Perusahaan Gas Negara Considering Buying 3 Oil Blocks for $1b This Year

Perusahaan Gas Negara employees check pipes at a gas receiving-and-transmitting station in Bojonegara, Banten. (Reuters Photo/Supri)

Perusahaan Gas Negara employees check pipes at a gas receiving-and-transmitting station in Bojonegara, Banten. (Reuters Photo/Supri)

State-controlled gas distributor Perusahaan Gas Negara is considering acquiring three oil and gas blocks in Indonesia this year, with internal cash, bonds and bank loans all possible sources of funding.

Hendi Priyo Santoso, president director of the company, said in Jakarta on Wednesday that the total investment for the acquisition was estimated to cost $1 billion.

“There are three main targets in the works right now,” Hendi explained, without giving any more details on location.

The company last year bought the Ketapang gas block in East Java and the Bangkanai gas block in East Kalimantan.

Hendi, who did not disclose the value of the acquisition of the two blocks, said the company had not decided yet how to finance the proposed acquisitions.

The president director said the company had $1.5 billion in cash on the books, with around $500 million available to be used to finance the company’s investment.

“We are open to any options. A bond sale is one option and a bank loan is another option,” Hendi said.

Hendi added that the Jakarta-based company planned capital expenditure of between $300 million and $500 million this year. Last year, the company set aside $700 million for capex.

The gas distributor is also working on building a pipeline linking Java, Bali and Sumatra, with Hendi adding that he hoped all the islands would be connected by 2016.

The company said in March that it wanted to participate in the Trans-Java pipeline — a series of pipelines extending 682 kilometers that will transport gas from gas-producing parts of West Java to consumers in East Java. The project is estimated to cost $1.12 billion.

Heri Yusup, PGN’s corporate secretary, said in March that the company had set aside Rp 2 trillion ($212 million) to finance the construction of the gas pipeline.

The Trans-Java pipeline will include a 140 kilometer line connecting the Muara Tawar steam-fueled power plant in Bekasi, West Java, to Cirebon, also in West Java, and another one between Gresik in East Java and Semarang, Central Java.

Surabaya, East Java, is home to manufacturing plants for companies, including Semen Gresik and ceramics makers. The plants rely on a sustained gas supply.

PGN is holding talks with companies that have been given the authority to build the pipeline.

Heri said that Pertamina Gas (Pertagas), a unit of state-owned energy company Pertamina, had been appointed to build the Gresik-Semarang link. Rekayasa Industri (Rekind), another state-controlled company, won the tender to build the Cirebon-Semarang link.

Djoko Saputro, director of technology and development at PGN, said the pipeline in Java would be built in stages.

The company will first build a gas pipeline linking Semarang and surrounding cities before they construct a pipeline linking Ungaran, a small city on the outskirts of Semarang, to Solo, Central Java.