Medco Eyes Diverting Gas to Batam

The Jakarta Globe, Mita Valina Liem, March 26, 2009

A subsidiary of PT Medco is planning to divert as much as 49 billion British thermal units of gas per day initially planned for a power plant in Java to a power plant in Batam Island in Riau Islands Province, an official at the Energy and Mineral Resources Ministry said on Thursday.

Medco, or Medco Energi Internasional Tbk, is the country’s biggest privately-owned oil company, Evita Legowo, director general for oil and gas at the ministry, said the gas extracted from Lematang block in South Sumatra Province, operated by Medco E&P Indonesia, may flow through a pipeline belonging to state-owned gas company, PT Perusahaan Gas Negara Tbk and its subsidiary, PT Trans Gasindo Indonesia.

“The gas may be diverted to supply a gas-fired power plant in Batam, but we haven’t decided who will get the gas yet,” Evita said, adding the ministry would have to decide before May when the gas is to come on-stream.

The destination options would be either to PT Perusahaan Listrik Negara’s power plant in Batam or to PT Dale Energy Batam, Evita said.

“The receiver will have to pay for a [gas distribution] toll fee to the transporter and BPH Migas will set the price of the fee.” Infrastructure, such as pipelines for transmission and distribution to support gas supplies to power plants, was limited, and the country relies heavily on PGN’s pipeline, Evita said.

Batam, which has an export-focussed industrial zone, and Java are two important destinations which often compete for local power.

The lack of a comprehensive pipe network throughout the country means the government has to choose carefully which areas it supplies.

The ministry plans to invite BPMigas, the country’s upstream oil and gas regulatory body; BPH Migas, the country’s downstream oil and gas regulatory body; PGN, as well as gas distributors, such as TGI and PT Pertagas, a subsidiary of state oil and gas company PT Pertamina, to calculate how much pipe the country needs for gas distribution networks.

“If we already know how much capacity the country needs for the pipe and the commercial calculations are ready, there will be a lot of investors interested in building the pipe,” Evita said.

PLN said the company could save more than Rp 5 trillion ($435 million) by adopting a gas conversion program at some of its plants in 2009.