Korea Electric Power Corp (KEPCO) will lead a group of South Korean energy firms and Indonesian utility PLN to invest $2 billion in gas and power projects in the Southeast Asian country to help secure gas supply as competition for demand heats up.
The South Korean group plans to develop projects from gas fields to power plants, Indonesian director for oil and gas Evita Legowo said at a forum in Jakarta between officials from the two countries energy ministries and South Korean companies.
"The investment is estimated at around $2 billion, but the figure is not final yet. KEPCO will not be alone, it will bring its partners," Legowo said.
"Earlier, KEPCO wanted to utilise LNG for this project, but they could not get the supply. Then we see that in West Java, there are several gas fields that they may use for the projects. We will arrange a special meeting between KEPCO and PLN."
A KEPCO spokesman in Seoul said the company, together with state-run Korea Gas Corp (KOGAS) and Korea National Oil Corp (KNOC), had proposed a feasibility study for the $2 billion project.
The project will include development of small and medium-sized gas fields, compressed natural gas (CNG) transport facilities and a 750-megawatt power plant in Banten province, a KEPCO official said in a forum presentation, adding that the overall development will require more than $2 billion.
Investors in the CNG project will include state utility KEPCO, KOGAS and KNOC, while investors for the power plant will involve KEPCO and Indonesian state utility Perusahaan Listrik Negara (PLN), the official said.
Other projects include an ammonia production plant with a capacity of 600,000 tonnes per year (tpy), of which 400,000 tpy will be exported to South Korea and 200,000 tpy retained for domestic consumption.
The gas from the fields and CNG facilities is for the ammonia plant and the power plant, both of which are expected to be located in Banten province, on West Java, the KEPCO official said, adding that the developers are doing a study for the CNG project and selection of gas fields.
Construction of the CNG project is expected to run from 2012 to 2014, while the development of gas fields is from 2012 to 2014. The power plant construction is from 2012 to 2015, while the construction of the ammonia production plant is from 2013 to 2015, the official added.
RACE FOR INDONESIA GAS, COAL
Indonesia has recently attracted investment interest in energy and mining from Asian countries eager to secure resources, especially natural gas and coal to fuel their economic growth.
This week, Japans Sumitomo and Mitsui inked a deal with Indonesias energy watchdog BPMigas to develop gas projects from its marginal fields, with state-run Japan Bank for International Cooperation (JBIC) agreeing to fund the gas projects prepared by the two firms.
Pri Agung Rakhmanto, a Jakarta-based energy analyst at the Reforminer Institute, said Japan and South Koreas recent deals to develop marginal gas fields in Indonesia were part of the two countries efforts to guarantee gas supply.
"I believe that there is nothing free in energy deals. Japan and Korea enter both upstream and downstream projects and this shows that they want to ensure Indonesia will continue to export gas to the two countries," Rakhmanto said.
Other than traditional Northeast Asian buyers of liquefied natural gas (LNG), India as well as Indonesia and Malaysia are turning to imports to feed local demand, stoking already strong prices. Indonesia and Malaysia are the worlds second- and third-biggest LNG exporters.
Rakhmanto added that by having control at processing facilities, the investors can endorse terms that include LNG export as one option in the projects.
Japans Mitsubishi Corp acquired in January a 20 percent stake in the Senoro-Toili natural gas field in Indonesia for $260 million, a step that allows the trading house to be involved in the LNG project from upstream to downstream. The upstream investment followed Mitsubishis investment in the Donggi-Senoro LNG project worth $2.8 billion via a joint venture.
Loss-making KEPCO, which bears annual fuel costs of 18.6 trillion won, with LNG and coal accounting for 43 percent each, oil 9 percent and nuclear the rest, has also invested in two Indonesian coal mining projects -- one with Adaro Energy and the other with Bayan Resources -- to secure 10 million tonnes per year.
KEPCOs shares ended down more than 1 percent on Thursday, while KOGAS slid 4.8 percent, underperforming the wider markets 0.3 percent rise . (Additional reporting by Cho Meeyoung in SEOUL, Writing by Ramthan Hussain)
source; apec-vc Korea
