Page 6 - AsiaElec Week 18 2021

AsiaElec COMMENTARY AsiaElec

Indonesian government divided

over delayed gas pipeline

The energy ministry and downstream regulator are split over how the
Cirebon-Semarang (Cisem) pipeline project should be executed, with

each side becoming increasingly invested in its vision

INDONESIA INDONESIA’S energy ministry and down- Cisem’s development if need be.
stream regulator have locked horns over how “If the government is tasked with maintain-
WHAT: best to proceed with the development of a ing the Cisem section, PGN is ready to imple-
The Cisem project has long-delayed natural gas pipeline. ment and integrate it with existing sections on
been delayed since its The energy ministry wants the Cirebon-Se- the island of Java to optimise gas utilisation for
award in 2006. marang (Cisem) pipeline project, which will run all sectors,” PGN corporate secretary Rachmat
from West Java’s port of Cirebon to Central Java’s Hutama told Kontan on April 23.
WHY: capital city of Semarang and which has been While Hutama said his company was await-
The original developer delayed for 15 years, to be funded by the state. ing a government decision on the project’s direc-
walked away in 2020, BPH Migas, meanwhile, has argued that its tion, BPH Migas has made it clear that it has no
arguing that the lack of decision to keep the project within the private intention of bowing to public pressure from the
guaranteed gas supplies sector is the correct choice and that the energy energy ministry.
made Cisem unviable. ministry does not have the authority to interfere
with the process. Counter-arguments
WHAT NEXT: The two sides’ public spat, which has irked BPH Migas head Fanshurullah Asa said on April
SKK Migas has said gas a parliamentary energy commission, has even 23 that his agency did not answer to the energy
supplies are not the drawn in upstream regulator SKK Migas, which ministry and that he would not be replying to
problem, demonstrating has said that while it can guarantee supplies, the Tasrif’s letter.
demand is the bigger issue of guaranteeing demand for the project is a Asa said he was preparing to explain the
issue. much bigger problem. BNBR award to Prime Minister Joko Widodo,
but that Presidential Regulation Number 79
Pipeline problems of 2020 stipulated that Cisem’s funding should
The Cisem project was beset by delays after come from the private sector.
Rekayasa Industri (Rekind) was awarded the BPH Migas committee member Jugi Prajo-
development contract in 2006. Rekind walked gio, meanwhile, told Kontan on April 23 that
away from the project in 2020, arguing that the BNBR had submitted a performance bond for
lack of guaranteed gas supplies coupled with the project on April 17. The performance bond
changing market dynamics had undermined has been set at 1% of Cisem’s value, which is an
the project’s economic viability. estimated $196.41mn.
While BPH Migas has acknowledged that the But the energy ministry is not willing to be
lack of guaranteed gas supplies had comprised dismissed so easily, arguing that the regulator is
the project’s development, it proceeded to award using legal loopholes to justify the BNBR award.
on March 15 the contract to Bakrie & Brothers The head of the ministry’s legal department,
(BNBR) – the runner-up in the 2006 auction. Idris Sihite, said the regulator’s retroactive use
The decision was quickly criticised by Energy of BPH Migas Regulation Number 20 of 2019
Minister Arifin Tasrif, who argued in an April to pick a runner up from the 2006 auction made
1 letter to BPH Migas that BNBR’s appointment no sense.
under the same terms and conditions set out in “If the auction was held in 2006, according to
the 2006 auction made little economic sense. the provisions of the legality principle, he may
The pipeline’s original design capacity of not refer to the provisions of the future princi-
350mn cubic feet (9.91mn cubic metres) per day ple. There is a prohibition to apply retroactivity,”
has been called into question, given that local Sihite said in a virtual press conference on April
upstream projects are predicted to struggle to 23.
deliver such volumes. The official argued that given current cir-
Tasrif called for the project to be developed cumstances, BPH Migas should be using BPH
via state funding instead. State-owned pipeline Migas Regulation Number 5 of 2005 instead.
operator Perusahaan Gas Negara (PGN) said Sihite said this earlier legislation makes no pro-
last week that it was ready to step in to promote vision for runners-up if the winner backs out of

P6 www. NEWSBASE .com Week 18 05•May•2021