Govt to boost investment in geothermal sector

The government is preparing measures to boost investment in the geothermal sector as the nation?s huge but largely untapped geothermal resources could significantly increase the national electricity supply.

Minister of Energy and Mineral Resources Purnomo Yusgiantoro said on Monday Indonesia has huge geothermal resources but investors remain reluctant to develop the resources due to various obstacles, including the lack of regulations that provide certainty to their investment.

? Now (the country?s power plants fueled with geothermal steam have the total capacity of) around 800 MW. In 2007, it will increase by 168 MW. The potentials total 27 gigawatt, which is equal to 11 billion barrels of oil ? that is our current total amount of oil reserves,? Purnomo said.

Purnomo said among factors that make investors reluctant to develop the country?s geothermal resources is the lack of price reference for the power to be produced from a geothermal power plant.

The government will issue a government regulation and the ministerial decree which among others will set the price.

Purnomo said the government could also carry out survey to determine whether certain areas have geothermal steam resources using its own funds. Once it discovers the geothermal resources, it will offer the working areas to investors.

?There is a proposal to offer the concession through ?direct offer? mechanism,? Purnomo said.

The government may also offer certain companies to carry out a joint study of a working area. Once they finish the study and find geothermal resources, the government will auction off the working area with the companies that have carried out the survey having the so-called ?first right refusal? ? which means they will get the contract if they are willing to pay at the highest bidding price offered by tender participants.

Sukusen Soemarinda, upstream director of state oil and gas company PT Pertamina, which has 15 geothermal working areas across the country, admitted that investors were not interested to develop the country?s geothermal resources.

?The problem is there is no legal certainty. Also, it takes long to get a license. The geothermal industry should have been progressing well, had the government provided all, including regulation,? he said.

He noted that prior to the economic crisis, a number of foreign investors had agreed to build geothermal plants because state electricity company PT PLN was willing to pay their power supplies at 7 U.S. cents per kWh.

Today, PLN pays 5 cents per kWh for supplies from coal-fired power plants

Several officials of PLN have indicated that the company will use the less-than-5 cents price as benchmark in negotiation with other independent power producers.

?We need to study if less than 5 cents is favorable price. At 7 cents per kWh, geothermal power is still cheaper than power produced using oil,? Sukusen said (Godang)