PGN says international banks ready to finance ambitious pipeline project

State gas distribution company PGN claimed that several international lending institutions had indicated willingness to partly-finance the company?s ambitious project to build gas pipeline from gas-rich province of East Kalimantan to Java, if the study showed the project was feasible.

?Asian development bank had indicated to support the project by lending US$ 250 million in semi-commercial loan with 20-year tenure, while World Bank and European Investment Bank had indicated to support $150 million and $100 million, respectively,? said PGN president WMP Simanjuntak late Tuesday.

PGN had ordered a consultant to conduct feasibility study to pipe natural gas from East Kalimantan to Java. The project will be divided into to segments, the 1,100-km 32 inches pipeline from East kalimantan to East Java, and the 680-km 28 inches pipeline from East Java to West Java. The pipeline would be able to transport 1 billion cubic feet of gas per day from East Kalimantan to Java. The project is estimated to cost $1.7 billion.

Simanjuntak said the study is expected to be completed later this month, adding if proven feasible, the project would likely commence in 2005 and would start to deliver gas in 2008.

He added that aside from the three banks, Japan?s tradinghouse Marubeni Corp. is also expected to back-up the project, but said Chinese potential partners CNOOC and CNPC had withdrawn their commitment for the project.

Simanjuntak said the remaining fund to finance the project would be raised from bond issue and strategic partners with investors.

Meanwhile, he also said that PGN had signed an MoU to study the feasibility of building LNG terminal and regasificasion facilities in East Java with Japan?s Itochu Corp. He said that the feasibility study would be completed within the next three to six months. (godang)