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Gas-supply woes hamper investment in Papua

Jakarta Post - March 3, 2015

Raras Cahyafitri, Jakarta – Uncertainty over the gas supply for planned industrial development in the eastern part of the country, particularly Papua and West Papua, has hampered the government program aimed at accelerating the realization of investment in the area, says the head of the Investment Coordinating Board (BKPM).

BKPM head Franky Sibarani made the statement on the sidelines of a visit to Manokwari, West Papua over the weekend.

"Several projects planned in the area, such as those involving Pupuk Indonesia [a fertilizer firm] and Ferrostaal [German firm Ferrostaal AG] have been delayed because of the gas-supply problem. We need support to debottleneck the issue so that we can encourage investment," Franky said.

He added that the price of gas was also a specific issue bottlenecking the realization of Ferrostaal's planned investment in West Papua.

The German firm previously said that it had planned to develop a petrochemical plant in West Papua with an estimated cost of US$900 million. The company initially planned to start construction in 2013 and would have finished the project by 2016. However, the planned project is now stalled.

Papua and West Papua hold natural resources that can support energy for industrial development in the country. Teluk Bintuni regency, for example, has a significant amount of gas resources. The regency is home to the Tangguh LNG plant project involving the development of six gas fields in Wiriagar, Berau and Muturi blocks. The Tangguh LNG is operated by BP Berau Ltd., which is now working on the development of the plant's Train 3.

BP Berau has committed 40 percent of the LNG to be produced at Tangguh Train 3 for domestic-market allocation. BP Berau and state-owned electricity firm PLN previously signed a memorandum of understanding (MoU) highlighting that the Tangguh LNG operator would provide LNG to PLN.

"The 40 percent also includes the allocation of 20 mmscfd [million standard cubic feet per day] gas for the West Papua province, including Bintuni and Fakfak, which can use the supply to fuel electricity," said Rudianto Rimbono, a spokesman for the Upstream Oil and Gas Regulatory Task Force (SKKMigas).

Given the commitments, no more gas can be allocated for other industries unless new resources are found.

According to Rudianto, new gas supply may come from Kasuri block, which is currently operated by Malaysian Genting Oil. "However, Genting Oil is still in the exploration stage and we are still waiting for its POD [plan of development]," Rudianto said, adding that SKKMigas expected Genting Oil's exploration in the West Papuan block to continue despite the declining price of oil, which has affected oil and gas firms' investment calculations.

Investments in Papua and West Papua, which are the country's eastern most provinces, have been sluggish in past years. According to BKPM figures, foreign investment in Papua province was $1.26 billion in 2014, down from $2.35 billion a year earlier. Meanwhile, investment by domestic players was worth Rp 249.9 billion last year, a drop from Rp 584.25 billion in 2013.

Domestic investment in West Papua province also slipped to Rp 100.1 billion last year from Rp 303.95 billion in 2013. Meanwhile, foreign investment in the province stood at $153.3 million in 2014, a significant rise from $54.16 million.

Source: http://www.thejakartapost.com/news/2015/03/03/gas-supply-woes-hamper-investment-papua.html