PGN to set up SPC for 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.