PGN to sign pipeline contracts

The Jakarta Post ,  Jakarta   |  Wed, 10/12/2005 1:17 PM  |  Business

Leony Aurora, The Jakarta Post, Jakarta

State gas distributor PT Perusahaan Gas Negara (PGN) will sign a contract worth US$326 million with a giant Japanese steelmaker to build the first pipeline connecting gas-rich South Sumatra and Banten on densely-populated Java island.

The contract with Japan's second largest steelmaker, JFE Engineering Corp., for a 270-kilometer segment from Pagardewa in South Sumatra to Labuhan Maringgai in Lampung was signed on Tuesday.

""The construction of the onshore pipeline will start in January, but the preparations are already underway,"" said PGN President Director WMP Simanjuntak. The contract is worth 18.38 billion (US$161.51 million), he added.

The gas utility plans to sign another contract worth $165 million with Nippon Steel on Friday, said Simanjuntak. Under the contract, Asia's largest steelmaker will construct the sub-sea pipeline from Labuhan Maringgai to Cilegon in Banten.

The construction of the 110-kilometer pipe is expected to commence in November.

""Both projects will be completed in February 2007,"" said Simanjuntak.

The first stage of the pipeline will have the capacity to transport 460 million standard cubic feet of gas per day (mmscfd), which could be boosted by 30 percent to 600 mmscfd.

With the completion of the pipeline, industrial areas, as well as household consumers in Banten will get a natural gas supply of 250 mmscfd from the Pagardewa field, operated by state oil and gas firm PT Pertamina, in South Sumatra.

Besides the first pipeline, PGN also has plans to build a second pipeline connecting ConocoPhillips' Corridor block in Grissik to Pagardewa and continuing to Labuhan Maringgai, parallel to the first pipeline. The second pipeline will then go to Muara Bekasi and Rawa Maju in Java.

The construction of the second pipeline is expected to start in November.

Soaring global oil prices and the government's decision to apply market prices to oil-based fuels used by industry have prompted business players to look for alternative fuels, such as gas and coal, both of which are available abundantly.

Lack of infrastructure, however, has hampered the development of gas usage in Indonesia. Large gas reserves -- located in South Sumatra, Kalimantan, and Papua -- are not connected to Java, the country's most heavily populated island.

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