Indonesia state gas firm says to supply power firm

JAKARTA, Sept 18 (Reuters) - Indonesia's PT Perusahaan Gas Negara (PGN) (PGAS.JK) has agreed to supply natural gas to a unit of the country's state power firm, an official at the state-owned gas firm said on Thursday.

Indonesia is seeking alternative sources of energy such as natural gas and coal to meet rising demand for power and to reduce consumption of expensive crude oil as its own reserves dwindle.

Heri Yusup, PGN's corporate secretary, said the firm had signed an agreement with PT Indonesia Power, a unit of state energy firm PT Perusahaan Listrik Negara (PLN), to supply natural gas to a power plant in the capital Jakarta.

"The gas price is about $5.6 per million British thermal units," Yusup told Reuters.

PGN will supply Tanjung Priok power plant, operated by Indonesia Power, with 30 million cubic feet per day of natural gas for three year from 2009.

The gas will be sourced from South Sumatra fields.

PGN already has a contract to supply about 200 million cubic feet of gas per day to PLN power plants near Jakarta for between 2 to 5 years.

PLN has a monopoly over power supply in Indonesia and operates 24,000 megawatts of capacity, but most of its plants are old, so daily output is far below capacity. Some 30 percent of the plants use oil products such as diesel and fuel oil.

Indonesian officials have said domestic electricity demand is growing at around 10 percent a year.

(Reporting by Muklis Ali; Editing by Ed Davies)