PLN to start bids for LNG terminal in West Java

PLN to start bids for LNG terminal in West Java

Fitri Wulandari, The Jakarta, Jakarta

State-owned electricity company PT Perusahaan Listrik Negara
(PLN) will begin a tender process within the next two months for
the construction of a natural gas receiving terminal in West
Java.

PLN president Eddie Widiono said that the facility, the first
in the country, would make less expensive fuel available for its
power plants.

"We will open the bidding within one or two months," Eddie
told reporters on Thursday.

PLN hopes the construction can be started next year, and
completed sometime between 2006 and 2007.

The construction of a liquefied natural gas (LNG) receiving
terminal would allow PLN to reduce the use of more expensive fuel
oil in the operation of its power plants on Java.

Lack of natural gas 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 impending power shortage.

Eddie added the project would also allow PLN to slash costs
for fuel to produce electricity, particularly for costly crude
oil.

PLN has said it will require Rp 29 trillion this year to buy
crude oil, coal and natural gas to just to run the power plants.
Crude oil makes up the bulk of that at Rp 14 trillion.

Eddie said by using natural gas, the company could save
between Rp 10 trillion and Rp 15 trillion annually.

However, he stopped short of saying the company would decrease
electric bills for the average household.

The terminal will receive LNG, which is natural gas turned
into liquid after a freezing process. In the terminal, the LNG
will be converted back into a gaseous form before being
distributed through pipelines to the power plants or other
consumers.

The terminal, which will have a capacity to supply up to 800
million cubic feet per day (MMSCFD) of natural gas, is planned to
be located in Cilegon, West Java.

Eddie had earlier said that the construction of the terminal
would cost between US$250 million - $300 million.

Asked if he was confident they could secure the financing,
Eddie only said it would seek financing from banks and investment
companies.

He added that the project would be open to all investors.

"We are open to investors but we will see what they have to
offer," Eddie remarked.

In addition to its own plants, other natural gas consumers in
Java will also benefit.

The Oil and Gas Upstream Regulatory Body (BP Migas) said that
demand for natural gas in West Java would jump from 751 MMSCFD in
2003 to 1,000 MMSCFD by 2006, boosted mostly by demand from
state-owned gas distribution firm PT Perusahaan Gas Negara (PGN),
PLN's Muara Karang power plant and the Pupuk Kujang fertilizer
company.

The supply of natural gas is expected to come from domestic
sources in Sumatra via a transmission pipeline.