THE Japan Bank for International Cooperation (JBIC) yesterday (2 April) signed a special ODA loan agreement for up to 49,088 million yen (approximately US$ 408.7 million) with the Government of the Republic of Indonesia for the South Sumatra-West Java gas pipeline project, which will be undertaken by PT Perusahaan Gas Negara (Persero), a state-owned enterprise in Indonesia.
The aim of the project is to construct gas pipelines for transporting production from the gasfields of Sumatra Island to West Java, and for developing a natural gas supply network in West Java. The proceeds of the loan will be used for procurement of equipment and material, civil works, and consulting services for supervising the implementation as well as operation and maintenance of the project.
Western Java, which includes metropolitan Jakarta, is the country s largest market for the consumption of natural gas. While gas supplies to this region have traditionally come from offshore gasfields in West Java, depleting gas reserves there have led to declining production in recent years, raising the prospect of supply shortages in the near future. The pipeline project aims at linking West Java with Sumatra Island, where there is still room for additional supplies.
The oil and natural gas sector has been on Indonesia s policy agenda since a new oil and gas law came into force in November, 2001. This eliminated the monopoly of state-owned enterprises and adopted market mechanisms through private-sector participation. In this context, the project will also lead to developing main gas pipelines and fostering a competitive energy sector.
