While in Malaysia, the gas price for the fertilizer industry is 0.9 U.S. cents per MMBTU.
Minister of Energy and Mineral Resources Purnomo Yusgiantoro said the gas price could be lowered to $1.50 per MMBTU even though it would reduce government revenue by up to $30 million per year.
Purnomo said the government realized lowering the gas price could have a multiplier effect in the overall economy, such as by creating employment in the petrochemical industry and by providing farmers with cheaper fertilizer so as to boost agricultural production.