Govt invites investors to build gas pipeline
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.