Indonesia State Gas Firm to Seek Foreign Loans

Text of report in English by influential Indonesian newspaper The Jakarta Post English-language website on 27 September

[Article by Ika Krismantari: "PGN to seek gas supply from Australia and Iran"]

State gas distributor PT Perusahaan Gas Negara (PGN) is hoping to buy 1.5 million tonnes of gas from Australia and Iran for its planned Liquefied Natural Gas (LNG) receiving terminal in Cilegon, Banten.

The publicly listed company has already secured a deal with Bontang LNG plant in East Kalimantan to receive 1.5 million tonnes of gas per year, the first instalment of which will be provided as soon as operations at the terminal commence. The facility will have a total capacity of three million tonnes.

The terminal project will provide gas to the domestic market, particularly for the power and industrial sectors in Java. To that end, the government has created a consortium led by PGN, with participation from state oil and gas firm PT Pertamina and state power firm PT Perusahaan Listrik Negara (PLN).

The company will need to secure all of its gas supply to ensure the project is economically feasible, said Bambang Banyudoyo, PGN Director for Development and head of the project’s technical team.

“We might try to obtain (the gas) from relatively nearby locations in order to reduce transportation costs, including Australia, Iran or maybe Russia,” he added.

Given the country’s rapidly developing industry, the consortium is not worried about paying a potentially high price for the imported gas, Banyudoyo said.

“I don’t think there will be a problem with the price, if the local market is able to pay for it.”

PGN President-Director Hendi P Santoso said the project would require a total investment of USD 800 million, 70 per cent of which would be secured in loans, with the remaining 30 per cent in internal cash. The company has been in talks with a number of foreign banks regarding the loans, but nothing has been finalised thus far, he added.

Banyudoyo said he hoped his team would finish the project within the next few months, providing clarity on its technical and commercial aspects.

No details are available on the stakes held by the three companies in the consortium.

Originally published by The Jakarta Post website, Jakarta, in English 27 Sep 08.

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