Pertamina, PGN plan gas pipeline

JAKARTA (JP): State-owned oil and gas company Pertamina and state gas distribution company PT Perusahaan Gas Negara (PGN) signed a preliminary agreement on Thursday for the supply of gas from South Sumatra to the industrial area of West Java.

"Under the so-called head of agreement, Pertamina will start developing its gas fields in Prabumulih, South Sumatra, and the first delivery of gas is expected in the first quarter of 2005," Pertamina president Baihaki Hakim told reporters following the signing.

He said that Pertamina had discovered a gas reserve of 3.8 trillion cubic feet (TCF) in its fields in Prabumulih.

The fields have the potential to produce 50 million cubic feet per day (mmcfd) of gas for 20 years, starting from 2005, he said.

"The gas sale agreement aims to anticipate the increasing demand for gas in West Java," Baihaki said.

Under the agreement, PGN will develop a 640-kilometer gas pipeline to stream gas from South Sumatra to West Java.

PGN broached the idea of building the pipeline several years ago in view of the potential gas market in West Java and the abundant gas reserves in South Sumatra.

Initially, the Japanese government showed interest in funding the project, but it later canceled the loan following the country's prolonged economic crisis.

PGN recently said European financiers were interested in financing the project.

Baihaki said that Pertamina would invest US$500 million to develop its 22 gas fields in Prabumulih for the project.

Baihaki said that Pertamina would continue exploration projects in Prabumulih and other parts of South Sumatra to increase its reserves in the province to 5 TCF to anticipate expectations of high demand in West Java and South Sumatra over the next five to 10 years.(11)