Govt to seek bids for gas pipelines next week
Govt to seek bids for gas pipelines next week
Grace Nirang, Bloomberg/Jakarta
Indonesia, the world's largest liquefied natural gas seller, will next week seek bids to build pipelines linking the island of Kalimantan to Java, ignoring a study showing the project is uneconomical.
State downstream oil industry regulator BPHilir Migas has been tasked with preparing a tender to build the 1,227 kilometers of pipelines, said Tubagus Haryono, its chairman. State-controlled gas distributor PT Perusahaan Gas Negara (PGN) has registered for the bidding, he said.
The government wants to build the underwater pipeline to link gas fields in East Kalimantan to consumers on Java island to cut the use of oil products and reduce import bills. The government expects the $1.2 billion project to be completed by 2009.
The project may cost the country Rp 18 trillion (US$180 million) in lost export revenue each year, a government sponsored study showed.
"The government wants to go ahead with the tender first and decide later on whether it would cut exports of LNG or not," Haryono said in a phone interview in Jakarta on Friday.
Piping 700 million standard cubic feet a day of gas from East Kalimantan to Java may help cut spending on diesel imports by about Rp 44 billion a year, Haryono said.
Fields in East Kalimantan operated by Total SA, Chevron Corp., and Vico Indonesia, a unit of BP Plc and Eni SpA, currently supply the province's PT Badak NGL plant.
Badak, the world's largest LNG plant, sells to customers in Japan, Taiwan and South Korea.
A government-sponsored study released last month said the country should scrap plans to build the pipeline because declining reserves will make the project uneconomical and draw gas away from the export market.
Indonesia shouldn't deepen export cuts because this would reduce foreign currency earnings, according to the study. The officials from regulatory agencies and the energy ministry who wrote the study were assigned to evaluate the pipeline's feasibility.
Remaining proven reserves in Kalimantan stand at 4.3 trillion cubic feet, enough to supply Java for 10 years, less than the pipeline's potential lifespan of 20 years, Haryono said.