PLN speeds up RI's first LNG terminal project

PLN speeds up RI's first LNG terminal project

The Jakarta Post, Jakarta

State electricity company PLN said on Wednesday that next month
it would begin sending out invitations for bids to develop a
liquefied natural gas (LNG) receiving terminal in West Java.

Ali Herman Ibrahim, PLN's director of power plants and primary
energy, said originally the company planned to send out the
invitations to bid early next year.

"We want to speed up the project so that it can start
operating in early 2007. That is why we need to start inviting
bids next month," Ali said, adding that it would be an open
tender in which foreign investors would be allowed to
participate.

He did not elaborate on which investors would be invited to
bid on the project, which will include LNG storage and
regasification facilities.

PLN earlier said construction of the LNG terminal -- to be the
first in the country -- would cost about US$300 million.

The terminal, which will be located in Cilegon, is part of
PLN's efforts to boost and secure the natural gas supply for its
gas-fired power plants in West Java, while at the same time
reducing the use of more expensive oil.

The terminal will receive LNG from ships as well as
transmission pipelines from Sumatra. At the terminal, the LNG
will be converted back into gaseous form before being distributed
through pipelines to power plants or consumers.

The planned terminal would be expected to reduce the risk of
gas shortages for power plants in the province.

According to data, demand for natural gas in West Java grew by
50 percent from 276 million standard cubic feet per day (MMSCFD)
in 1999 to 413 MMSCFD in 2002. It jumped to 751 MMSCFD in 2003
with increasing demand from state gas company PGN, PLN's Muara
Karang power plant and the Pupuk Kujang fertilizer company.

The terminal will have an initial capacity to supply some 400
MMSCFD of gas, which is expected eventually to rise to 1 million
cubic feet per day.

The project has been hailed by observers as giving a boost to
the nation's LNG industry, which currently exports all of its
production.

A lack of natural gas on the domestic market has forced PLN to
switch to oil to run many of its combined-cycle power plants. The
use of fuel oil has reduced the life span and performance of
PLN's power plants, which has in turn hastened Java's looming
power shortage.

Dependence on oil has also put a burden on PLN's finances, as
the price of oil is more expensive compared with other primary
energy sources, including natural gas.