Publications

A gas swap arrangement has been established since early December 2011 involving several parties which consist of two gas producers, two gas transporters, a gas buyer and SKK Migas (successor to BPMIGAS) to enable delivery of gas under a gas sales agreement between a gas seller or producer having its gas plant in South Sumatera and a buyer having its plant in West Java before the pipeline infrastructure required to connect the gas plant and the main transmission pipeline is completed. Under the executed gas swap agreement, ConocoPhillips (Grissik) Ltd. (CPGL) will deliver up to certain volume of gas on behalf of JOB Pertamina Jambi Merang (JOB PTJM) at the Grissik Plant Gate to PT. Perusahaan Listrik Negara (Persero) (PLN), as JOB PTJM’s gas buyer. PLN, as the shipper, will have PT Perusahaan Gas Negara (Persero) Tbk (PGN), as the transporter, transport the gas from the Grissik Plant Gate thru the PGN South Sumatera West Java Pipeline (PGN SSWJ Pipeline) to the PLN Muara Tawar Power Plant in Muara Bekasi in West Java. In return, JOB PTJM will deliver the same amount of gas to CPGL at the Sei Kenawang-TGI Pipeline tie-in point. CPGL, as the shipper, will have PT. Transportasi Gas Indonesia (TGI), as the transporter, transport the gas from the tie-in point thru the TGI GD Pipeline to PT. Chevron Pacific Indonesia (CPI) receiving facilities in Duri, Central Sumatera. Complexities arose during development of the agreement, which took about eleven months to complete from the first kick-off meeting among the parties in January 2011 to its full implementation in early December 2011. Consideration of the existing agreements between the parties, and the desire of each party to protect its existing gas sales and transportation agreements and to manage the additional risks assumed versus the benefits gained gas in Indonesia. For those areas where gas sources have been connected to the market in the past, the through the swap arrangement contributed to the extended time required to conclude the agreement and obtain approval by the parties’ respective managements. The multi-party negotiation was finally completed as the parties, with the leadership and facilitation of SKK Migas, jointly worked to find a creative solution to PLN’s persistence to reduce the use of diesel fuel oil at its PLN Muara Tawar Power Generation Plant by utilizing natural gas from its own gas sales agreement with the upstream gas producer. The execution of this gas swap agreement has provided benefit to the government in the form of direct fuel cost savings to PLN that can contribute to the reduction of the electricity subsidy. The use of natural gas will allow PLN to operate its power plant in a more environmentally friendly manner. Further, the swap arrangement has facilitated the allocation of JOB PTJM gas to the PLN Muara Tawar Power Generation Plant as per the allocation plan. This paper shares the experience of developing a pipeline gas swap arrangement which can be used as a benchmark for future gas delivery arrangements through pipelines in the country. The presence of existing main gas transmission pipeline infrastructures and additional gas sources surrounding the pipelines provides the opportunity for natural gas deliveries to move from traditional point-to-point arrangements to multi-point sources and multi-point offtakes, which may require swap arrangements (such as this one) as are already utilized in mature markets.