Medco Takes on New Partners for Java 1 Power Plant Project

Arnold Sirait
19 Juli 2016, 08:18
Medco
Arief Kamaludin|KATADATA
Medco Energi

Medco Power Generation Indonesia has said that it is still interested in participating in the tender for the Java 1 power plant project. However, the subsidiary of the Medco Group has decided to replace its consortium members for the project tender.

President Director of Medco Power Generation Indonesia Lukman Mahfoedz said that it would partner with Korea Electric Power Corporation and Nebras Power for this tender, instead of Mitsui. (Read: Pertamina Threatens to Withdraw from Java 1 Power Project)

According to Lukman, the company has changed its partners because Java 1 is such a strategic and important project. “So we’re partnering with those that have the commitment,” he said at the EMR Ministry office, Jakarta, Monday (18/7).

Lukman said that Medco was reasonably happy with this change to the terms and conditions, particularly as the guarantee of natural gas supply is crucial for the future power plant.

The company plans to submit the tender documents for Java 1 next week. “We’re still taking part in the tender for Java 1 despite the change in the terms and conditions,” he said

PLN changed the terms of the condition of the Java 1 tender in May. The state electricity company created a new rule that required the winning bidder to use gas from the Tangguh Field in Bintuni Bay, Papua, to fuel the power plant. (Read: Tangguh Train 3 Ready to be Constructed following Approval of Final Investment Decision)

PLN’s Procurement Director Supangkat Iwan Santoso said that the terms and conditions had been changed in the interests of all. Under the new rule, the power plant can immediately commence operations. The previous rule that required all bidders to have their own gas supply was a mistake, he added.

According to Iwan, the operations are expected to start sooner than expected thanks to the simpler financial closing process, which means that bidders will not have to include the cost of gas in their calculations because that will be borne by PLN. Because the funding will only be for the development, the construction phase can be brought forward.

As soon as the power plant has been constructed, PLN can start supplying gas and the plant will be able to commence operations in 2018. This would not be the case if the investors were required to provide gas supporting facilities, especially if they had difficulties finding a gas supplier. (Read: Gas Share in Power Plant Up 25 Percent)

Iwan added that there were two other reasons behind the change in the tender rule. First, although the Special Task Force for Upstream Oil and Gas Business Activities (SKK Migas) did not request the change, it prioritised the use of domestic gas.

Deputy Chief of SKK Migas M.I. Zikrullah confirmed this. “Basically, optimising the use of domestic gas must be a priority to support upstream activity and meet energy demand,” said Zikrullah to Katadata.

The2x800 MWJava1 Project is the largest gas-fired power plant in 35 GW power project. The winning bidder will be granted a 25-year concession before the power plant is handed over to the state, in this case PLN. (Read: Pertamina Threatens to Withdraw, PLN Insists to Continue Tender for Java 1 Power Plant Project)

The plant requires a huge 250 mmfcfd of gas for its operations, enabling the project to meet the requirement that gas-fired power plants produce 20 percent of the power for the 35 GW megaproject.

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