Japan finally okays loan for S. Sumatra-W. Java gas pipeline

Japanese government had finally approved US$ 415 million soft loan to finance the construction of a 640-kilometers gas pipeline linking gas rich region of South Sumatra to the industrial provinces in the western part of Java, a senior official of state gas distribution company PGN said on Wednesday.

?Japanese government had just given their approval. The special yen loan (SYL) will be disbursed through the Japan Bank for International Cooperation and will carry interest rate of 0.75 to 0.95 percent per annum. The loan maturity will be 40 years, with a grace period of 10 years,? WMP Simanjuntak, PGN president was quoted by Detik.Com as saying on a sideline of mega-projects inauguration.

A team from JBIC had conducted due diligence on the project in March this year. The pipeline will transport 250 million standard cubic feet per day (MMCFD) of gas, ramping up to 700 MMCFD.

Simanjuntak said the construction is expected to commence as early as next year and would be completed in 2005.

PGN needs about US$486 million to finance the construction of the gas transmission network which will pass through Pagar Dewa in South Sumatera, Cilegon, and Cimanggis in Banten and West Java provinces. US$415 million of the total funds are expected to be financed by the Japanese soft loans. The project is part of the cooperation agreement between PGN and Pertamina in the distribution of gas in Java.

The project is planned to ease future natural gas shortage in West Java. Gas will be supplied from Pertamina?s gas fields in and other South Sumatra gas producers.(*)