State gas distributor PT Perusahaan Gas Negara (PGN) plans to build a compressed natural gas (CNG) plant to enable the company to sell gas outside its pipeline system.
Bambang Banyudoyo, PGN’s director for corporate development, said the company had started a pilot project for the CNG plant in Surya Cipta, Karawang, West Java.
“The project is still at an engineering stage. We expect to finish it in 2011,” Bambang said Tuesday night.
CNG is natural gas compressed into a volume and density which makes it practical as a moveable fuel supply. The plant is basically a compressor to produce CNG.
“After being compressed into CNG, gas can be loaded into tanks and distributed further both to traders and end users,” Bambang said.
He added that PGN needed at least Rp 60 billion for the CNG compressor only.
The pilot project would be a new trading mechanism for PGN as currently the company only sells gas through its pipelines.
“We are building the plant to fulfill demand in the areas which cannot be accessed by our gas pipeline system.”
According to Bambang, the PGN’s CNG pilot project is expected to have an initial capacity of 10 million cubic feet per day to cover areas within a radius of 200 kilometers from the plant.
Bambang said buyers would likely be industries around the area. PGN has yet to determine the selling prices for its CNG, but Bambang said it would not be higher than the similar products already on the market.
CNG has been sold by several private businessmen at an average price of $12 per million British thermal units (mmbtu), he added.
PGN now sells its pipeline gas at a price of $5.5 per mmbtu and buys from its suppliers at a price of US$3.9 per mmbtu.
PGN is in an upbeat mood to expand its gas sales volume.
It expects gas sales to reach between 700 and 800 million cubic feet per day (MMcfsd) in 2009, up from an estimated 600 MMcfsd this year, president director Hendi Prio Santoso said on Nov. 26.
PGN expects higher sales because it has increased demand from power plant operators.
Beside the CNG plant, PGN has set up two other projects to expand its gas distribution business. It has formed a consortium with state oil and gas company PT Pertamina and state power firm PT PLN to build a gas receiving terminal in Bojanegara, Banten Province.
Bambang said the terminal was expected to be operational by 2012.
PGN also plans to build a 600 kilometer gas pipeline from Duri, Riau Province to Medan, North Sumatra Province.
Bambang, however, said the project could only be started when PGN has secured the gas supply. He said the company was still calculating the investment needed for this project.
PGN expects to spend $200 million on capital expenditure next year.
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