FOCUS: LNG terminals might not be ready in 2011 due to bureaucratic problem
Tuesday, May 4 2010 - 02:45 AM WIB
Many Indonesians are excited over the prospect that the country will have at least three floating Liquefied Natural Gas (LNG) terminals in Medan, Jakarta , and Surabaya, before the end of 2011.
Expectations were high that the government would do whatever necessary to guarantee that the development of the terminals could be finalized on schedule in 2011. After all, it is the government who urged the development of the LNG terminals and set the schedule for the completion of the projects.
State owned gas distributor PT Perusahaan Gas Negara (PGN) and oil and gas firm PT Pertamina (Persero) that will either jointly or solely build the terminals have, however, indicated that they may need longer time to pass through bureaucratic hurdles before starting construction works.
PGN and Pertamina will jointly build the Jakarta LNG terminal, while the Medan project will be solely developed by PGN and the Surabaya project solely by Pertamina.
?We have to secure more than 100 approvals from a number of governmental agencies in Jakarta and regencies and provinces. We might need longer time than expected to settle bureaucratic things alone. Not to mention the time we need to construct the terminals that will need about one and half years. Now we?re nearing the middle of the year,? Tengku Nathan Machmud, the president commissioner of PT PGN, told Petromindo.Com on the sidelines of the Oil and Gas Outlook Seminar organized by Petromindo.Com and SwaEnergy recently.
Had the projects been given to foreign investors with PGN and Pertamina acting as lessees, the time needed by both state owned firms to wait before they can make use the terminals would not be much different. ?The difference will be only a matter of several months,? he said.
PGN?s president director Hendi P. Santoso noted during a recent hearing with the House of Representatives that the company would also need first to secure gas contracts with gas producers and consumers as a requirements to get financing for the projects. But price could become a problem. LNG producers may prefer to sell their product on the international market where prices can reach more than US$13 per MMBTU as compared to the local market where prices average $5 per MMBTU.
The government has urged the development of the LNG terminals to meet the increasing demand for gas in Sumatra and Java, which are the most developed regions of the country. The demand for gas on both islands has been increasing over the past several years due to rapid industrialization, while gas reserves there are fast declining. Indonesia still has a lot of gas in Kalimantan and eastern Indonesia but the gas can only be carried to both islands in the form of LNG due to the absence of pipelines connecting the areas with Java and Sumatra.
Hendi has said PGN needs 1,206 BBTUD to meet its customers? needs, while gas supply to the firm amounts to only about 821 BBTUD. By 2015, when all the LNG terminals are expected to have started operation, gas supply to PGN will increase to 1,424 BBTUD, but the demand is projected to jump to 2,137 BBTUD. The gas shortage will be much more severe unless measures are taken to speed up the development of the LNG terminals.
That is why, said Machmud, the government should take a drastic move by simplifying all the licensing process. ?If the government can simplify all the bureaucratic procedures, we shall be able to start the construction soon and complete it on time,? he said, adding that most of those approvals were for the regional administrations to issue.
Hendi also underlined the hurdles during the hearing with the House?s Commission VI. He asked for the help to urge the government to take any steps needed to accelerate the development of the gas infrastructures.
?If necessary it should make it in one-stop service so that we can start the construction soon and make the infrastructures ready by 2011. Otherwise, there will be more delays,? he said. (end)
The author is an editor of Petromindo.com. He can be contacted at besalicto@petromindo.com