Why BPH Migas Planning to Build Cisem Gas Pipeline in Stages?

Summary

The Downstream Oil and Gas Regulatory Agency (BPH Migas) plans to gradually build the Cirebon-Semarang (Cisem) natural gas pipeline transmission project. The project is constructed in order to accelerate gas supply for industrial estates in Kendal and Batang, Central Java. The gas supply will come from the Jambaran-Tiung Biru (JTB) Field in East Java. "There is still time to build 40 km to 50 km by the end of 2021," said BPH Migas Committee Member Jugi Prajogio in a press conference, Wednesday (10/14).

Head of BPH Migas M. Fanshurullah Asa said that his agency had received the handover of special rights for the Cisem natural gas transmission line from PT Rekayasa Industri (Rekind). Furthermore, BPH Migas will conduct a one-month study on various components of the project's feasibility to decide its continuation. The options they are currently reviewing are: returning the project to the government, designating it as an assignment project, and conducting a re-auction with changes to the terms and conditions. "After one month, there will be a joint decision regarding the solution for the Cisem pipeline project," he said.

If the decision is re-auction, BPH Migas plans to adjust a number of project provisions, such as a smaller pipe diameter. Then, changes the transportation tariff or gas toll fee. According to Fanshurullah, BPH Migas will choose the most economical toll fee but with a logical internal rate of return (IRR) calculation.

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