PGN seeks to set up SPC for Sumatra gas project

PGN seeks to set up SPC for Sumatra gas project

Fabiola Desy Unidjaja
The Jakarta Post/Medan

State-owned gas distributor Perusahaan Gas Negara (PGN) is slated
to establish a special purpose company (SPC) to help finance its
key pipeline project linking gas fields across Sumatra.

PGN president director W.M.P. Simanjuntak said in Medan, North
Sumatra, on Thursday his company would only ask for 15 to 20
percent of the shares in the SPC, while the remaining shares
would be offered to investors.

The 650-kilometer pipeline, which will link Duri gas field in
Riau to electricity firm Asahan Power, requires some US$405
million in total investment. The completion of the first phase of
the project is slated for July 2007.

"We will complete the financial scheme for the pipeline
project in March and interested investors will be invited in
April," Simanjuntak said.

While refusing to name specific investors, Simanjuntak said
several foreign investors had expressed interest in the
establishment of the company, though they were waiting to see
what sort of financing scheme PGN had in mind.

The scheme would be discussed in more detail at the upcoming
tripartite meeting between PGN, Asahan Power and Duri's field
operator, he added.

To attract investors, he continued, PGN would introduce a
hybrid system in the construction of the pipeline -- which would
allow the gas to be tapped before it reached the end of the
pipeline in Belawan, North Sumatra.

"The pipeline project will also open up business opportunities
for local administrations to participate in the distribution of
the natural gas within their respective regions and support local
industries," added Simanjuntak.

The company's top executives are on a roadshow to areas to be
affected by the pipeline, which will pass through North and South
Sumatra, Riau and Jambi.

In a meeting with North Sumatra Deputy Governor Rudolph
Pardede on Thursday, PGN also sought support from authorities to
provide guarantees to avoid problems related to land acquisition
and permits.

In his response, Rudolf promised that there would be minimum
disturbances in the construction and operation of the project,
and that he would set up a meeting with regents in the province
whose regencies would be affected by the project.

"We will try to minimize possible disturbances from the public
and local authorities, by starting to promote the project, as
well as the benefits it could bring for local people, as soon as
possible," the deputy governor said.

He added that the pipeline would also support the province's
plan to build a gas-fired power plant there with a capacity of
1,000 megawatts.