Pertamina, PGN in talks on S. Sumatra ? W. Java gas project
Tuesday, September 11 2001 - 05:01 PM WIB
?We have yet reached agreement on gas price, but we hope we will be able to sign memorandum of understanding with PGN this week,? Baihaki told Petromindo.Com Tuesday.
Industry sources said that the price of the gas at the well head would be set between US$ 2 to US$ 3 per million British thermal unit (MMBTU) at the rate of 250 million standard cubic feet per day (MMCFD).
PGN has long planned to build a 640-kilometers gas pipeline capable of transporting up to 500 MMCFD of gas per day from the gas rich province of South Sumatra to the industrial province of West Java.
PGN needs some US$ 650 million to finance the project and the Japanese government had initially agreed to provide soft loan for the project.
However, uncertainties in Indonesian political conditions caused the Japanese government to suspend the talk.
PGN earlier predicted that the increasing gas consumption prompted by complete phasing out of oil subsidy in 2005 together with the decline of gas reserve in West Java would create gas shortage of some 600 MMCFD in the next five years.
?The project is still have a long way to go, as so far, there is no clear financing scheme for the project,? industry sources said.
Industry sources further said that South Sumatra gas producers such as Gulf Indonesia Resources would welcome the project, as the gas price range was already considered economic.
Gas producers had been reluctant to sell domestically as government imposed the so-called domestic gas incentive, which forced producers to sell far lower than international price. (alex/godang)