FOCUS: East Kalimantan-Jakarta gas pipeline is feasible: Consultant
Monday, February 9 2004 - 12:48 AM WIB
Is the natural gas pipeline project connecting natural resources-rich East Kalimantan with the industrial island of Java still feasible after state gas transmission and distribution company PT PGN has decided to go ahead with a similar project linking South Sumatra and Java?
It is, according to local consultant Pendawa Consultama Sejati, which recently completed its feasibility study on the East Kalimantan-Java pipeline project.
In the study, the firm projects gas demand in Java to grow 4.9 percent to 1.8 billion cubic feet per day (BCFD) in 2010 and 3 BCFD in 2025 on the most conservative assumption of 3 percent GDP growth for the island.
Based the most optimistic assumption that the island?s GDP will grow 6 percent per year, gas demand is projected to grow 8.3 percent per year to 2.4 BCFD in 2010 and 6 BCFD in 2005.
Meanwhile, gas supplies from fields in Java and its surrounding waters are projected to reach 1.4 BCFD in 2010. Thanks to additional supplies from South Sumatra, supplies to the island will total 1.7 BCFD.
On the most conservative scenario of GDP growth, the island still needs an additional 0.1 BCFD that year, while on the most optimistic scenario of GDP growth, it will need an additional 0.7 BCFD.
Gas from East Kalimantan can cover the shortfall, the feasibility study says.
The feasibility study was financed with a US$650,000 grant from the United States? government, while the giant project was proposed by PGN.
Aside from the East Kalimantan-Java project, PGN is now preparing to build a natural gas pipeline linking South Sumatra to Java. The 520- kilometer pipeline will supply natural gas from South Sumatra to West Java at a maximum rate of 0.7 BCFD starting in 2007. The firm has secured loans for the project from Japan Bank for International Cooperation (JBIC).
PGN has proposed the East Kalimantan-Java project on the grounds that gas supplies from Java and its surrounding waters will enter natural declining phase starting from 2008, while supplies from South Sumatra through the pipeline will not be adequate to cover the rest of gas demands on the island.
Initially, PGN proposed to build a 1,100-kilometer pipeline from East Kalimantan to East Java.
However, the Pendawa study says the project is not feasible in view of the fact that East Java has a large indigenous gas reserve, which will enable the area to reach ?gas self-sufficiency? until 2015 or 2020 depending upon the GDP growth of the area.
According to the study, East Java?s gas demand is projected at 0.6 BCFD and 0.7 BCFD in 2010, respectively, while gas supplies from fields in the province is projected to reach around 0.6 BCFD.
Gas supplies for the province are expected to come from a number of gas fields in the province, including the giant Cepu block located on the boundary area of Central Java and East Java. According to state-owned oil and research centre LEMIGAS, the Cepu block has natural gas reserves of around 6.3 TCF.
The Pendawa study thus proposes the construction of a pipeline stretching about 1,624 kilometers from East Kalimantan to Jakarta, passing Central Java and West Java to meet huge demand in the western part of Java. It proposes a 42-inch pipeline with a maximum transportation capacity of 1.5 BCFD of natural gas.
The region?s gas demand is projected at between 1.2 BCFD and 1.7 BCFD in 2010, while gas supplies to the area from local fields and South Sumatra is projected to reach 1.3 BSCFD, according to the study.
Meanwhile, in Central Java, gas demand is projected at between 0.2 BCFD and 0.3 BCFD in 2010, according to the study.
The study says that the East Kalimantan?Jakarta pipeline project needs around US$1.6 billion of investment. With transportation fee of US$0.89/MCF, the pipeline?s total revenue is projected at $31.1 billion over 20 years of operation.
PGN is not the only one eying business opportunities in western Java?s gas market. State-owned electricity firm PT PLN has also said it is considering to build a liquefied natural gas (LNG) receiving terminal with a supply capacity of 0.8 BCFD in West Java to ensure gas supplies for its power plants in the area.
PLN plans to construct the terminal from 2004 through 2006 or 2007 with a total investment of $300 million. U.S. engineering company Kellogg Brown and Root has completed a feasibility study on the project.
PLN has yet to specify the supplier of LNG for its terminal, but Anglo-American energy firm BP PLC, which leads the consortium to build an LNG plant in the Bird?s Head area of Papua, the Tangguh LNG project, has long voiced interest to supply LNG to any terminal to be built in West Java.
However, in its study, Pendawa says gas transported via pipeline from East Kalimantan to Java costs as much as LNG transported to the island from an old LNG plant. The gas is however cheaper than LNG taken from grassroot plants. (*)
