PLN closes deal with Petronas for Klorok power Plant

Fabiola Desy Unidjaja, The Jakarta Post, Jakarta

State-owned power firm PT PLN signed a deal with Malaysian counterpart Petronas to deliver liquefied natural gas (LNG) to the Klorok power plant in East Java.

The LNG usage is expected to trim some US$100 million from annual expenses at the plant.

Under the US$147 million planned annual contract, the Malaysian firm is slated to deliver LNG amounting to 145 million cubic feet per day from the Kepodang gas field in the northeast of Madura island.

"We concluded the negotiations last week and will sign the up- to-12-year deal as soon as possible," PLN director of power plants and primary energy Ali Herman Ibrahim told The Jakarta Post on Sunday.

The signing of the contract, he added, would take place early next month.

"We expect them to start the delivery two years after the signing. Using LNG will save our operational cost for the power plant compared to more expensive diesel fuel."

Time of delivery is one of the points of negotiation as Petronas said they could deliver the LNG 30 within months after the signing of the contract, but PLN asked the firm to deliver in 24 months after the signing.

The Klorok power plant is the power source for Semarang, the capital of Central Java, and has been using diesel fuel for its operation.

Petronas has acquired two new gas blocks in Indonesia since last December, including the Production Sharing Contract (PSC) for the northeast Madura offshore field.

The contract was acquired from BP Plc which has been operating in the 500-square-kilometer offshore field since 1999.

"This is the first time that we are using LNG instead of diesel fuel for the Klorok power plant. We hope there will be more power plants using natural gas to cut down the costs," Ali explained.

Petronas is a relatively new player in the oil and gas industry in Indonesia, with its first branch office in Jakarta opened in 2001. The company has owned some 40 percent of PT Transportasi Gas Indonesia since 2002.

PLN has been trying to switch to LNG because its diesel fuel dependence has burdened the company's finances.

They are hoping to develop an LNG receiving terminal in Banten province that could cost about $300 million.

The planned terminal will receive LNG through pipelines from Sumatra or by ship.