Kalimantan-Java gas pipeline project not feasible: BP Migas

The plan to build the inter-island gas pipeline linking East Kalimantan and Java would be financially unviable due to uncertainties of the gas supply and its high construction costs, BPMIGAS official said on Friday.

Eddy Poerwanto, the deputy chairman of BP Migas, the regulatory body for oil and gas exploration and production, said in Jakarta on Friday that the lack of gas supply could hamper the operation of the East Kalimantan pipeline project which will cost more than US$1 billion to build.

According to him, the gas supply in East Kalimantan has begun to decline due to the delay in the operation of new gas fields. He feared that the lack of new gas findings would further cause a decline in the gas production in the province.

"The government should make sure that there will be enough gas supply for at least 20 years, If not, it will not be feasible for such massive pipeline project," he said.

Eddy also warned that if the government supplies all the gas production from East Kalimantan for the Kalimantan-Java pipeline project at the expense of the LNG production of the Bontang LNG plant, the government will lose up to Rp 18 trillion a year from LNG exports.

He said the gas transmission cost through a pipeline would reach at least US$1.6 per mmbtu, much more expensive than if the government uses other transportation means such as through LNG tankers. The LNG shipment will cost only about US$1 per mmbtu, he said.

Meanwhile, PGN president WMP Simanjuntak said the gas reserves in East Kalimantan is enough to supply demands from households and industries in heavily-populated island of Java for 20 years.

Simanjuntak said on Friday that based on feasibility study, which had been carried out three times from 2001 until 2004, sponsored by the Asian Development Bank and the U.S. Trade and Development, the gas reserves in the provinve was estimated at between 7-8 trillion cubic feet.

The gas reserves in the province mainly come from gas fields owned by Chevron, Total and Vico, he said.

"The three studies show the market potential and gas reserves in East Kalimantan, which tells us that it is feasible to develop the East Kalimantan-Java pipeline project," he said.(godang)