Firm presses plans for Indonesian gas line

Eric Watkins
Senior Correspondent

LOS ANGELES, Dec. 20 -- Indonesia's PT Bakrie & Bros. (B&B) plans to proceed with construction of a 1,115-km pipeline to transport natural gas from East Kalimantan to Central Java despite doubt voiced by officials about the project's feasibility.

B&B Pres. Bobby Gafur Umar said the company will continue with its plan to construct the pipeline despite adverse comments by Indonesian Vice-President Jusuf Kalla.

The Indonesian official earlier said the government might cancel the $1.26 billion project due to a change in domestic gas markets, with Java now likely to get fresh supplies from Cepu gas field in Central Java.

"If Cepu is capable of supplying gas, why take it from far away?" Kalla asked on a visit to Bontang in East Kalimantan. He also said gas output in Kalimantan is showing signs of depletion.

Umar, however, said the pipeline was in line with the program proposed to upstream regulator BP Migas, which awarded BB the tender to build the project (OGJ, Feb. 20, 2006, Newsletter). Construction of the line has been scheduled to start in early 2007, with completion expected in 2009.

B&B has a 25-year contract from the government to operate the transmission pipeline, and it has been seeking cooperation with Mitsui of Japan and Daewoo of South Korea to build the line, which will transport 1 bcfd.

In October, B&B said it would invest $360 million of its funds in the project but would need a loan of $840 million.

Last July, Umar said B&B had not secured supply contracts but had signed agreements with gas buyers in Java, including PT Indonesia Power, PT Rabana Gas Indo Makmur, and PT Bayu Buana Gemilang.

Contact Eric Watkins at hippalus@yahoo.com.

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