RI, Singapore sign second gas deal worth $9 billion

JAKARTA (JP): State oil and gas company Pertamina and Singapore's PowerGas Ltd signed a gas sales agreement on Monday worth US$9 billion, confirming Indonesia's second natural gas sales deal with the city state.

Minister of Energy and Mineral Resources Purnomo Yusgiantoro said the new contract would ensure the supply of natural gas to Singapore by July 2003.

"The signing ceremony today marks the completion of negotiations for the Sumatra to Singapore gas project, and commencement of the construction phase for the pipeline and upstream facilities," Purnomo said in his opening speech.

Also attending the ceremony was Singapore's Minister of Trade and Industry George Yeo.

Under its deal with Singapore's Sembcorp Gas, since last year Pertamina has been supplying 325 million cubic feet of gas a day from West Natuna through a 656-kilometer underwater pipeline.

In total, eight contracts were signed on Monday, covering deals such as gas transportation, end users and guarantee agreements.

Under the gas sales deal, Pertamina will supply PowerGas with an initial volume of 150 million cubic feet of gas per day (mmcfd) which will increase to 350 mmcfd by 2009.

Total investment for the construction of gas plants and the pipeline is estimated to reach $1.2 billion.

PowerGas, a wholly owned subsidiary of Singapore Power, will purchase the gas for $9 billion over a period of 20 years.

The gas will come from three fields in Sumatra, operated by a consortium of Pertamina's production sharing partners.

Gulf Indonesia Resources Limited owns two blocks, the Corridor Block in Grissik and the South Jambi "B" Block in Jambi.

Santa Fe Energy Resources (Jabung) Ltd operates the Jabung Block.

Pertamina has a 10 percent stake in the Corridor and Jabung blocks, and another 25 percent in Gulf's South Jambi "B" block.

A 500 kilometer-long pipeline, half of which will be undersea, will link the gas fields to Singapore.

Purnomo said the new pipeline would provide a "second physical link" for future plans of a gas pipeline grid connecting Southeast Asian countries.

The first link, a 656 kilometer-long underwater pipeline, was built for the first gas contract with Singapore, signed in 1999.

The second pipeline will be operated by state gas company PT PGN, which plans to invest $400 million in its construction.

PGN project coordinator Adil Abas said that the company had received funding from the Asian Development Bank (ADB) and the European Investment Bank (EIB).

PGN, he said, would commence the tendering process for construction of the pipeline by the end of this month. But he declined to name the consortiums who have joined the pre- qualification process.

In total, he said, PGN would open 18 tenders for the construction of different parts of the pipeline project.

The most expensive component of the project is construction of the underwater pipeline, costing about $170 million, Adil said.

President of Singapore Power Boey Tak Hap said that the importation of more natural gas to Singapore would promote competition in the electricity and gas industries.

"With the liberalization of the electricity industry, more combined cycle gas turbine power plants will be built to meet the growing demand of electricity in Singapore," he said in a statement.

Meanwhile, Minister Yeo said that the Singapore business community was closely watching Indonesia's political developments, which had become unstable lately.

"I brought with me a small delegation of high level Singaporean businessmen. They are here to assess whether in the near future there should be new investment in Indonesia," he said.

According to Indonesia's Ambassador to Singapore Johan S. Syahperi, Indonesia must attend to its "homework" of providing security, legal certainty and resolving labor issues.

He said that in the short term some Singaporean investors were considering investing in Vietnam or India instead of Indonesia. (bkm)