PGN blames management, technical problems for pipeline delays

Ika Krismantari, The Jakarta Post, Jakarta

State gas company PT PGN has blamed a six-month delay in the opening of a key US$1.1 billion pipeline -- which sent its shares tumbling by 23 percent last week -- on management and technical problems.

The pipeline will span a total of 1,106 kilometers and link South Sumatra and West Java, and have the capacity to transport 1,000 million standard cubic feet per day (mmscfd) of gas. It was originally scheduled to open in December.

PGN's shares fell 23.3 percent last week to Rp 7,400 (US$0.81) from Rp 9,650.

"We should have realized there would be a delay earlier, but because of the explosion the directors, who were appointed in mid-November, were focused on that," PGN president director Sutikno said Sunday.

The explosion he was referring to involved a PGN gas pipeline in Sidoardjo, East Java, the site of the mudflow disaster.

It was not until the middle of December that the directors started analyzing the problems hindering the gas pipeline project, he said.

"We released a statement about the delay on Jan. 11, after we reached a final conclusion on how long the project would be delayed," Sutikno said.

He denied there was any effort on the part of the management to try and cover up the delay.

PGN director for development Adil Abbas said another problem facing the project was the issue of land clearance.

As a result of the delay in the opening of the pipeline, PGN revised down its gas production target for this year to 555 mmscfd from 787 mmscfd.

For 2007, PGN has set aside $517.11 million for a number of different projects, including gas pipelines linking Duri in South Sumatra, Dumai in Riau and Medan in North Sumatra.