Release: PGN: BOD clarification on delay of S. Sumatra gas commercialization
Monday, January 15 2007 - 12:09 AM WIB
The press release announcement was prepared following resolution of the BOD and the BOC investigative meeting on January 10, 2007. The management assures that no significant and substantial occurrences that affect fundamental and performance of the company in 2006.
Therefore, it is important to affirm that, rumors regarding manipulation on the company?s Financial Report is completely untrue. PGN?s Financial Report had been audited by Independent Auditor, appointed by Annual General Meeting of Shareholders, according to PSAK (Financial Accounting Standard Guidance) standard of IAI (Indonesia Accountant Association) and regulation of BAPEPAM (Stock Market Regulator) concerning guidance for providing and disclosing financial report of public companies.
Although delay has taken place, all gas sales and purchase contracts continue to implement. Thus, revenue projection for 2007 and onward will be increasing in comparison to projected revenue in 2006. Concerning SSWJ gas commercialization delay, following are the Management clarification:
1. The pipeline segment Pagardewa ? Labuhan Maringgai ? Cilegon (375 km), which is designated to transport 250 MMSCFD natural gas from Pertamina Pagardewa gas field in South Sumatera, is physically installed at December 17, 2006 and currently in the testing stages. Commercialization that was planned for December 2006 is now delayed to March 2007 after due investigation of obstacles at site and after having certain strategic steps done. Gas commercialization will start from 30 MMSCFD and will increase to 40 MMSCFD as of May 2007;
2. In July 2007, gas delivery will increase from 40 MMSCFD, as mentioned in point 1 above, to 170 ? 232 MMSCFD. The increase will be made possible by the completion of the pipeline segment Grissik ? Pagardewa (196 km) and the pipeline segment Labuhan Maringgai ? Muara Bekasi ? Rawa Maju (195) that enable transportation of ConocoPhillips gas starting July 2007;
3. With the completion of Bojonegara gas station in December 2007, gas delivery to Cilegon will increase to 100 MMSCFD by January 2008, consequently total gas delivered in January 2008 will be minimum 272 MMSCFD;
4. In March 2008, the parallel line Pagardewa ? Labuhan Maringgai (looping line) of 270 km and compressor facilities in Pagardewa are scheduled to complete. The completion of both pipeline and compressor facility will enable PGN to carry minimum 480 MMSCFD, from which, 250 MMSCFD coming from Pertamina?s gas field in Pagardewa and 230 MMSCFD originating from ConocoPhillips gas field in Grissik. Consistent with the above conditions, the PGN 3 years estimated total distribution volume would be as on the table bellow;
| ? |
2006 (estimate) (MMSCFD) | 2007 (projection) (MMSCFD) | 2008 (projection) (MMSCFD) |
| SBU I? | 180? | 293? | 650 |
| SBU II?? | 97 | 170? | 170 |
| SBU III? | 61? | 92? | 99 |
| Total Volume? | 338? | 555? | 919 |
Volume increase in gas distributed by the company, from 338 MMSCFD in 2006 to 555 MMSCFD and to 919 MMSCFD in 2008 will have direct effect on company?s financial performance.
However, delay of gas commercialization will revise Capital Expenditure (disbursement) as follows;
| ? |
2006 (Million USD) | 2007 (Million USD) | 2008 (Million USD) |
| SSWJ Phase I? | 181.75? | 297.68*)? | 18.34? |
| SSWJ Phase II | 448.28? | 110.74? | 0.56 |
| Duri-Dumai-Medan | 0.00? | 2.69? | 134.00? |
| West Java Distribution Project? | 62.26? | 106.00**)? | 27.56 |
| Total? | 692.29? | 517.11? | 180.46 |
*) JBIC Loan: USD 222 Million
**) World Bank Loan: USD 66 Million
The Management describes that delay on South Sumatera gas commercialization is triggered by delay in pipeline construction caused by the following hindrances:
1. Land Acquisition
It is recognized that site physical works had experienced some complexities in land acquisition processes which blockade the sequence of the pipeline construction. Gradually all difficulties has been settled and only about 1,8 km (0.4%) of land acquisition is still in process for Right of Way (RoW) Grissik to Pagardewa. All the land acquisition process is targeted to complete by February 2007;
2. Climate
High rainfall created difficulties in heavy equipment and personnel mobilization as flood covered the RoW, such as hydro test work;
3. Technical Problems
In accordance to standard quality transmission pipeline, the testing processes must be conducted based on the prevailing SOP. Actually, the testing process requires more time than predicted, especially for hydro testing, as failure will raise consequences of repeating the whole process. Yet, the whole required hydro test has been done successfully and now the pipeline is in the drying stage and sectional valve installation. Management efforts to accelerate South Sumatera gas volume increase are as follows;
1. Acceleration of minimum facility at the Bojonegara station to allow 100 MMSCFD gas to be delivered by November 2007 from previously scheduled on January 2008. This effort will increase the number volume distributed to maximum 272 MMSCFD by November 2007 (previously scheduled on January 2008);
2. Acceleration of partial operation of the compressor station at Pagardewa by completion of 2 (two) compressor units by January 2008 from previously scheduled on March 2008 for 3 (three) compressor units. This partial completion of the compressor units will permit the pipeline to transport 400 MMSCFD;
3. Acceleration of parallel line (looping) Pagardewa ? Labuhan Maringgai completion to allow the 270 km gas transmission pipeline to transport more volume by 2008.
On the subject of withholding information, as published in national mass media, regarding delay on SSWJ, the management would like to clarify that the rumor is absolutely not true. The project delay announcement was made public on January 11, 2007 because we happen to know same right after detail project schedule evaluation.
Chronological decision making to stipulate SSWJ project completion delay:
1. December 18th, 2006, BoD Meeting evaluated project progress for project inauguration purposes. The meeting detected project delay and instructed further examination;
2. December 26th, 2006, BoD Meeting reevaluated project completion timetable in the back of the latest site condition. The completion is estimated to take place between February and March (still uncertain as the outcome depended on technical testing works);
3. In Board of Directors and Commissioners (BoD and BoC) Meeting held on December 27th, 2006, the Management has sounded the possible delay of project completion. The BoC suggested to carry out a deepening analysis to review schedule of gas commercialization;
4. January 2nd, 2007 BoD Meeting has decided new gas-in timetable by end February 2007 and gas commercialization in March 2007 including commercial impact on the delay;
5. January 3rd, 2007 BoD and BoC Meeting discussed and predicted the commercial impact on the delay;
6. January 8th, 2007, BoD Meeting prepared and extended written statement regarding delay on commercialization to BoC;
7. January 10th, 2007, BoC Meeting discussed about possible impact of gas commercialization delay and disclosure action plan to public;
8. January 11th, 2007, public announcement released by the Corporate Secretary.
On behalf of the Management and Staff of PT Perusahaan Gas Negara (Persero) Tbk, I would like to express our deepest apology to all concerned parties in regard to delay of gas commercialization and the unintended pending of information disclosure. (end of release)