PGN seeks guarantees for Sumatra project

Fabiola Desy Unidjaja, The Jakarta Post/Pekanbaru

State gas distributor Perusahaan Gas Negara (PGN) is seeking a guarantee from provincial and local governments to support its key pipeline project linking the Duri gas field in Riau to North Sumatra.

In a meeting here with Riau Governor Rusli Zainal, PGN president director W.M.P. Simanjuntak said the guarantee was needed for investors to avoid unnecessary snags over land acquisitions and permits.

"Of course (the guarantee) is important to assure investors in this key project that such issues will not hamper its realization. But, we are also keen to assure local authorities that the project will benefit the provinces," Simanjuntak said on Wednesday after the meeting, which was part of series of forums held between the company and regional governments.

Locals could get jobs in the new regional companies in charge of gas distribution that would be established, while some of the gas would be earmarked for local SMEs, especially palm oil businesses that were flourishing in the area, Simanjuntak said.

In response, Governor Rusli said he would coordinate with the regencies involved in the project, and underlined that his office would try to identify possible problems the project may encounter in the future so as to find solutions.

"We cannot say anything yet, because we are still working out which regencies will be affected by the construction, but of course we will try to find best solutions," Rusli said.

Since the implementation of regional autonomy in 2001, many investors have complained about the resulting confusion caused by numerous regulations, often contradictory to those issued by central government, which often cause expensive delays and boost production costs. Many regulations have been criticized as excuses for bribe-taking by government officials.

PGN is planning to build some 493 kilometers of pipeline from the Duri field in Riau to North Sumatra, a project worth some US$ 300 million. The project is due for completion in July 2007.

The pipeline will pass through several regencies in four provinces -- North and South Sumatra, Riau and Jambi.

"What we can say is that we are committed to helping investors as it will help us improve the province's economy, but we would also like to see the project benefit local people," Rusli said.

The Riau administration planned to build two gas-fired power plants in the area, he said.