PGN to build East Kalimantan-Java pipeline
PC Naommy, The Jakarta Post, Jakarta
State-owned gas distributor PT Perusahaan Gas Negara (PGN) unveiled on Wednesday plans to develop a US$1.7 million pipeline running from East Kalimantan to Java.
PGN director of development Adil Abas told The Jakarta Post that the prelaunch was intended to open a discussion with several field experts for their input on the project.
"This is a big project that will involve big money -- that's why we have to conduct a comprehensive study to determine whether it's feasible," he said.
Adil said PGN had received a $650,000 grant from the USTDA (United States Trade and Development Agency) for a feasibility study. PGN has also consulted with the Asian Development Bank (ADB) and the World Bank in regards financial assistance.
So far, three international financial institutions have committed soft loans for the PGN pipeline project. The ADB will is to provide $250 million, the European Investment Bank (EIB) has offered $100 million and the World Bank, $100 million.
PGN has allocated $320 million of its own capital for the project.
Besides providing an improved gas supply for Java, the project will also bring investment to upstream and downstream industries that will help boost economic recovery in the country, said Adil.
"The project will improve economic growth in the provinces, especially in East Kalimantan, Central Java, East Java and West Java," he said.
He added that the pipeline project would also help develop a better source of energy to support the government's blue sky policy as it would provide environmentally friendly fuels.
Adil said the gas would be sourced by several East Kalimantan gas fields, and that the company planned to conduct further studies to determine those gas fields to be tapped.
In regards potential investors, Adil said several investors were interested in the project, but would likely wait until the results of the feasibility study, which are to be presented at a final workshop scheduled for Feb. 26.
The project includes a 1,600-kilometer pipeline to supply 1,000 million metric standard cubic feet per day (MMCFD) of liquid gas from East Kalimantan to East Java and West Java.
A study has projected that, with an annual economic growth of 3 percent to 6 percent, gas demand in Java will grow by 4.9 percent to 8.3 percent annually.
In addition, Java's gas demand is projected to reach between 2.0 billion cubic feet per day (BCFD) to 2.5 BCFD by 2010 and between 3 BCFD to 6 BCFD by 2025.
PGN is also developing another pipeline from Pagardewa, South Sumatra, to Cilegon, West Java, that will stretch 499 km. The company is currently selecting consultants to prepare necessary documents for the Pagardewa-Cilegon pipeline project.
Adil said that the project was scheduled to commence at the end of this year and too finish in mid-2006.
West Java's gas demand is projected to reach 130,000 MMSCFD by 2006.