RI to launch its second transnational gas pipeline

RI to launch its second transnational gas pipeline

Evi Mariani, The Jakarta Post, Jakarta

State-owned gas distribution and marketing company PT PGN
announced here on Tuesday the completion of the Sumatra-Singapore
gas pipeline project that will allow Indonesia to boost its gas
exports to the neighboring country.

The pipeline is also expected to become an embryo for the
planned gas pipeline network crossing all the member countries of
the Association of Southeast Asian Nations (ASEAN).

President Megawati Soekarnoputri is scheduled to inaugurate
the startup of the pipeline on Aug. 4 on Batam island, Riau, in a
ceremony expected to include Singapore Prime Minister Goh Chok
Tong and ASEAN's energy ministers.

The new pipeline is the second linking Singapore and the
Indonesian territory after the Natuna-Singapore pipeline, which
started operation in 2000.

The new pipeline stretches about 470 kilometers from Grissik
in South Sumatra to Singapore's Sakra island, passing Sakernan in
Jambi and Batam. Of the total length, 206 kilometers are built
overland and the remaining 264 kilometers are underwater.

The project's cost reached $420 million, including $88 million
in loans from the Asian Development Bank (ADB) and $112 million
in loans from the European Investment Bank. The remaining $220
million is covered by PGN along with some strategic investors.

The pipeline will carry gas supplies from gas fields in the
Corridor Block and South Jambi Block, operated by ConocoPhillips,
and the gas fields in Jabung Block operated by Petro China, to
PowerGas Ltd, a subsidiary of Singapore Power, in Sakra Island.

Initially, they will supply 150 million metric standard cubic
feet per day (MMSCFD) of natural gas. The volume will gradually
be increased to more than 350 MMSCFD.

PowerGas will use the gas supplies for its power plants and
industries.

Under the deal signed in 2001, the gas supply will generate a
total revenue of US$9 billion throughout the contract period of
20 years.

Since gas is cheaper than diesel oil, the pipeline will also
bring benefits to the industries in Batam as they can now buy
cheaper fuel for their operations. State-owned electricity
company PT PLN can also cut costs by using gas at its power plant
on the island.

PGN's president director Washington M.P. Simandjuntak told a
media briefing that the development of the pipeline started in
February 2001 and was completed on schedule.

The completion of the project is expected to boost PGN's
profile as the state company is preparing to issue bonds worth
$500 million and to offer a maximum 49 percent of its shares to
the public in November.

Following the completion of the pipeline project, Indonesian
gas producers can explore the opportunities to send gas to
Malaysia or Myanmar.

Thus, he said, the pipeline could give an impetus for ASEAN
member countries to realize their plans of building the Trans
ASEAN Gas Pipeline.

ASEAN has long planned to build a gas pipeline network
crossing the region with most of the gas supplies expected from
Sumatra and Natuna islands.

Since 2000, Indonesia supplies Singapore with 325 MMCFD of gas
from the western part of Natuna through a 656-kilometer
underwater pipeline.

Aside from sending gas through pipelines, Indonesia also
exports gas in the form of liquefied natural gas (LNG) to South
Korea, Japan and Taiwan. Indonesia is now the world's largest LNG
exporter with a total export of more than 30 million tons per
year.