Eric Watkins
Senior Correspondent
LOS ANGELES, Oct. 27 -- Indonesia has ruled that a natural gas pipeline project connecting East Kalimantan to Java must be submitted to public tender and not assigned to a state agency backed by a major Chinese petroleum firm.
The ruling by Aburizal Bakrie, the Coordinating Minister for the Economy, said the tender will be conducted by the Downstream Oil and Gas Regulatory Agency (BPH Migas) under the supervision of BPH Migas Chairman Tubagus Haryono.
Energy Minister Purnomo Yugiantoro said the ministry would also give its recommendation based on a feasibility study of the pipeline. The study, conducted by BPH Migas, is expected to be completed late this year.
Bakrie's ruling appeared to reverse an earlier agreement made with state gas distributor PT Perusahaan Gas Negara (PGN), which planned to undertake the project in partnership with China National Offshore Oil Corp. (CNOOC).
In late August, shortly after the pipeline plan was announced, PGN signed a memorandum of understanding with CNOOC witnessed by Indonesian Vice-President Jusuf Kalla to build the pipeline. PGN said the Chinese company was ready to finance the $1.2 billion project.
But there has been a heated debate in Indonesia during the past 2 months about whether the project would be tendered out or given directly to PGN.
Critics also have urged the government to reconsider whether a pipeline would be the best means to bring gas from the aging fields in Kalimantan to Java. An LNG terminal might prove to be a better option, they said, because if natural gas runs out in Kalimantan, the terminal could still receive supplies from other areas.
The receiving terminal also would fit in with a project of state power firm PT Perusahaan Listrik Negara, which is planning to construct an LNG terminal in West Java with start-up set for 2009.
Indonesia announced in August plans to build the 1,200-km pipeline from natural gas fields in East Kalimantan to Java at a cost of $1.2 billion (OGJ Online, Aug. 24, 2005).
Contact Eric Watkins at [email protected].