Govt to open tender for Kalimantan-Java gas pipeline
Govt to open tender for Kalimantan-Java gas pipeline
Leony Aurora, The Jakarta Post, Jakarta
The government will announce the opening of the much-debated
tender for the special rights to build and operate a gas pipeline
linking Kalimantan and Java on Thursday, signaling the priority
to meet domestic demand over the more lucrative exports.
The Downstream Oil and Gas Regulatory Agency (BPH Migas), in
charge of the tender for the 1,219-kilometer pipeline between
Bontang in East Kalimantan and Semarang in Central Java, expects
to announce the winner in May next year, chairman Tubagus Haryono
said on Wednesday.
"Our reference (in choosing an offer) is based on the IRR
(internal rate of return), capacity and toll fee," Tubagus said.
Tender documents for the 25-year special rights can be
obtained between Jan. 16 and Jan. 27 and offers are to be
submitted between April 24 and April 28 next year. The pipeline,
estimated to cost US$1.7 billion, should be able to channel
between 700 million standard cubic feet per day (mmscfd) and
1,000 mmscfd.
Tubagus said to ensure gas availability, the government had
decided not to extend half of the 12 million metric ton contract
of liquefied natural gas (LNG) with Japanese buyers after it
expired in 2010. Indonesia is still in negotiation for the other
six million metric tons.
"This is in line with the letter sent by the coordinating
minister for the economy on Dec. 2," said Tubagus, referring to a
document signed by former minister Aburizal Bakrie on his last
day in office before he took up the post of coordinating minister
for people's welfare.
The letter states that the government has decided not to
extend LNG contracts, nor draft new export agreements. Instead,
gas output will be used for the country's power generation and
industrial needs.
The pipeline will require between 5.110 trillion cubic feet
(tcf) and 7.3 tcf of gas, depending on its design capacity, to be
channeled over a period of 20 years.
Without export reduction, there will only be 2.6 tcf of gas
available from the proven reserves of the huge gas fields in East
Kalimantan, operated by Total, Vico, and Chevron, said Tubagus.
The calculation is based on 95 percent of proven reserves,
amounting to 23.6 tcf, some 10.1 tcf of gas already committed,
3.5 tcf allocated for uncommitted export contracts and 7.4 tcf of
uncommitted domestic plans.
Analysts have questioned the government's plan to build the
pipeline as it would bring a substantial loss in revenue for the
country, not to mention idle infrastructure once the gas runs
dry.
Many suggested the gas be transported from resource-rich
Kalimantan to meet the demands of densely populated Java in the
form of LNG, as state power firm PT PLN plans to construct an LNG
receiving terminal in West Java. An LNG terminal can look for
supply from other places if Bontang plant, the larger of the two
LNG plants currently running in the country, cannot allocate
production for Java.
A feasibility study from the Asian Development Bank (ADB) has
concluded that although a pipeline would need a much higher
initial capital to build, gas transported through a pipeline is
eventually 6 percent cheaper per thermal unit than LNG.
Based on a capacity to ship 1,150 mmscfd for a period of 20
years, the cost to transport gas through a pipeline will be 72
U.S. cents per million British thermal unit (mmBtu) as compared
to 77 cents for LNG.
The report also concluded that Indonesia would need to cut
exports to secure a supply for the pipeline.