PLN says HOA with Keppel aimed to explore more efficient LNG supply chain

State-owned electricity firm PT PLN said on Monday that the recent Heads of Agreement (HOA) signed with Singapore?s Keppel Offshore & Marine Limited (Keppel O&M) and Pavilion Energy was intended to carry out deeper feasibility study for possible utilization of small-scale LNG facility in Singapore for gas distribution to small gas-fired power plants to be developed by PLN in Tanjung Pinang and Natuna islands in Sumatra.

PLN said in a statement that considering the close proximity of Tanjung Pinang and Natuna with Singapore, the utility company is looking into the aforementioned possibility of processing PLN?s existing LNG supply from domestic sources at the Singapore LNG hub into gas for later distribution to the power plants in the two islands.

While the PLN statement did not provide details, the company said earlier of possible swapping the LNG it obtained from Bontang plant in East Kalimantan with LNG from Keppel to be processed into gas for power plants in Sumatra as the island is located closer to Singapore than Kalimantan, which could help reduce transportation cost.

PLN said in the statement that the planned cooperation with Keppel and Pavilion forms part of efforts to help lower electricity production cost, which would eventually help lower tariff.

PLN said in the statement that if the six-month feasibility study proves that it would not gain much from the proposed utilization of the Singapore small-scale LNG, it would not proceed with the planned LNG project.

?So, the HOA is not an LNG sale and purchase contract, but for study of (possible) mini LNG infrastructure facility with the intention to obtain the most efficient and reliable logistics solution. If the study later proves that the cost is higher, then it will not be proceeded with implementation stage,? PLN Director Amir Rosidin said in a statement, apparently dismissing speculation at the local media suggesting that the HOA with Keppel and Pavilion is an LNG gas sales and purchase agreement.

Editing by Reiner Simanjuntak