PGN to start two gas pipeline projects in 1996

PGN to start two gas pipeline projects in 1996

JAKARTA (JP): The state-owned gas company Perum Gas Negara
(PGN) plans to construct two gas pipeline networks from the
Asamera gas field in South Sumatra to Duri and Batam Island, both
in Riau, and to Muarakarang in North Jakarta next year.

PGN's president, A. Qoyum Tjandranegara, said yesterday that
the first network will consist of a 540-kilometer trunk line
which will carry gas from the Asamera field at the Corridor block
near Palembang to PT Caltex Pacific Indonesia's Duri oil field
near Pekanbaru, and a 283-kilometer spur line (smaller pipeline)
from Jambi to Batam Island.

Speaking in a hearing with Commission VI of the House of
Representatives, Qoyum said that the second pipeline network,
which will have a total length of 508 kilometers, will transport
gas from Asamera and Prabamulih near Palembang to a gas
distribution station in Muarakarang.

"The first pipeline, the construction of which will start
early next year, will require an investment of US$588 million,"
he said, adding that $470 million of the investment will be
financed with a loan from the Asian Development Bank, $100
million will be generated from sales of bonds to the public
through the country's over-the-counter (parallel) bourse and the
remaining $18 million will come from PGN's own equity.

"We expect to sign an agreement on a loan with Asian
Development Bank next month," he said.

He told reporters after yesterday's hearing that his company
plans to tender the project by June or July.

Qoyum estimated that the second pipeline will cost the company
around $700 million.

He pointed out that around $300 million of the investment will
come from the World Bank, $350 million from the floating of bonds
and the remaining $50 million from PGN's own equity.

The construction of the Asamera-Muarakarang pipeline is
expected to start by the middle of next year.

"We have just finalized a survey on the placement of the
planned pipeline and an environment study," he added.

Bonds

Responding to a question of the prospect of bond flotation,
Qoyum assured the members that at least nine foreign gas
companies have shown an interest to either buy the PGN bonds or
put their funds in PGN through direct placement.

The companies include Osaka Gas Corp. of Japan, Gas de France,
British Gas of England, Unigas of the Netherlands, Ital Gas of
Italy, Elpasso and Enron Corp., both of the United States, and
Nova Corps of Canada, he told The Jakarta Post.

Qoyum expects both planned gas pipelines to be operational by
the year 2004.

"Their operations will help the country reduce the utilization
of oil by 12.5 percent a year," he said, adding that PGN thus far
only helps reduce oil utilization by around 1.8 percent a year.
(fhp)