Pertamina To Invest US$1.96 Billion for Energy Diversification Infrastructure

27 Januari 2012 14:30 WIB

JAKARTA, PT Pertamina (Persero) is ready to invest US$1.96 billion for constructing new infrastructure to meet the demand of natural gas by the state electricity company PLN's power plants and domestic industry needs until 2014.

The investment on energy infrastructure is part of Pertamina's support for Indonesia's master plan in diversification of energy, development of upstream gas industry, and reduction of subsidized energy in Indonesia. Of the total investment, US$30 million will be utilized for the construction of pipes and onshore receiving facilities of the Floating Storage and Regasification Unit (FSRU) in West Java; US$1.15 billion for FSRU in Central Java and the Gresik-Semarang-Cirebon pipe network; US$380 million for Arun regasification and Lhok Sukhon-Medan pipe network; and US$400 million for the construction of mini LNG Receiving Terminals with PLN at Tanjung Batu, Batakan, Balikpapan, Semberah, Bali, Pomala, Jeneponto, Tello, Minahasa and Halmahera.

Pertamina's natural gas infrastructure development plans are in line with the government policies as stipulated under the Ministerial Decree   No.0225.K/11/MEM/2010 on National Natural Gas Transmission Network and Distribution Master Plan 2010-2025 and Presidential Regulation  No.5/2006 on National Energy Policy. It is hoped that the utilization of natural gas, which reserve is available in large quantity in Indonesia, will take up more than 30% portion of national energy, replacing oil in 2025.

The construction of natural gas infrastructure is also in line with Presidential Regulation No.32/2011 on Master Plan for the Acceleration and Expansion of Economic Development in Indonesia (MP3EI) 2011-2025.

The MP3EI is intended to stimulate the emergence and growth of new industries in Indonesia, all of which will require infrastructure support, including the natural gas.

In the realization of the infrastructure projects, Pertamina always engages relevant stakeholders, including the Government, Upstream Oil and Gas Regulatory Body, Downstream Oil and Gas Regulatory Body, consumers, and producers.

Through its discussion agendas, Pertamina has gained full support from policy makers (Government and BPMigas) to continue with its natural gas infrastructure construction project plans, particularly the revitalization of Arun asset and Central Java FSRU.

"Pertamina certainly can't move forward alone without the support from the Government and BPMigas in the form of the assurance of LNG supply. During high level meeting with officials from relevant agencies, Pertamina gained the support and now is only waiting for actualization of the commitment because the investment certainty is determined by the assurance on LNG supply allocation. Pertamina has requested to the Government and BPMigas, as well as the producers, to provide assurance for LNG supply allocation," the Vice President Corporate Communication of Pertamina Mochamad Harun said.

Regarding the economic value of natural gas, the acceptable price by domestic consumer is around  US$9 per million Btu, or almost three times higher than the the price of LNG Tangguh being exported at only US$3.35 per million Btu. Such better price certainly provides better economic value for upstream projects, increases state income and prevents the State's potential lost such as the export of LNG to Fujian.

The natural gas business is supply-driven, which means the growth of consumption is largely affected by the assurance of supply, which acts as the basic capital for investment in the infrastructure. Besides, the assurance of early consumers is needed and Pertamina has identified potential demands, even has received official purchasing requests from consumers in Java and Aceh.

"PLN and Pertamina have signed the Gas Sales Head of Agreement for gas supply to Tambak Lorok steam power plant. PT Pupuk Iskandar Muda, which is preparing to manage the inactive fertilizer plant PT Asean Aceh Fertilizer, has also requested for gas supply from Pertamina. Electricity and fertilizer are currently two special government priorities beside other industries, " Harun says.

"Such domestic consumer purchasing power is enough to bridge the need of national income with government's and BPMigas' mission to make oil and gas sector as the driving force of national economic growth. It is done by placing natural gas as the domestic raw material and energy source cheaper than oil."

The demand for LNG in Indonesia in 2014 is estimated to reach 10 million metric tons or half of total LNG currently being exported. This LNG supply is needed by the 3-million-MTA West Java FSRU (starting its operation in March 2012), by the 3-million-MTA Central Java FSRU (starting its operation in the first quarter of 2013), for revitalization of Arun mill in Aceh to become LNG Receiving Terminal with total capacity of 3 million MTA (starting its operation in 2013), and mini LNG Receiving Terminals with PLN for Tanjung Batu, Batakan, Balikpapan, Semberah, Bali, Pomala, Jeneponto, Tello, Minahasa and Halmahera with total capacity of 1 million MTA.