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tate-run gas distributor PT Perusahaan Gas Negara (PGN) has allocated up to US$500 million to develop gas distribution infrastructure this year, as part of the government'€™s effort to accelerate the fuel conversion program.

PGN investment planning and risk management director Wahid Sutopo told reporters on Wednesday evening that the publicly listed firm had prepared $300 million to $500 million to help the company construct gas pipelines in Java and Lampung.

'€œThe disbursement of [the pipeline budget] will depend on the situation on the field. We will focus construction in East, West and Central Java as well as in Lampung, to support the urgent needs of industry, households and power plants for natural gas there,'€ he said.

The gas to be distributed will be both compressed natural gas (CNG) and liquefied natural gas (LNG).

As of June, PGN has built a 90-kilometer gas pipeline distribution network in Lampung, expecting it to be expanded to 100 km.

The pipeline will be used to distribute gas from the company'€™s floating storage and regasification unit (FSRU), a 46-meter-wide LNG vessel with a storage capacity of 170,000 cubic meters. The vessel is also equipped with a regasification facility, with a capacity of 240 million standard cubic feet per day (mmscfd).

The gas from the Lampung FSRU will be distributed to meet the growing gas demand of households and industry in Lampung and in western Java. The electricity sector in Lampung needs about 30 mmscfd of natural gas.

Other major projects of PGN include the construction of a 200-km submarine gas pipeline to transmit gas from the Kepodang field in the Muria gas block in Jepara to the Tambak Lorok combined-cycle power plant (PLTGU) in Semarang, Central Java. The construction of the undersea pipeline will cost about Rp 2.75 trillion ($230.75 million).

The pipeline is expected to be ready to deliver gas to the power plant beginning in August 2015, with a capacity of between 116 million mmscfd and 120 mmscfd.

Construction of the pipeline is in anticipation of an energy crisis, which has the potential to hit Central Java in 2017.

Wahid added that the funds would also be used to finance the company'€™s plan to strengthen its existing gas networks in East and West Java.

The funds allocated to finance the pipeline construction are part of the total Rp 15 trillion in capital expenditure to be disbursed by the state-run firm this year.

PGN finance director Reza Pahlevi Tabrani said that half of the allocated capex had been absorbed to support the company'€™s expansion in the first half of the year.

The spending comprises a $650 million payment for the acquisition of a 75 percent stake in East Java'€™s Ujung Pangkah block from US oil and gas producer Hess Corp., which was agreed upon in early January. The acquisition, conducted through subsidiary PT Saka Energi Indonesia, saw the company obtain a 100 percent stake in the block.

Saka Energi has also acquired 36 percent of participating interest in Swift Energy Company'€™s shale gas block in Fasken, the United States. The transaction for the acquisition was concluded on Monday, with an investment of $175 million.

The expansion, Reza said, is aimed at gaining knowledge on shale gas technology that Indonesia has yet to acquire.

'€œWe hope to start the commissioning for the block this month, pending approval from [the Indonesian] government,'€ he added.