Deadline set for Bakrie & Brothers to secure gas supply

Downstream oil and gas authority BPH Migas will set a deadline for Bakrie & Brothers to secure natural gas supplies for its planned pipeline network that will transport natural gas from East Kalimantan to East Java.

?I shall summon (the management of) Bakrie & Brothers. If it is unable to secure gas supplies within a timeframe, we shall review (the contract),? BPH Migas? chairman Tubagus Haryono said on Thursday. He however did not specify the timeframe.

In July this year, the business group, linked to Coordinating Minister of Public Welfare Aburizal Bakrie, was awarded by BPH Migas with the contract to build the giant pipeline after beating out several bidders, including state owned gas transmission and distribution firm PT PGN.

Bakrie is however facing difficulties to secure supplies from gas producers in East Kalimantan because the latter set too high prices for their gas. The producers, which also supply gas to the Badak LNG plant that export LNG to buyers in Japan, South Korea and Taiwan, want Bakrie to buy their gas about the same price paid by the foreign buyers.

Pressure from several parties has also been building on Bakrie to abandon the project. Minister of Energy and Mineral Resources Purnomo Yusgiantoro, for instance , said on Wednesday that building an LNG terminal in Java would be more economically viable than the East Kalimantan-East Java pipeline project.

Speaking during a consultation with Regional Representatives Assembly (DPD), Purnomo said despite the fact that the right to build the pipeline has been granted to Bakrie, there is no guarantee that the project could be materialized as the business group has to secure gas supply first and make careful calculation whether landed gas price in Java would be competitive.

Tubagus said on Thursday that the agency had only declared Bakrie as ?the winner? in the tender for the construction of the East Kalimantan-East Java pipeline, but still withheld the right to build the pipeline.

He noted that Bakrie had yet to obtain a gas transmission and distribution business license from the government.

?We shall give the right (to develop the pipeline) (to the company) if it has obtained the license, that is from the Directorate General of Oil and Gas,? Tubagus said. (Godang)