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nergy logistics company PT Pelindo Energi Logistik (PEL) is aiming to see operations at its Benoa liquefied natural gas (LNG) terminal kick off by March, delivering LNG from Bontang in East Kalimantan to Pesanggaran power plant in Denpasar, Bali.

PEL president director Denny Hermanto said that the terminal would help improve state infrastructure for LNG distribution and maximize domestic gas production for domestic use as a cleaner fuel alternative and means of reducing dependence on more expensive energy.

'€œWhile it is a top gas producer, Indonesia still exports much of the gas. The main reason for this is the inadequate distribution infrastructure,'€ Denny told reporters here on Friday.

In 2014, Indonesia, the world'€™s 10th biggest gas producer, produced 73.4 billion cubic meters of gas but consumed only 38.4 billion cubic meters, according to the BP Statistical Review of World Energy 2015.

According to a PEL estimate referring to diesel prices at US$100 per barrel and LNG at $12 per million British thermal unit (MMBTU), gas-fired plant could save Rp 9.6 billion ($694,000) in production costs annually for each megawatt of power, as gas prices are lower than those of diesel.

'€œThe government will save a good deal of money,'€ Denny said.  The government also subsidizes power plant production.

Pesanggaran power plant is owned by PT Indonesia Power, a subsidiary of state-owned electricity distributor PLN. The diesel-fired plant has been revamped to be able also to run on LNG since last year.

The 200-megawatt diesel- and gas-powered plant (PLTDG) is expected to start using LNG in March.

PEL, established in 2014 with 90 percent of its shares owned by state-owned port operator PT Pelindo III and 10 percent by South-Korean-affiliated shipping firm Jaya Samudra Karunia (JSK) Group, invested $500 million in the project.

As a parent company, Pelindo III provides 250 square meters of space at Benoa Port in Bali for PEL to dock its floating LNG storage unit (FSU) and floating LNG regasification unit (FRU).

The two South Korean-made vessels are worth around $100 million with storage and production capacity of at least 40 million standard cubic feet per day (mmscfd). They are scheduled to being operating on March 1.

Pelindo III operation and business development director Rahmat Satria said that PEL would take the LNG from Pertamina'€™s Bontang offshore well in East Kalimantan using ships owned by PT Humpuss Intermoda Transportasi before processing at the terminal.

'€œThe floating units will then store and regas the liquefied gas before it goes through a 3.7-kilometer underground pipe to Pesanggaran power plant,'€ Rahmat said.

He asked the public to take note that the project was not located at the currently disputed Benoa reclamation project.

'€œThe initial plan was to build the units onshore but there'€™s this conflict. So we decided to use floating vessels. Should anything go wrong, they can easily move elsewhere,'€ he added.

The contract with the port would run for at least five years, he said, adding, however, that the LNG provision contract with Pertamina would only last for a year, forcing the company to look for a new supply after 2016.

Currently, the country has four major offshore natural gas production sites: Arun in Aceh, Bontang and Tangguh in Papua and the Natuna Islands. Eighty-seven percent of production is carried out by foreign companies and only 13 percent by state-owned Pertamina. (rbk)