Indonesian industries face natural gas shortage

Indonesian industries could suffer a severe gas shortage in 2009 following a decision by state gas distributor Perusahaan Gas Negara to increase supplies to state firm Perusahaan Listrik Negara.

Eric Watkins
Oil Diplomacy Editor

LOS ANGELES, Sept. 29 -- Indonesian industries could suffer a severe natural gas shortage in 2009 following a decision by state gas distributor PT Perusahaan Gas Negara (PGN) to increase supplies to state power firm PT Perusahaan Listrik Negara (PLN).

"PGN's traditional market, especially in West Java, will face a gas shortage of about 200 billion btu/day," said PGN Pres. Director Hendi Prio Santoso, who spoke before the House of Representatives' Commission VII, which oversees energy and mineral resources affairs.

"We already have a memorandum of understanding with some of these industries, but we will not able to supply gas to them," Hendi told commission members, adding that East Java and North Sumatra are also threatened with a severe gas shortage.

Hendi said the predicted shortage would burden industries with extra costs by forcing them to turn to more expensive diesel fuel.

"Industries will need an additional 8 trillion rupiahs for every 100 million cu m of gas not supplied. But we will try our best to find an alternative gas supply for them," Hendi said.

PGN has signed a 5.63-trillion-rupiah contract to sell gas to PLN, and will supply 30 MMscfd from fields in South Sumatra to PLN's Cilegon power plant for 10 years, starting in 2009.

PGN also has signed contracts to supply other PLN facilities: 13.2 MMscfd to Batam power plant, 200 MMscfd to Muara Tawar power plant, and 30 MMscfd to Tanjung Priok power plant.

PGN also is scheduled to sign another agreement to supply 8 MMscfd to Talang Duku power plant, said Hendi, who added that PLN had agreed to buy the gas at the industry price of $5.50/million btu.

In the course of his discussion, Hendi also told commission members that PGN is seeking loans worth $560 million to finance the construction of an LNG regasification plant in Cilegon, Banten.

Last week, PLN announced plans to cooperate with PGN and state oil and gas company PT Pertamina to build a $500 million gas-receiving terminal (OGJ Online, Sept. 19, 2008).

Contact Eric Watkins at hippalus@yahoo.com.

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