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)