PGN needs $2.95 billion to develop gas pipeline

PGN needs $2.95 billion to develop gas pipeline

Moch N. Kurniawan, The Jakarta Post, Jakarta

State-owned gas company PGN will need about US$2.95 billion in
funds up to 2007 to develop four pipeline projects in the country
that are aimed at meeting growing gas demand, according to a
senior company executive.

PGN president W.M.P. Simandjuntak said on Tuesday that the
expansion program would be funded mainly from foreign loans.

"We will develop four pipeline projects up to 2007, namely
Grisik to Singapore, South Sumatra to West Java, East Kalimantan
to East Java, and East Java to West Java," he said at the Gas
2002 Indonesia conference.

PGN needed about $470 million to develop the Grisik-Singapore
pipeline, $480 million for the South Sumatra-West Java pipeline,
$1.2 billion for the East Kalimantan-East Java pipeline, and $800
million for the East Java-West Java pipeline, Simandjuntak said.

"At present, we have almost obtained one financing scheme for
a 540-kilometer pipeline project from Grisik to Singapore," he
added.

Simandjuntak said the company had secured loans worth $420
million from the Asian Development Bank and the European
Investment Bank for the development of the Grisik-Singapore
pipeline project.

PGN would also announce a strategic partner for the project
next month in the form of a consortium that was expected to
provide around $276 million in funds in exchange for a 25 percent
to 40 percent stake in the project, he added.

According to Simandjuntak, there are four consortia bidding
for the project, but he declined to disclose their names.

He expected the construction of the gas pipeline to commence
in May or June this year, and to be completed sometime next year.

The pipeline would become part of a pipeline linking gas
fields in South Sumatra with Singapore, via Batam, and to crude
oil fields in Duri, Riau, operated by PT Caltex Pacific
Indonesia.

Singapore Power would import 150 million standard cubic feet
per day of South Sumatra gas through the pipeline from mid-2003,
ramping up to 350 mmscfd by 2009, for a total volume of 2.27
tscfd over 20 years.

Simandjuntak said PGN's next project was to undertake the
development of the South Sumatra-West Java pipeline once a loan
from Japan worth $450 million had been disbursed.

Last year, PGN agreed with state-owned oil and gas company
Pertamina to allow the latter to deliver gas through the pipeline
from the Prabumulih gas fields in South Sumatra at a flow rate of
250 million metric standard cubic feet per day (mmscfd) starting
in 2005 in order to help meet growing demand for gas,
particularly for power generation.

Simandjuntak said PGN expected to develop the other two
projects, the 1000-kilometer East Kalimantan-East Java pipeline
and the 680-kilometer East Java-West Java pipeline in 2005.

"We might seek loans worth $1.4 billion to finance the two
projects ... but the numbers will become less and less if a
strategic investor comes in," he said.

According to one estimate, the country's gas demand will grow
by between 5 percent and 8 percent for the next few years.