PGN?s S. Sumatra ? Singapore pipeline to be completed August 2003: Report

The US$477-million pipeline project is slated for completion in August 2003, but there is a three-month grace period before Transgasindo faces a penalty of US$80,000-a-day, Dow Jones Newswires quoted Iwan Heryawan, PGN pipeline project coordinator, as saying on Monday.

Transgasindo's penalty payment is capped at US$27 million. The penalty payments begin Dec. 1 if the pipeline isn't completed by that date, Iwan said.

But "we are still confident that the project will be completed on target," Iwan said, adding that the pipeline tenders will be concluded by April.

The pipeline construction will be partially financed by the Asian Development Bank, which has committed US$88 million in loans to PGN contingent upon the Transgasindo stake sale.

"Asian Development Bank has agreed to give the approval for the pipeline tender (award), ahead of the appointment of a strategic partner in Transgasindo I," said Iwan.

Aminul Huq, who oversees the project for the ADB, added Friday: "We are not standing in the way of the project implementation; we support the project and want it to succeed."

Singapore Power Ltd., which signed the gas import contract and gas sales agreements with Singapore electricity generators, hasn't been informed of any delays in the project, spokeswoman Sarah Koh said.

Singapore Power divested its unit Gas Supply Pte. Ltd. - the legal holder of the contract - to government investment arm Temasek Holdings in January, but remains a participant in monthly update meetings on the project.

Huq said the ADB will finance any pipeline contracts awarded before the stake sale is completed. But the ADB is dismayed at ongoing delays in the privatization of Transgasindo, which was originally slated for late-2001.

Transgasindo was incorporated on Feb. 1, with US$1 million in paid-up capital, but existing pipeline assets haven't yet been transferred, Huq said. In addition to the Sumatra-Singapore pipeline, Transgasindo will own and operate an existing pipe from the South Sumatra fields to oil fields in central Sumatra.

A consortium led by Malaysia's Petronas, and a partnership between Unocal Corp. and El Paso Corp. have also submitted bids for a stake in Transgasindo.

The Petronas-led consortium includes Singapore Petroleum Co., Talisman Energy Inc. and Gulf Indonesia Resources Ltd. PowerGas, a unit of Singapore Power, will bid together with Williams Co. and Indonesian pipeline developer, PT Trans Nusantara Multi Construction, or Tranaco. (*)