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T Pertamina Gas (Pertagas), a subsidiary of state-owned oil and gas firm PT Pertamina, started construction on a 30-kilometer pipeline project on Friday.

The pipeline will deliver gas from the West Java floating storage regasification unit (FSRU) to a power plant in Muara Tawar operated by state-owned electric company PT Perusahaan Listrik Negara (PLN) and to industries in West Java.

Construction of the US$65.94-million pipeline project will take a year and is slated to enter into commercial operation in the second half of next year. Pertagas has appointed a consortium of Hutama Karya-Moeladi-Promatcon to work on the project.

'€œThe project kicked off in May. We are sure that it will be on schedule,'€ Pertagas president director Hendra Jaya said.

He added that the pipeline would help reduce shortages of gas supply to buyers from industrial sectors in West Java as well as help PLN use gas to replace diesel fuel to generate power.

The pipeline has the capacity to deliver 270 million standard cubic feet per day (mmscfd).

Apart from the Muara Tawar pipeline, Pertagas is currently working on the 350-kilometer Arun-Belawan pipeline, 132-kilometer Belawan-Medan Industrial Area, 271-kilometer Semarang-Gresik, 40-kilometer Muara Tawar-Tegal Gede, 56-kilometer Porong-Grati and 16-kilometer Wunut-Ngoro.

Indonesia has been moving to improve domestic gas use in a bid to reduce dependence on fuel imports, which are severely hurting the country'€™s balance of payment.

However, the attempt has been hampered by inadequate infrastructure to distribute gas from producing regions, which are mostly in the eastern part of the country, to populated areas, particularly in Java.

The Upstream Oil and Gas Regulatory Task Force (SKKMigas) is aiming to see 57.3 percent of total gas produced in the country sold in the domestic market this year. Distribution of domestic gas at home has been increasing in recent years, touching 52.1 percent of total production last year compared to only 25 percent in 2003.

SKKMigas deputy for commercialization control Widhyawan Prawiraatmaja said on Friday the increase in the country'€™s gas consumption was supply driven demand, meaning that availability of infrastructure would figure significantly into whether demand would go up or down.

Indonesia is estimated to have around 104 trillion standard cubic feet (tscf) in proven and 48 tscf in potential gas reserves, making the country the 13th-largest owner of proven natural gas reserves in the world and the second-biggest in the Asia-Pacific region after China, according to the International Energy Agency.

Several big gas projects are in the pipeline, such as the Indonesia Deepwater Development (IDD) by US-based Chevron and the development of the Abadi field of the Masela block by Inpex. However, the billion dollar projects are pending approval from the government, including regarding contract extensions proposed by the developer to ensure that they have enough time to benefit from the investment.