The body responsible for regulating the downstream oil and gas industry has awarded state oil and gas firm PT Pertamina and state engineering, procurement and construction company PT Rekayasa Industri preferential rights to construct and operate two pipelines connecting the provinces of Java.

Pertamina won the tender for the preferential right to build and operate a 390-kilometer pipeline from Gresik in East Java to Semarang, the chairman of the Oil and Gas Downstream Regulatory Agency (BPH Migas), Tubagus Haryono, said Wednesday.

Meanwhile, the agency had selected Rekayasa to build and operate the 290-kilometer segment connecting Semarang and Cirebon in West Java, Tubagus said.

"The companies have seven working days to confirm their willingness (to undertake the projects) in writing," Tubagus added.

The tender winners would be awarded preferential rights to their respective segments, meaning that no other companies would be allowed to build pipelines connecting the same cities. The preferential rights would be valid for 25 years.

The agency considered various factors, including financial capacity, the investment required, funding guarantees and proposed gas transmission fees in selecting the winners, said Tubagus.

With a projected investment of US$179.9 million and a transmission fee of 25 U.S. cents per million British thermal units (mmBtu), Pertamina beat Rekayasa, PT Bakrie and Brothers, and state gas distributor PT Perusahaan Gas Negara (PGN) to secure the right to build and operate the Gresik-Semarang pipeline.

Rekayasa, meanwhile, proposed an investment of $169.54 million for the construction of the Semarang-Cirebon pipeline and a transmission fee of 36 U.S. cents per mmBtu, said Tubagus. The other bidders shortlisted for this segment were Bakrie and PGN.

The pipelines, which will transport between 350 million standard cubic feet per day (mmscfd) and 500 mmscfd, will connect gas fields in East Java to industrialized and densely populated areas in the western part of the island.

Among the fields that will feed gas to the pipelines are those operated by Santos offshore Madura, an island lying off the coast of East Java, ExxonMobil in Madura, Amerada Hess in Ujung Pangkah, East Java, and the disputed Cepu block.

Indonesia has some of the most extensive gas reserves in the world at 188.34 trillion standard cubic feet. However, a lack of infrastructure connecting gas-rich areas with Java has hampered the use of the environmentally-friendly fuel by potential household and industrial consumers.

The government expects that the development of a gas-supply network in Java and pipelines connecting the island with gas-rich South Sumatra and Kalimantan will reduce the use of subsidized oil-based fuels.

Java and Bali account for some 62 percent of the country's domestic oil-based fuel consumption, while Sumatra accounts for 20 percent and the rest of the archipelago the other 18 percent.