Gas supply from Kepodang field set to go on stream in 2013

The Kepodang gas field in Central Java is expected to begin gas supply to the Tambaklorok Power Plant in late 2013 after the government resolved its difference with Malaysian oil company Petronas on the construction of the field’s pipeline network, an energy official said.

BPH Migas head Tubagus Haryono said Monday that Energy and Mineral Resources Minister Darwin Zahedy Saleh, had issued an instruction to accelerate the construction of a 200-kilometer long pipeline network connecting the field and the power plant.

“The construction will begin when the plan of development [POD], the gas sales agreement [GSA] and the gas transportation agreement have been completed,” he told reporters at the House of Representatives in Jakarta.

The construction of the pipeline is to be complete in 22 months after all administration procedures are cleared, he continued. He expected that the necessary administration procedures could be complete in April this year.

State electricity company PT PLN has said that the gas supply from the Kepodang gas field, operated by Malaysia-based Petronas Carigali, might begin far behind the schedule due to the involvement of Bakrie & Brothers in the pipeline project. The field was previously scheduled to start its gas supply to the Tambaklorok Power Plant in late 2011.

In 2008, PLN made an agreement with Petronas that it would receive 354 billion cubic feet (bcf) of gas until 2021. According to the initial plan, the pipeline would be built by Petronas as part of its contract in the operation of the Kepodang gas field.

In 2009, Bakrie & Brothers, the concession holder of the Kalimantan-Java gas pipeline project, proposed to build the pipeline network from the Kepodang field to the Tambaklorok Power Plant as part of the company’s Kalimantan-Java pipeline project.

After a series of negotiations held in late 2010, the government approved Bakrie & Brothers’ proposal and an early estimation suggested that the company would start the gas delivery in the fourth quarter of 2014.

Upstream oil and gas regulator BPMigas said earlier that the involvement of Bakrie & Brothers in the pipeline project had sparked a small friction between the government and Petronas, but after a series of mediation meetings, the problems were solved.

PLN said in a press statement that the company would receive a less amount of gas, or only 290 bcf, if the delivery was to start in late 2014 and to deal with the rising operational cost burden, the electricity firm said that it had shut down the power plant.

Tubagus claimed that the government might save more money by allowing Bakrie & Brothers to construct the pipeline because it should not pay cost recovery as if the pipeline was build by Petronas.

“The toll fee will be 0.37 US cents per billion British thermal units [bbtu]. That is cheaper than the earlier agreement of 0.814 cents,” he said after a hearing session with the House’s Commission VII overseeing energy.

An energy expert from the University of Indonesia, Kurtubi, told The Jakarta Post that it was not important who built the pipeline; The vital thing is who can provide services at the cheapest price.

“If Bakrie & Brothers can provide a cheaper toll fee, why not?” he said in a telephone interview.