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tate oil and gas firm PT Pertamina and state gas distributor PT PGN announced on Friday that they had began constructing a long-awaited floating storage and re-gasification terminal (FSRT) in West Java.

The FSRT, also called an LNG receiving terminal, would pave the way for the country to boost liquefied natural gas (LNG) use for domestic consumers and secure the gas needs of state electricity company PT PLN’s power plants in particular, a press statement from the two companies said.

“The coming FSRT will be a milestone for the country’s LNG infrastructure. For around 30 years, Indonesia has become one of the world’s largest LNG producers, but once the FSRT is installed, the LNG will be utilized domestically,” the statement said.

Pertamina and PGN said the project was a manifestation of their commitment to support the government’s policy in developing the country’s gas infrastructure to counteract the impact of soaring global oil prices.

The FSRT will be constructed and operated by PT Nusantara Regas, jointly owned by Pertamina (60 percent) and PGN (40 percent). The LNG receiving terminal is expected to begin operation in January next year, with a projected storage capacity of 3 million tons of LNG per year, equal to 400 million standard cubic feet per day (mmscfd).

“The gas will be channeled to PLN’s power plants in Muara Karang and Tanjung Priok, Jakarta,” the statement said.

The FSRT is expected to decrease PLN’s future electricity subsidy.

The electricity subsidy has ballooned over the past seven years, reaching Rp 40.7 trillion (US$4.76 billion) in 2011, according to the state budget. Last year, the subsidy reached Rp 57.6 trillion. Before 2004, the electricity subsidy totaled approximately Rp 3 trillion.

To channel gas to the Muara Karang plant, a 24-inch-diameter, 15-kilometer-long undersea pipeline network will be constructed.

PLN currently operates 5,233 power plants across the country with a total capacity of 24,960 megawatts, of which 22 percent, or 1,151 plants, are fueled by natural gas.

Pertamina and PLN had previously announced that they would collaborate to build eight smaller LNG terminals to support the electricity company’s operations in eastern Indonesia.

The Mahakam gas block in East Kalimantan will supply around 1.5 million tons of LNG, or 200 mmscfd, to the West Java receiving terminal. Nusantara Regas is currently seeking additional LNG supply to utilize the FSRT at its maximum capacity.

The receiving terminal will apply new gas storage and re-gasification technology, which involves the ship-to-ship loading and unloading stages. The West Java FSRT will be the first receiving terminal in Asia to install the technology.

The statement said the benefits of using the FSRT rather than building a receiving terminal on the ground were cheaper construction costs and faster development time. Additionally, it would be easier to mobilize the receiving terminal, which made it more suitable for the archipelago.