Govt to resume development of mega gas distribution project

The government plans to resume the development of the US$660 million gas distribution project linking the Jambi province and the West Java province, according to the Kontan economic weekly in its June 5 edition.

The paper said that this week's visit of the Coordinating Minister for Economy, Finance and Industry Kwik Kian Gie to Japan included talks with the Japan Bank for International Cooperation (JBIC) on the gas project.

JBIC has earlier expressed interest to finance up to 85 percent of total cost of the project. The remainder would come from the local partner, the state owned gas-distributing firm PN Gas Negara.

A source at PGN was quoted by Kontan as saying that the JBIC loan would not cause a burden to the state budget because it only carries a 0.95 percent interest rate per year and a payment period of 40 years plus 10 years of grace period.

Kontan said that the gas project would provide gas for industries in West Java to anticipate the drop in the supply of fuel over the next 15 years.

The project was expected to already start operation in 2004 if the development could be resumed next year.

The paper said that the gas reserves in Grissik, Jambi, was enough to support the industries in West Java for 50 years.

The paper added that the Japanese government was enthusiast to support the project because many Japanese industries were located in the West Java province.

"MITI is very keen to support the project," said second secretary of the Japanese Embassy in Jakarta Koji Hachiyama.

The source at PGN also said that the company had enough cash to provide up to 15 percent of the financing need of the gas project.

But a source at the National Development Planning Agency (Bappenas) said that there's a threat that the project might be delayed again because the state oil and gas firm insisted that a gas selling price of US$3.4 per cubic, while PGN had been selling gas to the West Java industries at $1.5 per cubic. (*)