FOCUS: Deadline nears, govt must soon make decision on Donggi-Senoro
By: Benget Besalicto Tnb.
Thursday, May 27 2010 - 03:06 AM WIB
Three potential buyers from Japan and Korea --Kyushu Electric Power Inc., Korean Gas Corp. and Chubu Electric Power -- have extended their deadline until early next month (June) for the government to make a decision. If no decision is taken by the deadline, they will follow the step of Kansai Electric Power Co. Inc. of Japan which terminated its agreement to buy the LNG in August last year due to the government?s indecisiveness.
The government has been indecisive on the gas project for years. Apparently, the gas project is posing a dilemma for the government as it finds it hard to decide whether it should be for export or local markets.
If it decides to export the gas to meet the need of the three potential buyers, it will draw a harsh criticism that the government pays no attention to the rising local need for gas. The public pressures are mounting for the government to make sure that all energy resources developed to meet the rising local need.
If it decides otherwise, it will be facing the problem of lacking infrastructure to implement the decision. There is no pipeline network that links the gas location to consumers, who are mostly in Java and Sumatra. The schedule of the planned development of gas receiving terminals in Medan, Jakarta, and Surabaya is not certain yet.
In addition to the problem is that gas prices at the local market are usually much lower than those in international market, discouraging gas producers from selling to the local market. The low gas price is also the reason that investors are reluctant to develop the gas infrastructure.
?We?re facing the problems of lacking infrastructure and price at the local gas market. Without the infrastructure we cannot transmit the gas production from the gas fields to consumers,? Energy and Mineral Resources Minister Darwin Zahedy Saleh acknowledged in several occasions.
Vice President Boediono, during a dialog with businessmen in Cikarang, West Java , two weeks ago, indicated that the government would take the middle way to accommodate the needs of export and local market. ?We have to do both, to allow the export and to meet the local demand. We?ve to put both interests in balance, as we also need fund (from the export) to finance our (energy) development,? he asserted.
Last week, Coordinating Minister of Economy Hatta Rajasa said that the government would soon take a decision on the project. The likely option is that 70 percent of the Donggi-Senoro gas will be allocated for export and the other 30 percent for local market, mainly to meet demand from power plants and fertilizer industry. ?The 30 percent allocation is enough for local market. That will be mostly to meet the need of power plant and fertilizer plant in Central Sulawesi,? he said.
State-owned oil and gas company Pertamina and PT Medco Energy International, which control the gas fields, said that they were ready to implement a decision which accommodates export and local market needs. ?It won?t be a problem for us. Our problem is that it?s decided soon or not. We hope that the government will decide it soon, so that we can continue the project soon,? said Basuki Trikora Putra, Pertamina?s vice president communication.
Members of the House of Representatives? Commission VII have warned the government not to further delay making decisions. Indonesia, he said, badly needs more investments, particularly from foreign investors, to develop its energy sector. It needs to further improve, or at least maintain, its image as a good place to invest.
?If there is any further delay, the potential buyers will pull out. That will create a feeling of uncertainty among investors. Then we?ll be losing a golden momentum to develop our oil and gas sector,? M. Romahurmuziy, a member of the Commission VII, said recently.
The writer is an editor of Petromindo.com. He can be contacted at besalicto@petromindo.com