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.