THE Indonesian government is understood not to be proceeding with its threat to revoke the license given to PT Bakrie & Brothers to construct a subsea gas pipeline from East Kalimantan to Central Java. The company has now started work on the project, including land clearing, the country’s upstream oil and gas regulatory body BP Migas has confirmed.
Earlier, BP Migas said it may cancel the authorization granted the company to construct the 1,200-km long pipeline project, valued at around $1.2 billion, if it did not start construction work soon.
It is understood that Bakrie & Brothers had been discouraged from beginning the project after the government said it would not be able to guarantee a gas supply for the pipeline. The feasibility of the project was thus put into doubt after a number of observers said East Kalimantan does not have sufficient gas to spare to send to Java, and that the existing production is barely enough to feed industries in that province. East Kalimantan has a number of large industries such as an LNG plant and fertilizer factories, which need large supplies of natural gas. Also, Java may no longer need to import gas supplies from other regions when the Cepu Block offshore East Java comes on line in 2008 or 2009.
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