PGN to spend $1b to expand network
PGN to spend $1b to expand network
JAKARTA (JP): State gas transmission and distribution company
PT Perusahaan Gas Negara (PGN) said on Tuesday that it plans to
spend nearly US$1 billion expanding its gas transmission network
over the next five years.
Company president Abdul Qoyum Tjandranegera, in a hearing with
House of Representatives' Commission V for mines and energy, said
the money would be used to expand its gas transmission network
from Central Sumatra to Singapore and Java.
He said PGN would start developing a 480-kilometer pipeline
from the Grissik gas fields in South Sumatra to Singapore later
this year. The gas pipeline will pass Sakernan in South Sumatra
and Batam island in Riau.
The gas fields in Grissik are being developed by Gulf and
Santa Fe Energy, both of whom are production sharing contractors
to state oil and gas company Pertamina.
Last month, Pertamina, PGN, Gulf and Santa Fe Energy signed an
agreement with PowerGas, a Singapore Power subsidiary, to supply
the latter with gas for 20 years beginning in 2001. The Singapore
company will purchase approximately 400 million cubic feet of gas
per day (MMSCFD).
Qoyum said PGN would invest $389 million to develop the
Central Sumatra-Singapore pipeline, adding that the Asian
Development Bank (ADB), Japan Exim Bank (JEXIM) and the European
Investment Bank (EIB) would finance the project.
Qoyum said the pipeline should be completed by 2001.
PGN will also develop a 280-kilometer gas distribution
pipeline between Cilegon and Purwakarta in West Java. The project
will begin in 2000 assisted by a planned investment of $102
million from the same financiers backing the South Sumatra-
Singapore pipeline.
PGN believes there is a potentially lucrative market to be
found in supplying the area's industries.
The state company also plans to begin construction of a 370-
kilometer pipeline to transmit gas from gas fields in Pagardewa
in South Sumatra to Cilegon in West Java in 2001. The same
financiers will also back this project with funds of $330
million.
PGN has recently completed the development of a 544-kilometer
gas pipeline from Grissik to PT Caltex Pacific Indonesia's oil
field in Duri, Riau. The pipeline became operational early this
month.
ADB, JEXIM, EIB provided funds amounting to $386 million to
support the project, of which only $231 million was used by
PNG.
Qoyum also said PGN expects to post a steady growth in profits
over the coming years on the back of rising sales.
The company expects to post a net profit of Rp 113.2 billion
this year, compared with Rp 82.6 billion last year.
It also expects to book net profits of Rp 396.2 billion in
1999, Rp 498.7 billion in 2000, Rp 591.1 billion in 2001 and Rp
474.6 billion in 2002.
Qoyum noted that despite its rosy outlook, "being forced to
buy natural gas in U.S. dollars had put the company in great
difficulty."
PGN buys natural gas from Pertamina in dollars, which it then
sells on the domestic market in rupiah. However, the company also
builds pipelines to transport gas, for which its clients pay in
dollars, providing PGN with badly needed foreign currency.
Qoyum also called for the scrapping of Pertamina's monopoly on
the development of gas fields and the sale of natural gas.
Under the existing law, Pertamina holds the sole right to sell
gas. However the government allows PGN to sell gas to small
buyers, leaving Pertamina to cater to big buyers. (jsk)