ADB to Assist in Developing Major Natural Gas Project in Indonesia

JAKARTA, INDONESIA - ADB today signed a $350 million loan to help develop the Tangguh Liquefied Natural Gas Project in Irian Jaya Barat province, Indonesia.

“ADB is committed to assisting in the development of Indonesia’s energy-producing capabilities in line with international standards and best practices for environmental and social standards,” said Robert Bestani, Director General of ADB’s Private Sector Department.

The Tangguh Liquefied Natural Gas Project will develop, build and operate gas production wells, platforms and a liquefied natural gas (LNG) facility to export gas initially to the People’s Republic of China, Republic of Korea and the West Coast of North America.

The multi-billion dollar project is being developed by the London-based energy firm BP, which has significant equity interest in the project. The remaining financing will come from various international investors and banks, including Japan Bank for International Cooperation (JBIC).
ADB expects the project to generate financial benefits to the Indonesian government to support the shared goal of reducing poverty via sustainable economic growth.

“The project encourages clean energy use around the region,” said Mr. Bestani. “At the same time, it will increase revenue flows to the national, provincial and local governments. These funds can accelerate social and economic development and reduce poverty.”

The project is important for Indonesia in its energy development and export efforts, and it will help Indonesia maintain its position globally as a key LNG export centre. It will also provide environmentally benign LNG to the region, and promote the use of cleaner fuel in countries such as the PRC and Korea.

The project includes a comprehensive social and environmental program based on extensive consultations with the affected communities and in line with ADB's social and environmental safeguard standards. Currently, BP is also working with other donor agencies and civil society in implementing its corporate social responsibility programs.

ADB, through its Indonesia Resident Mission in Jakarta, will also coordinate with BP and other donor agencies in scaling up capacity-building programs aimed at strengthening local governance, according to Edgar A. Cua, ADB’s Country Director in Indonesia.

“Sustainable development, cultural preservation, maintaining biodiversity and improved local governance are core principles at the heart of this project,” Mr. Cua said. “Moreover, this is an excellent example of the large scale infrastructure projects that are needed in Indonesia.”

ADB's participation will catalyze a significant amount of long-term debt to support Indonesia's energy sector. Since this is ADB's first private sector project in Indonesia's oil and gas sector, it has the potential to spur subsequent projects not only in Indonesia but also in the region.
“Tangguh LNG is the largest private sector project for Indonesia since the Asian financial crisis,” said Mr. Bestani. “Its successful completion demonstrates the private sector’s increasing confidence in the country.”

Support for the private sector is one of ADB’s key financing tools, and ADB’s Private Sector department is one of the fastest growing parts of the institution. A total of 29 financial markets and infrastructure projects providing $1.3 billion in assistance in the private sector are expected by end of August this year. These investments act as a catalyst to mobilize funding from other sources, leveraging ADB’s own funds by nearly 10 times.

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