Floating Gas Terminals a Reality by End of Next Year

Jakarta Globe, Janeman Latul, February 04, 2010

A replica of a Iiquefied natural gas tanker. Three floating LNG terminals are on track to be built in Indonesian waters by the end of 2011. EPA Photo

The government’s plan to build three floating liquefied natural gas terminals is on track to be finished by the end of 2011, said the state-owned companies involved in the plan, as a joint-venture agreement for the first terminal was signed on Thursday.

The LNG terminals are aimed at helping to meet rapidly growing local demand for gas for electricity generation and the fertilizer and manufacturing industries.

However, Indonesia, the world’s third-biggest LNG producer, may still need to start importing to meet demand, with the government confirming on Thursday that Pertamina was in negotiations to start receiving shipments from Qatar.

State oil and gas producer PT Pertamina and state-owned PT Perusahaan Gas Negara signed the agreement to form a joint- venture company, to build the $200 million West Java LNG terminal, which will be able to supply 500 million cubic feet of gas per day to Greater Jakarta.

“Today [Thursday], we see an agreement between state-owned companies to develop and supply gas as the national demand is increasing rapidly,” said StateEnterprises Minister Mustafa Abubakar. “The fertilizer and electricity sectors are the sectors that need the gas supply the most.”

Pertamina will own 60 percent of the yet-to-be-named venture with PGN holding the rest. Pertamina will select the company’s president director, technical and operation directors, while PGN will choose its financial and administration directors.

PGN president director Hendi Prio Santoso said the agreement showed the commitment the two companies have to help nation cope with quickly growing needs for electricity. The West Java terminal was on track to be completed before the end of 2011, he said.

“We will eventually invest around Rp 800 billion [$85.6 million] in the West Java terminal while Pertamina will invest the rest,” Hendi said.

The other floating LNG terminals will be located near Medan in North Sumatra and East Java. The Medan terminal will be fully financed by PGN while the East Java terminal will be financed by Pertamina. Each terminal will require an investment of $150 to $200 million, Hendi said.

“The North Sumatra LNG terminal is currently at the technical preparation stage and is expected to be operation by 2011 as well,” Hendi said. It would handle around 1.5 to 2 million tons of LNG a year, he said.

The North Sumatra terminal would be 70 percent financed by loans and the rest would come from PGN’s internal cash, he said.

Pertamina is planning to form a joint venture with a shipping company that provides oil and gas services to build the East Java terminal and it will start searching for a partner before the end of February.

Pertamina president director Karen Agustiawan said the terminal should also be completed by the end of 2011. The floating terminals would help Pertamina complete its LNG supply chain, which has been in development for 30 years, she said.

The terminals will be supplied by British energy giant BP, which will supply 1.5 million tons of LNG a year from the Tangguh field in Papua, and PGN, which will provide 1.5 million tons of LNG a year from the Bontang field in East Kalimantan. The three terminals will eventually have a combined storage capacity of 3.5 million to 4 million tons of gas.

However, even after the floating terminals are operational there still won’t be enough gas to meet the rising demand in Indonesia.

“We [Indonesia] may still import two million tons a year from Qatar to meet local demand,” said Michael Baskoro, PGN’s commercial director.

Evita Legowo, director general of oil and gas at the Energy Ministry, confirmed that Pertamina was negotiating with a Qatar company for additional gas supplies.