PGN to commence feasibility study on ambitious pipeline project

State gas distribution company PGN will start feasibility study on the ambitious project to construct gas pipeline that would link gas rich East Kalimantan to Industrial provinces of Java, a company official said.

"The feasibility study will commence next month and is expected to be completed after six months. It will be funded with US$ 650,000 grant provided by United States Trade and Development Agency (USTDA)," said PGN president WMP Simanjuntak.

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.

Simanjuntak said if proven feasible, the project will commence in 2005 and would start to deliver gas in 2008.

"The project cost is estimated at US$ 1.7 billion. Asian Development Bank and European Investment Bank had indicated to pledge around $ 320 in loan if the project is proven feasible. PGN is projected to be able to raise between $ 300 million to 400 million. The remaining $ 1 billion will be financed by investors. Several potential investors from China, Europe and United States had expressed their interests," said Simanjuntak.

Simanjuntak said the realization of the project would secure stable and clean energy supply for Java for at least 20 years as uncommitted gas reserves in East Kalimantan are abundant."Uncommitted gas reserves in East Kalimantan is a around 18 trillion cubic feet," he said.

"The project would provide 600 million standard cubic feet per day (MMCFD) to generate 3000 MW of electricity," he said.

Some analysts, however, doubt the feasibility of the plan.

"Gas reserves in Java are still adequate to supply Java for the next ten to fifteen years. There are significant gas discovery in Cepu, Central Java, where the amount of reserves could reach as much as 6 TCF," said an analyst.

Another analyst estimated that gas reserves in East and Central Java at around 10 TCF. "The importance of the pipeline is beyond argument, but I don't think it need to be constructed that fast. What we need now is to bring Java gas reserves into production and to build pipeline network that would enable gas producers to transport their gas cheaply," said the analyst. (alex)