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ertamina Gas (Pertagas), a subsidiary of state-owned oil and gas firm Pertamina, will spend up to US$500 million this year to build a 267-kilometer gas pipeline from Gresik, East Java to Semarang, Central Java, a company executive says.

Gunung Sardjono Hadi, the president director of Pertagas, which transmits and distributes natural gas, said it had already secured all permits to build the pipeline and was waiting for the final investment decision from its shareholders to deliver natural gas from East Java to Central Java.

“We expect to begin construction by the middle of the year and can finalize construction by the end of 2014,” he told The Jakarta Post on the sidelines of an energy seminar on Wednesday in Jakarta.

The pipeline was designed with capacity of up to 500 million standard cubic feet per day (mmscfd) once it commences operations.

Earlier this year, Pertagas revealed its plan to invest $500 million to build 350 kilometers gas pipeline to connect Belawan Port in North Sumatra and Arun regasification plant in Aceh.

The pipeline, equipped with a capacity of 200 mmscfd, will transport natural gas shipped from Tangguh liquefied natural gas (LNG) plant in West Papua, totaling around 80 mmscfd, for state-owned utility firm PLN and the rest for the industry surrounding Medan in North Sumatra.

The pipeline project is scheduled to commence in April, while the completion is expected by the end of 2014. For the operation of the planned Gresik-Semarang pipeline, Pertagas expects to win an ongoing bid to secure natural gas from Madura Strait offshore block operated by Canada’s Husky Energy Inc., according to Gunung.

It is eyeing up to 70 mmscfd from several fields in the block that will produce a total output of 120 mmscfd.

“We hope to have an announcement on the utilization of the gas fields by the end of March,” Gunung said.

Apart from the Madura Strait block, the firm is also looking toward natural gas from other fields in East Java, including Terang Sirasun Batur field operated by Kangean Energy Indonesia, he added.

Based on estimates, East Java will have a natural gas surplus of between 130 mmscfd and 250 mmscfd from 2013 through 2015 due to an absence of pipelines to move the energy source from Gresik to Semarang.

Pertagas’ pipeline is designated as “open access”, meaning any party can utilize it to deliver gas by paying usage fees as long as the capacity of the pipeline is still sufficient.

The Gresik-Semarang pipeline is a part of the Trans Java pipeline project that will stretch more than 600 kilometers, connecting Bekasi and Cirebon in West Java, Cirebon and Semarang, and Semarang and Gresik.

Once the Trans Java pipelines come into operation, it will help supply the industry, particularly on Java island, currently the home of the majority of industrial activities, industry officials have said.

Indonesia is the world’s third-biggest liquefied natural gas exporter after Qatar and Malaysia. However, a lack of distribution infrastructure greatly hinders the industry from benefiting from the country’s abundant gas supply.

Local industry has long suffered a constant shortage of gas, which is both a main raw material and energy source for the manufacturing industry.