PGN to open country's longest gaspipline later this week

JAKARTA (JP): The state gas distribution company Perusahaan Gas Negara (PGN) will start operating the country's longest gas pipeline in central Sumatra on Thursday.

Project manager for the development of the 544 kilometer gas pipeline, Irwan Heryawan said PGN could operate the country's longest gas pipelines two months earlier than scheduled, despite the fact the development of the project had been shelved for two months due to the haze blanketing the area late last year.

The pipeline has been in the commissioning stage since Aug. 21 after being constructed for 18 months.

The pipeline will transmit natural gas from the gas fields of Gulf Indonesia Resources Ltd. in Gersik, Musi Banyuasin, South Sumatra, to the oil fields of PT Caltex Pacific Indonesia in Duri, Riau.

In Duri, the gas will be used to replace crude oil used by Caltex to pump crude oil wells.

Caltex currently burns 60,000 barrels per day (bpd) of crude oil to pump the Duri oil wells.

PGN will transmit 310 million cubic feet per day (MMSCFD) of natural gas from Gulf to Caltex at a cost of 62 U.S. cents per MMSCFD.

Gulf will receive 60,000 bpd of crude oil per day from Caltex in exchange for the gas.

PGN's executive coordinator for gas transmission projects Adil Abas said PGN had saved on the cost of the development of the gas pipelines by $120 million, after conducting an international tender for the project.

He said the Asian Development Bank (ADB), which financed the project, had initially estimated the cost of the project at $360 million, but PGN spent only $240 million of the funds to develop the project.

"There were no elements of corruption, collusion and nepotism in the project," Abas said.

The contract for the construction of the project was won by Management Pipelines Construction Combination (MPCC), a consortium made up of three local companies -- PT Citra Panji Manunggal, PT Rabana, state construction Nindya Karya --, Manesman of Germany and Nacap of the Netherlands.

The pipelines were supplied by PT KHI Pipe Industries, a subsidiary of state steel maker PT Krakatau Steel.

Pipeline coatings were provided by South Korean metal maker Hyundae Metal Industries.

Abas said PGN initially estimated the pipeline's operations would reach break even point in 10 years based on the development cost of $360 million. But, the break even point could be reached earlier, given the fact that the development cost had been significantly reduced.

PGN has also planned to develop another pipeline to transmit gas from South Sumatra to Batam island and Singapore with a budget of $230 million, which would also be provided by ADB.

The pipeline linking Gersik and Duri would branch out in Sekernan, South Sumatra to continue to Batam with a distance of 400 km, of which 200 km would be underwater.

State oil and gas company Pertamina signed a memorandum of understanding (MOU) two weeks ago in Singapore with Singapore's PowerGas, a subsidiary of Singapore Power, which will allow the latter to buy natural gas from the former's contractors, Gulf and Santa Fe Energy.

According to Abas, Pertamina will supply PowerGas between 350 MMSCFD and 850 MMSCFD of natural gas for 20 years starting from 2001 through pipelines that would be built by PGN together with PowerGas.

All related parties are to finalize the commercial aspects of the agreement by October and the signing of the contract is slated for March 31, 1999. (jsk)