MANILA, PHILIPPINES - A $75 million loan will promote clean, indigenous energy in Indonesia <http://www.adb.org/Indonesia> by assisting in the construction of a 661 km natural gas pipeline from South Sumatra to West Java.

In addition to a direct loan without government guarantee to the Indonesian energy firm PT Perusahaan Gas Negara (PGN), ADB will support loans of up to $125 million to PGN provided by other international financial institutions and commercial banks, also without government guarantee.

The $652.5 million project involves the construction of a pipeline for the transportation of natural gas from major gas fields in South Sumatra to the major gas consuming areas of West Java. The pipeline is one of two being built by PGN to address a shortage of natural gas in West Java.

“This pipeline will promote clean energy,support economic growth in West Java and is also a strong endorsement of Indonesia’s sector reforms in the oil and gas sector,” said Stephen N. Edwards, Structured Finance Specialist with ADB’s Private Sector Department.

PGN, an Indonesian gas utility involved in the transmission, distribution, and sale of natural gas, is 61% owned by the Government of Indonesia. Holding over 90% of the gas distribution market, PGN has a dominant position in the country’s gas industry.

The project is ADB's second non-sovereign guaranteed operation in Indonesia's oil and gas sector. The first one, a $350 million loan <http://www.adb.org/Documents/RRPs/INO/38919-INO-RRP.pdf> to help develop the Tangguh Liquefied Natural Gas Project <http://www.adb.org/media/Articles/2006/10347-Indonesia-natural-gas/> in Irian Jaya Barat province, was signed last 1 August.