PT KHI wins gas pipe contract

JAKARTA (JP): PT KHI Pipe Industries, a subsidiary of the state-owned PT Krakatau Steel, has won a contract worth US$74 million from the state-owned PT Perusahaan Gas Negara to supply 86,000 tons of steel pipes for a gas pipeline in Sumatra.

"We awarded the contract to PT KHI through a competitive international tender, which was participated in by four foreign companies from Japan, the United States and Germany," Gas Negara's president, Qoyum Tjandranegara, said after the contract was signed yesterday.

"This is the first time that a local company has won such an international tender," Qoyum said at the signing ceremony, which was also attended by Minister of Mines and Energy I.B. Sudjana.

According to Qoyum, KHI Pipe must comply with the delivery time agreement between the two companies, otherwise it will be fined US$125,000 a day.

He said the steel pipes would be used to build a 550-km gas pipeline linking Asamera in South Sumatra to Duri in Riau.

He said the procurement of the pipes would be 50 percent funded by a loan from the Asian Development Bank and 50 percent by a loan from Japan Exim Bank.

"Early next year we'll start construction. We'll soon invite a number of companies, local and foreign, to participate in an international tender for the project," he said.

He said the winning bidder would have to build the 550-km gas pipeline within two years.

KHI Pipe's president, Sabungan Hutapea, said that 56 percent of the 86,000 tons of pipes would be manufactured by his company, while the rest would be imported from Germany and Italy because the company's production capacity was too small.

He said his company would get a $32 million loan from the state-owned Bank Rakyat Indonesia to pay for the imported pipes because Gas Negara would only pay after the pipes were delivered.

Qoyum said the 550-km gas pipeline was part of the planned 800-km gas pipeline to connect the Asamera gas field in Jambi province, Duri in Riau province and Batam. He said this pipeline would be completed by the year 2000 and cost $600 million.

After completing the Asamera-Duri-Batam pipeline, Gas Negara intends to start developing a second gas transmission project from Asamera to Palembang in South Sumatra and to Cilegon in West Java.

He said the company was trying to raise domestic gas utilization from two percent of the country's total energy consumption to about 20 percent in the next 10 years. (bnt)