PLN to build LNG terminal next year
Fitri Wulandari, The Jakarta Post, Jakarta
State electricity generator PT Perusahaan Listrik Negara (PLN) plans to build a natural gas receiving terminal in a bid to secure the natural gas supply for its power plants in West Java and reduce the use of the more expensive oil.
"The plan to build a natural gas receiving terminal in West Java has received the green light from the shareholders," PLN's President Eddie Widiono told reporters on Tuesday.
Eddie refused to give details on the exact location of the receiving terminal or the identity of the investors who would partner the company in the project.
The terminal will receive liquefied natural gas (LNG), which is natural gas turned into liquid after a freezing process. In the terminal, the LNG will be converted back into gaseous form before being distributed through pipelines to power plants or consumers.
The receiving terminal is expected to reduce gas shortages for power plants in West Java. The terminal, the construction of which is planned to start next year and last until 2006-2007, will have a capacity to supply up to 800 million cubic feet per day (MMSCFD) of gas.
Data from the Oil and Gas Upstream Regulatory Body (BP Migas) shows that demand for natural gas in West Java grew by 50 percent from 276 MMSCFD in 1999 to 413 MMSCFD in 2002. It jumped to 751 MMSCFD in 2003 with increasing demand from state gas firm PT Perusahaan Gas Negara (PGN), PLN's Muara Karang power plant and the Pupuk Kujang fertilizer company.
Demand is forecast to increase to 1,000 MMSCFD in 2006. Supply is expected to come from Sumatra, which started at 90 MMSCFD in 2003 and will increase to 346 MMSCFD in 2008, through a transmission pipeline.
Ali Herman Ibrahim, PLN's director of power plants and primary energy, said setting up a receiving terminal was deemed more economical then relying on a transmission pipeline as it would allow LNG to be received from different sources, while a transmission pipeline only connected with a specific natural gas resource.
The receiving terminal would also help the company reduce dependency on oil for firing its power plants.
Lack of natural gas has forced the company to switch to oil to fire 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 worsened the nation's power shortage.
Dependence on oil has also been putting a burden on PLN's finances as the price of oil is more expensive compared to other primary energy sources, such as coal or natural gas.
Ali Herman said spending on oil, coal and natural gas to fire PLN's power plants will be up by 7 percent in 2004 compared to the previous year.
The company would spend Rp 3.4 trillion on natural gas and coal, and between Rp 12 trillion and Rp 14 trillion on oil.
Critics of the company say it should be able to provide cheaper electricity if it used more gas than oil.
PLN spends Rp 510 (about 6 U.S. cents) on producing one kilowatt-hour of electricity using oil, while the cost is only Rp 200 if it uses natural gas.
Analysts say PLN's plan to build the LNG terminal will give a significant boost to the country's LNG industry, which thus far has exported all its production.
Last year when Indonesia failed to win some LNG contracts in the region, analysts called on the government to turn its attention to the local market, saying the local market had the potential to absorb the nation's LNG output. It would also solve the oversupply problem in the regional market, which has led to a reduction in the price of Indonesian LNG.