Delayed Sumatra-West Java gas pipeline comes onstream

Ika Krismantari, The Jakarta Post, Palembang

After nearly four months of delay, state-owned gas distributor PT Perusahaan Gas Negara's (PGN) US$1.1 billion pipeline linking South Sumatra and West Java finally came onstream Sunday.

The pipeline will initially deliver 30 million cubic feet per day from a Pertamina gas field in Pagardewa, South Sumatra, to industrial areas in Cilegon, West Java.

"We will gradually increase the gas distribution to about 250 million cubic feet per day in 2008," PGN president director Sutikno said during a ceremony to inaugurate the operation of the South Sumatra and West Java (SSWJ) gas pipeline.

State Minister for State-owned Enterprises Sugiharto and Energy and Mineral Resources Minister Purnomo Yusgiantoro also attended the ceremony.

The 375-kilometer pipeline is the first part of the company's 1,101-kilometer gas pipeline network connecting South Sumatra and West Java.

The second and final pipeline in the network is still being completed and will distribute gas from ConocoPhillips's gas field in Grissik, South Sumatra through Pagardewa and Labuhan Meringgai to Muara Bekasi and Rawa Maju in Bekasi, West Java. The pipeline is expected to go on stream in the fourth quarter of this year and will distribute up to 400 million cubic feet per day.

PGN's shares slumped by more than 20 percent from Rp 9,650 ($1.06) on Jan. 12 after PGN unveiled that the SSWJ gas pipeline project would be delayed.

Sutikno estimated that the company's soon to be announced 2006 profit will reach Rp 2 trillion (about $222 million), exceeding the government's target of Rp 1.89 trillion.

In 2005, PGN's total revenue rose by 22 percent from Rp 4.4 trillion in 2004 to Rp 5.4 trillion in 2005. Its operating profit over that period rose by 82 percent to Rp 862 billion.

With the operation of the new pipelines, the company expects its gas distribution volume to increase from 338 million cubic feet per day last year to 555 million cubic feet per day this year.By 2008, gas volume is expected to reach 919 million cubic feet per day.

Under the existing contracts, PGN will distribute a total of 3.3 trillion cubic feet of gas for 12 years from Pertamina's Pagardewa field and for 17 years from ConocoPhillips' Grissik field.

Starting this March, a power plant owned by Indonesia's biggest steelmaker PT Krakatau Steel in Cilegon will start receiving 30 million cubic feet per day from the pipeline. The volume will be increased to 40 million cubic feet per day in May. PGN is also planning to build 509-kilometer pipeline from Duri, Riau to Medan, North Sumatra with an initial capacity of 350 cubic feet per day. The construction of the project requires approximately $537 in investment.