Medco, Lapindo to supply gas for users in Surabaya, Palembang

Alfian, The Jakarta Post, JAKARTA | Sat, 03/07/2009 11:42 AM  

Oil and gas companies Medco E&P and Lapindo Brantas have agreed to pioneer gas supplies for  consumers in the South Sumatra capital of Palembang  and the East Java capital of Surabaya, with each pledging to pump about one million metric standard cubic feet per day (MMSCFD). 

A memorandum of understanding for the supply will be signed soon, director general of oil and gas Evita H. Legowo said in a statement made on Friday.

“We are just waiting for available time from the energy and mineral resources minister for the MoU signing. But, it is actually only a formality,” Evita said. 

She added that her directorate and the upstream oil and gas regulator BPMIgas had received assurances about the supply from the two companies.

With these assurances in hand, she said, the government would immediately open a bidding process for the construction of natural gas distribution infrastructure.

“We expect the development of city gas distribution networks in the two  cities will be completed by the end of this year,” she said.

The city gas distribution infrastructure in Palembang will be built in Lorok Pakjo and Siring Agung subdistricts, supplying 4,200 households.

The infrastructure project in Surabaya, meanwhile, will be built in Rungkut Kidul and Kalirungkut subdistricts, transmitting  gas to about 3,200 households.

Evita said the projects would be funded by the state budget.

She refused to cite the investment figure. The central government will hand over project mana- gement to other stakeholders once the gas is being transmitted.

“We can either hand over the project to the regional governments or open tenders for other (alternative) management,” Evita said.   

The government began to study the development of city gas transmission in 2006 in a bid to replace use of kerosene that had previously stretched the state budget dearly because of the subsidies involved. 

Similar gas distribution projects will be replicated in West Java’s Bekasi and Depok, and in East Kalimantan’s Tarakan in 2010.

In the same year, the government is due to conduct engineering and construction design work and planning for gas distribution networks to low-cost apartments in Greater Jakarta. Similar studies will be made for households in Jambi.

Meanwhile, PT Perusahaan Gas Negara (PGN), Indonesia’s biggest distributor of natural gas, said it has increased supply to a power plant run by state utility PT Perusahaan Listrik Negara (PLN) ahead of schedule, Bloomberg reported. 

PGN raised the gas supply to the Muara Tawar power plant to an average of between 200 million cubic feet a day and 210 million cubic feet a day, corporate secretary Wahid Sutopo said. The company had expected to achieve that level of gas supply in the second quarter, Sutopo said on Friday as reported by Bloomberg.

Gas supply may be increased by another 100 million cubic feet a day later this year, the company said in a statement.

PGN said on Dec. 23 that it expects to boost sales this year by as much as 33 percent to an average of between 700 million cubic feet a day and 800 million cubic feet a day during 2009.

Supply, pipelines and distribution networks are a key bottleneck in Indonesia as reserves are often in remote areas  benefiting PGN as a main distributor to PLN, CLSA Asia-Pacific Markets said in an information note in early March. 

“Muara Tawar power plant is the key growth driver” of PGN’s volume of sales  this year,” Erwan Teguh, head of research at CIMB-GK Goh Pte, wrote in a note on Friday as reported by Bloomberg.