Trans-ASEAN gas pipeline faces huge challenges ahead

Trans-ASEAN gas pipeline faces huge challenges ahead

SINGAPORE (AFP): The initial links for a natural gas pipeline
network across oil-dependent Southeast Asia are slowly being
laid, but formidable challenges lie ahead, experts and officials
said.

Completion of a 656-kilometer (406-mile) pipeline that began
delivering natural gas from Indonesia's West Natuna fields to
Singapore in January has rekindled hopes that the ambitious
trans-ASEAN gas network will be realized by its target date of
2020.

Already, another high-pressure pipeline, spanning 500
kilometers (310 miles) to deliver natural gas from South Sumatra
to Singapore would be completed by 2003.

Negotiations are in the works for a major gas supply deal
between Indonesia and Malaysia expected by April.

These national and bilateral links are to be integrated into a
10 country regionwide network, which would complement a planned
regional power grid, according to the plan.

"The trans-ASEAN gas pipeline will increase the security of
natural gas supply within ASEAN (Association of Southeast Asian
Nations)," Singapore Trade Minister George Yeo said at a recent
energy conference here.

He expressed hope that Singapore's two multi-billion dollar
natural gas deals with Indonesia "will take us a step closer
towards the establishment of an ASEAN (gas) grid."

ASEAN groups 10 countries with diverse political systems,
cultures and economies -- Brunei, Cambodia, Indonesia, Laos,
Malaysia, Myanmar, the Philippines, Singapore, Thailand and
Vietnam.

With an estimated 227 trillion cubic feet of natural gas
waiting to be tapped, ASEAN is well positioned to slash its
dependence on imported oil.

Volatile oil prices have been a perennial worry for key ASEAN
members, where crude cost adjustments are a politically sensitive
issue.

However, challenges ranging from funding to cross border
issues such as taxation, ownership, transit rights, third party
access, pricing and harmonization of technical standards, needed
to be resolved first, experts said.

Deregulation of national markets for gas and electricity is
also a must, although such a move could be cumbersome because it
requires legislation in many countries.

Mohamad Farid Amin, the lead coordinator of a task force for
the pipeline, said they have come up with a draft memorandum of
understanding that seeks to address these issues.

Energy ministers will review the draft before it is adopted by
their respective governments.

Edu Hassing, a senior projects officer with the Asian
Development Bank, said financing would be crucial as countries
which have just emerged from a crippling economic crisis were
unlikely to have the money for the projects.

Guillermo Balce, executive-director of the Jakarta-based ASEAN
Center for Energy, estimates the pipeline network would need
investments of at least 10 billion US dollars over the next 10
years.

Singapore's Yeo said government support "must be complemented
by private sector participation to ensure that the projects
proposed are commercially sensible and financially viable."

Conoco Indonesia Inc. of the United States, Canadian firm Gulf
Resources Ltd. and Premier Oil Natuna Sea Ltd. of Britain
ploughed about 1.5 billion US dollars for the Natuna-Singapore
pipeline alone.

While the resources are abundant, Yeo said "we need to develop
an efficient market for these resources and establish a
regulatory structure and a cooperative framework which encourage
private investment."

About 6,000 kilometers (3,720 miles) of pipelines are already
in place within Southeast Asia, including a network linking
Thailand to gas fields in the Gulf of Thailand. Another pipeline
network allows Myanmar to deliver gas to Thailand.

Some 7,000 kilometers (4,340 miles) of pipelines are in the
planning stage to complete the jigsaw puzzle, according to ASEAN
figures.

Among them is a submarine pipeline from the Camago-Malampaya
fields in the western Philippines to land gas on the main island
of Luzon currently being built by a unit of the Royal Dutch Shell
Group, and a network to bring gas from the South China Sea to
industries in southern Vietnam.