EcoSecurities to promote carbon emission marketing in Indonesia: Report
Wednesday, November 9 2005 - 10:58 AM WIB
Oxford-based Ecosecurities will help finance pollution reduction and alternative energy production projects and then market the Carbon Emission Reductions, or CERs, that those projects create, the firm's Indonesia Country Director, Agus Pratama Sari, told Dow Jones in an interview.
"25 million (metric) tons is the potential for Indonesia to reduce emissions per year... (especially) in the oil and gas sector," Agus said. Those reductions can be marketed as CERs for a current price of $5 a metric ton.
EcoSecurities is capitalizing on provisions of the international anti-pollution scheme, the Kyoto Protocol, which allows wealthy countries or companies to pay to reduce greenhouse gas emissions in underdeveloped nations in exchange for CERs which they can apply toward the protocol's emissions reduction targets.
The 1997 Kyoto pact went into effect for signatory nations in February, although its potential impact has been undermined by a U.S. refusal to take part and by major polluters such as China being exempt.
Emissions trading aims to cut volumes of greenhouse gases released into the atmosphere by funneling money into low-emission alternative energy production projects in developing countries.
EcoSecurities opened a Jakarta office in October in partnership with the commercial arm of Pelangi, an Indonesia nonprofit environmental institute.
U.S.-based food, agricultural and financial products firm Cargill took a 10 percent stake in Ecosecurities in August.
Agus said that Ecosecurities will target the marketing of gas flaring reduction technology to oil and gas firms in Indonesia, including state-owned Pertamina and U.S. oil giant Exxon Mobil, as an initial source of CERs.
The two firms in September inked an output-sharing contract to tap East Java province's massive Cepu oil block.
Legal Uncertainties
Oil companies frequently flare, or burn off, small natural gas deposits found in oil fields as a waste product.
A World Bank report published in 2001 identified gas flaring as significant contributor to greenhouse gas emissions.
"A total of 75% of all flaring in Asia occurs in Indonesia, producing a huge amount of methane gas into the atmosphere," Agus said.
"We can (apply technologies) to reduce the flare... or to burn it for something useful, like to produce electricity."
Agus said a stumbling block in EcoSecurities' plans is legal uncertainty about whether the Indonesian government or oil firms would pay for and be the beneficiary of technology that would produce tradable CERs.
Oil and gas output contracts between the Indonesian government and oil firms now govern only oil and gas products and don't include associated byproducts, or CERs.
EcoSecurities' CER trading aspirations will require adjustments in existing and future oil and gas production sharing contracts that specify the division of CER revenues.
Agus is confident that Ecosecurities' recent signing with 13 Indonesian ministries, including the Ministry of Energy and Mineral Resources, of a memorandum of understanding to accelerate the development of CER trading will help to remedy existing legal ambiguities.
Indonesian government initiatives to meet Kyodo Protocol obligations will also help to boost investment in low-emission alternative energy, which will be potentially lucrative sources of CERs, Sari said.
These include potential geothermal, biomass and biogas projects.
"Indonesia ratified Kyoto last year and set up its Clean Development Mechanism national authority earlier this year... (which) can provide quite a lot of incentive for alternative energy projects (investment)," Agus said. (*)