Pertamina consortium leads in race for Jawa 1 gas-to-power project

Singapore

A CONSORTIUM led by Indonesia's state-owned oil and gas company Pertamina is said to be leading by a wide margin in a tender for state utility group, PLN's US$1-2 billion Jawa 1 gas-to-power project.

But the project award is at least weeks away from concluding, sources said, as Pertamina needs to clear a few hurdles including justifying the pricing of its commercial proposal.

The Jawa 1 project to be located in West Java involves the supply of a floating, regasification, storage and offloading unit (FSRU) and the construction of a 1,600 MW gas turbine, combined cycle power plant.

The project tender floated about four months ago also attracted at least three other bids including one from a partnership between Singapore-listed conglomerate Sembcorp Industries and Indonesian mining group, Adaro Energi.

The joint bid between Sembcorp and Adaro was trailing as a distant second to the Pertamina-led consortium also comprising Japanese trading companies, Marubeni, Indonesian shipping company, Humpuss Intermoda Transportasi and Belgium-headquartered diversified oil and gas shipping group, Exmar, sources said.

The material price difference, however, has raised eyebrows with project watchers asking if the leading consortium has left money on the table.

Others suggested the project specifications proposed by the consortium will be subject to intense scrutiny by PLN due to the significant differential.

The state utility group would also want assurance from Pertamina and its bid partners that the project financing would be in place before the award can be firmed up. PLN is expected to finalise the Jawa 1 project award as early as late-October. Construction is projected to take about three to four years to complete.

Shipbuilders in Asia will be looking forward to a newbuild tender for the 170,000-cubic-metre FSRU once the project award is finalised.

The tender stated the FSRU needs to be constructed for the purpose of operating at the Jawa 1 project location.

This puts South Korean shipbuilders - with their vast experience in delivering new FSRUs - in a good position to contend for the newbuild FSRU contract. Yards in Singapore by contrast, could be excluded from the race for the Jawa 1 FSRU, taking into consideration they have proven track records in converting vessels into FSRUs instead of building such vessels from scratch.

The Jawa 1 project tender was issued as the central government of Indonesia underwent a major cabinet reshuffling.

Industry watchers said that the central government of President Joko Widodo (Jokowi) has thrown its backing behind progressing the Jawa 1 project tender despite the political wrangle surrounding the appointment of a new energy minister.

Jawa 1 is among a limited handful of power generation projects that may remain on track to come on stream by 2019.

Jokowi had pledged to power up Indonesia under a 35 GW nation-wide electrification programme to be delivered by 2019.

But a trade media report, citing data released by PLN in May, said that the 35 GW programme had come under review.

PLN data showed only 397 MW of new capacities have been commissioned in Indonesia and another 3,862 MW were under construction and commissioning phase.