| Indonesia's Trade and Investment News, 21 May 2007 |
| Written by Mahendra Siregar/ Hari S.noegroho | |
| Monday, 21 May 2007 | |
Highlights Politics · Indonesia and Pakistan to work together against radicalism · Former terrorist figure Hambali may face death penalty from US Regions · Indonesia leads developing world fight on bird flu samples Economy · First quarter growth close of 6%, statistics bureau announces · Chinese firms to set up car, truck plants Business briefs Macroeconomy · Strong exports, reviving consumption and investment push growth · Unemployed numbers down by over 500,000 in last year Investment · Royal Doulton looks at expanding operations · Two sugar companies to establish raw sugar mills State concerns · Trade minister ponders palm oil supplies for domestic use SOEs · Bank Negara Indonesia second offering by July: Minister · Merpati Airlines to offer golden handshake to workers Private Sector · Ad spending grows by 19% in first quarter Banks · Three private banks to fund toll road · Bank Central Asia to enter shariah sector Power · Medco in talks with Kyushu Electric on geothermal prospects Oil & gas · President Yudhoyono pledges better deal for sector · Tenders invited for 21 new blocks Mining · Smelters on Bangka island start shipping tin · Foreign, domestic funds for bauxite project POLITICS Jakarta, Pakistan Join Forces Indonesia and Pakistan have agreed to work together to stamp out radicalism as part of efforts to top future deadly militant attacks, Agence France-Presse reported on Monday (14/5/07). They have formed a joint working group amid concerns some Indonesians have attended Islamic schools in Pakistan and have later undergone training in extremist camps. “We will work together in a joint working group to find, among others, a new method to eradicate radicalism in Islam that often becomes the root of terrorism," said senior anti-terror officer Ansyaad Mbai. Security experts have said JI militants, including one of its main leaders, fugitive Abu Dujana, have undergone training in weapons and combat in camps in Pakistan and neighboring Afghanistan. Mbai said Indonesia had formed similar working groups with Saudi Arabia and Turkey in an effort to combat Islamic radicalism. Hambali Faces Death Penalty Accused Bali bomber Hambali could face the death penalty, with the US military prosecutor confident he will be among the few Guantanamo Bay detainees to be charged, The Australian reported on Wednesday (16/5/07). Chief prosecutor Mo Davis told the newspaper that prosecutors are busy developing cases against the 15 so-called "high-value detainees", one of whom is Hambali. "We're certainly early in the development stage of it ... we're optimistic that we'll be able to develop a case that is suitable to take to trial," he said. Davis said prosecutors aimed to bring charges against at least some of the high-value detainees by October at the latest. "I can't say that any one of the (high-value detainees) is the frontrunner at present but we have attorneys working on all the cases with a target date of having the first of the cases ready by fall," he said. He said the cases against detainees such as Hambali, accused of being the interface between Jemaah Islamiyah and al Qaeda, and alleged September 11 mastermind Khalid Sheikh Mohammed were more complicated than other cases to be heard by the military commissions. "The high-value guys, we were truly starting from scratch on those," he said. "They were very substantial, voluminous cases. It'll take a significant amount of work to get them ready for trial." Davis declined to outline what charges Hambali might face, but said murder was a contender. He intimated there was a good chance he would face the death penalty. "Certainly that's a possibility," he said. "If you look at the cases that people have had direct involvement in causing the deaths of many people, he certainly is one that, at least at this stage, suggests that he may be responsible for the deaths of a number of people." Hambali was arrested in Thailand in 2003. US authorities allege he was the operations chief of Jemaah Islamiyah. He is accused of helping to plan the 2002 Bali bombings, which killed 202 people, including 88 Australians. Prosecutors Under New Scrutiny Four out of five prosecutors in Indonesia are open to corruption, new Attorney General Hendarman Supandji admitted in a magazine interview on Monday (14/5/07) as he vowed to root out the wrongdoers, Agence France-Presse reported. Supandji said his wide-ranging campaign against corruption would target state prosecutor's offices because they had a history of graft. Prosecutors have reportedly taken bribes from some suspects in return for compiling weak criminal cases against them or recommending lenient punishment once cases reach court. "I see that law enforcement can only succeed if the law enforcers themselves are clean," Supanji said in an interview with Tempo news weekly. Supanji, a noted anti-graft campaigner, was appointed to the post in the recent cabinet reshuffle in a sign that President Susilo Bambang Yudhoyono is seeking to revitalize his flagging crackdown on corruption. Indonesia Joins UN Rights Council Indonesia was elected as one of the 47 members of the UN Human Rights Council at an election at UN headquarters in New York on Thursday (17/5/07). The world body's 192 members gave Indonesia 182 votes, according to the Antara news agency reported. Other Asian countries that were also elected to the council were India, the Philippines, and Qatar. The Human Rights Council was created in March 2006 to replace the widely discredited and highly politicized Human Rights Commission, with the aim of keeping some of the worst human rights offenders out of its membership. But it has been widely criticized in its first year for failing to change many of the commission's practices, including putting much more emphasis on Israel than on any other country. The US was virtually alone in voting against the establishment of the council, arguing that the new body was only marginally better and would not prevent with poor rights abuse records from membership. REGIONS Govt: Fair Deal over Bird Flu Samples Developing countries led by Indonesia demanded a fair deal on Tuesday (15/5/07) for providing samples of the deadly H5N1 bird flu virus that drug companies use to make vaccines, Reuters reported. A resolution presented by 17 countries at the annual World Health Assembly came as Indonesia said it had resumed sharing virus samples with the World Health Organization (WHO) after a five-month hiatus. The United Nations agency, under growing pressure from countries hard hit by the disease, is trying to come up with a new formula for sharing of samples and the resulting benefits. Indonesian Health Minister Siti Fadillah Supari said the WHO's 50-year-old sharing system was unfair to poor countries. "There is an unfair mechanism in which avian flu virus samples are provided free by developing countries but drug companies patented this vaccine and are selling them at unaffordable cost for the developing countries," Supari told the assembly. Genetic sequencing had been used in published research, commercialization and patent requests without consent, she said. "Such practice violates the spirit in which virus is given." David Heymann, the top WHO bird flu official, said that sharing was essential to track the virus's evolution worldwide. He also acknowledged that some WHO collaborating centers had sought patents on "parts of the virus" they had obtained through the network, but gave no specifics. "This network has been going on for 50 years and we hope we will have the support of all member states to continue functioning in a way which will ensure our collective public health security," Heymann told a technical briefing. Supari later told a news conference: "An equitable sharing mechanism is not about royalties, it is about a basic human right to health." Indonesia had recently sent several samples to the WHO which she said were "only for pandemic risk assessment and research and not for commercial use". She also made clear that Jakarta had held back some virus samples pending a wider agreement. "We hope we can have a resolution as soon as possible and then we can send all of our samples to the WHO collaborating centre," she said. The WHO confirmed that its collaborating centre in Japan had received three samples from Jakarta. Indonesia in February signed a memorandum of understanding with a unit of US company Baxter International Inc to develop a bird flu vaccine. Supari said Indonesia would require drug companies wishing to develop a vaccine from its samples to seek its permission. Jakarta would seek guarantees on preferential pricing, "fair distribution" of vaccines worldwide and transfer of technology. The virus has killed over 170 people, mainly in Southeast Asia, since it re-emerged in 2003. Although it remains mainly an animal disease, scientists fear that if it mutates into a disease easily spread amongst people, it could kill millions. ECONOMY First Quarter Growth 5.97%: Official The Central Statistics Bureau (BPS) announced on Tuesday (15/5/07) that its official figure for first quarter growth was a solid 5.97%. BPS said all sectors of the economy had contributed to the growth, but singled out strong export performance as a major factor, together with improving private consumption. Exports grew by 8.9%, contributing more than half of the on-year growth, while private consumption was up 4.5%. Analysts said the figure was strongly positive, especially since government spending rarely kicks in until the second quarter at the earliest. BPS chief Rusman Heriawan said exports were developing favorably a more sustainable nature. "There is now a richer composition between exports of natural resources commodities and manufactured goods," he said. "This can help stop exports from relying too heavily on commodities, which are mostly built up just on market price and demand trends." In more positive news from BPS, the agency said that the number of unemployed people decreased by 556,000 to 10.55 million in February from a year earlier. The workforce increased by 1.85 million to 108.13 million, BPS' Heriawan said. "The positive thing about the employment figures is that more women are getting opportunities to work, mostly in the manufacturing sector in a shift from the agriculture sector," he noted. While BPS said the increase in the workforce had done little to dent unemployment, higher growth figures are expected to start chipping away at the problem. China's Foton was reported to be planning to set up a truck factory in cooperation with PT Indobuana Autoraya while Geely Holding Group, China's largest private carmaker, said it has signed an agreement with Indonesia's PT IGC International to set up a car assembly line. The government said it would spend up to $5 billion to revitalize sugar mills around the country, in addition to earlier announced plans to help upgrade machinery at ailing textile companies. Sugar was also attracting interest from investors, with plans announced for new mills for raw sugar. At the State-Owned Enterprises Ministry, new incumbent Sofyan Djalil was pushing on with plans to offload shares in up to nine SOEs. The Coordinating Ministry for Economic Affairs, in a press release, said a full cabinet meeting on Wednesday had agreed on outline targets for the economy for next year. These included economic growth target of 6.8%, inflation at 6.0%, open unemployment between 8.0% and 9.0%, and poverty at 15.0% to 16.8%. The statement also noted that data from the Investment Board [BKPM] indicated that domestic investment realizations in the first quarter grew by 60.56% over the same period a year earlier, while foreign investment approvals grew by 15.4%. The statement promised further reforms aimed at improving the investment climate, accelerating infrastructure projects as well as new policies to support the development of small and medium enterprises. BUSINESS BRIEFS MACROECONOMY Economy Grew 6% in Q1 Strong exports and reviving consumption helped push the economy in the first quarter, momentum that could see it grow even faster over the course of the year, The Jakarta Post reported. First-quarter growth in terms of gross domestic product (GDP) was at 6% year-on-year, the Central Bureau of Statistics (BPS) said Tuesday (15/5/07). On a quarterly basis, the economy grew by 2% to Rp915.9 trillion ($101.7 billion), from last year's final quarter. Exports became the economy's main thruster, growing by 8.9% and making up more than half of the on-year first-quarter growth at 4.1%, as Indonesia gained from the strong demand and prices in the global market for its main commodities of metals, coal, crude palm oil and rubber. Private consumption, which has been recovering lately due to the easing of inflation and interest rates, provided further impetus, growing by 4.5% and contributing to 2.6% of first-quarter growth. Fixed investment and government spending also saw growth, at 7.5% and 4.3% respectively, but were still on their usual trend of beginning the year modestly. Meanwhile, from the supply side, the bureau noted an on-year 9.3% growth in construction and an 8.5% expansion in the trade and tourism industry. The trade and tourism sector made up 1.4% of the total first-quarter growth, just after the manufacturing and processing industry, which grew by 5.4% and contributed to 1.5% of the growth. Private consumption still makes up more than 60% of the GDP, while exports and imports account for less than 10%. "The (6%) growth in the first quarter confirmed that Indonesia has fully recovered from the 1997 financial crisis," Coordinating Minister for the Economy Boediono said. Unemployed 556,000 Lower: BPS The Central Bureau of Statistics (BPS) said in a report released Tuesday (15/5/07) that the number of unemployed people decreased by 556,000 to 10.55 million in February from a year earlier. This comes with another 2.4 million workers having been employed during the same period, The Jakarta Post reported, bringing the total number of employed people to 97.58 million. Indonesia's workforce of people between the age of 15 and 64 years increased by 1.85 million to 108.13 million, BPS said. BI Rate Below 8.5% Possible The BI rate could fall to less than 8.5% by the end of the year from 8.75% at present, central bank deputy governor Hartadi Sarwono said on Wednesday (16/5/07). The bank had previously said the policy rate could fall to 8.5% by the end of the year if inflation is contained at about 6%, which analysts said suggested that its interest rate-easing campaign was likely to be drawing to an end. "My point of view is that I am optimistic on the 8.5% (forecast) given the inflation trend. Is it possible for it to fall below 8.5%? Yes, the possibility is there," Sarwono was quoted as saying by Reuters. Annual inflation was lower than expected in April, easing to 6.29% from 6.52% in March as rice imports boosted supply and eased upward pressure on consumer prices. Analysts also say a strong rupiah has given the central bank added comfort when cutting interest rates by making imported food cheaper and helping to contain inflation. The rupiah gained strongly in recent weeks due to a surge in capital inflows seeking high yielding domestic stocks and bonds. Govt. Aims to Raise Rp3t from Bond Issue The government aims to raise Rp3 trillion ($340.5 million) from sales of rupiah bonds through an auction this week, part of efforts to finance maturing debt, the Finance Department said. The government plans to sell the bonds, maturing 2027 and 2037, and coded FR0042 and FR0045 respectively, on May 22, director in charge of debt management Widyajala Bhimantara, was quoted as saying by Reuters on Tuesday (15/5/07). Rupiah bonds have attracted strong demand in recent months due to expectations of lower domestic interest rates. INVESTMENT Royal Doulton Looks to Expand British tableware producer Royal Doulton is considering an expansion of its operations in the country with new investment of up to $28 million, The Jakarta Post reported. However, CEO Sir Anthony O'Reilly said after a meeting Wednesday (16/5/07) with Vice President Jusuf Kalla that he had asked the government to resolve problems concerning gas supplies to the ceramics industry. Royal Doulton plans to invest between $25 million and $28 million next year, which will add to its $75 billion investment so far in the country, said Investment Coordinating Board (BKPM) chairman M Lutfi, who accompanied O'Reilly during the meeting. The new investment will be used to increase production to 12 million items at the company's factory in Banten, O'Reilly said. The factory produces some $30 million-worth of porcelain tableware and other collectibles, of which 97% is exported. Royal Doulton has been investing in Indonesia since 1994, having made it one of its main production bases. O'Reilly said the local ceramics industry is competitive in the sense that it has a shorter production time of only five months, compared to 15 months in the company's other production bases. "Indonesian workers are also more skilled, producing higher quality products," he said. O'Reilly, who previously met with President Susilo Bambang Yudhoyono to discuss Royal Doulton's business plans, said Kalla had given assurances he would strive to resolve the issue of gas supplies for the company's investment needs. Exports by the local ceramics industry accounted for $288 million out of Indonesia's total industrial sector exports of $78 billion last year. The industry employs some 30,000 workers. Firms Plan Raw Sugar Mills Two sugar companies plan to set up the country's first raw sugar mills with a combined annual production capacity of 220,000 tons, a senior industry official said on Wednesday (16/5/07). Privately owned PT Sentra Usahatama Jaya and PT Angel Products plan to set up 15,000-hectare cane plantations and a raw sugar mill with an output capacity of 110,000 tons a year, said Melvin Korompis, chairman of the Indonesian Refined Sugar Association. "They are now exploring Papua and Sumatra for areas to set up the plantations and sugar mills," Korompis told Reuters. He did not give details of when the mills would be set up, but each company will need to invest $100 million. The country currently imports all its raw sugar, which is mostly used by industrial sugar producers. Indonesia has five industrial sugar producers with a total installed capacity of 2.18 million tons a year. It imports raw sugar from countries including Brazil, Australia, South Africa, Mozambique, Guatemala and Thailand. The association said Indonesia's raw sugar imports by industrial sugar producers may rise by 22.6% to 1.52 million tons in 2007 to meet growing domestic demand from the food and beverage industry. Sugar mills also import raw sugar to fill milling capacity when there is a shortfall in domestic cane production. The government has issued permits to seven sugar mills this year to import 232,563 tons of raw sugar. The country consumed 4.2 million tons of sugar in 2006 for industrial and household use, while domestic output from plantations and industrial sugar producers totaled 3.4 million tons. The rest was imported. Chinese Manufacturers Studying Market Some 54 major manufacturing companies from China are studying market expansion in Indonesia, Antara reported on Wednesday (16/5/07). The companies, which deal with the automotive and component, machinery, heavy equipment, communication and technology, and electronics industries, will take part in a China Machinery and Electronics Trade Exhibition to be held in Jakarta on May 24-26. Among the companies are carmakers Chery Auto Co, Great Wall Auto and Foton, tractor producer Liugong and YTO and printing machine producer Ningbo Haitan Plastic Machinery Group. Director of the China Council for Promotion of International Trade Liang Haiguang said Foton plans to build a truck factory in the country in cooperation with PT Indobuana Autoraya. Meanwhile Geely Holding Group, China's largest private carmaker, said it has signed an agreement with Indonesia's PT IGC International to set up a car assembly line, XFN-ASIA reported. It did not provide any further details of the deal in a statement posted on its website. State media reported earlier that the assembly plant will produce 30,000 cars annually, with 2,000 units expected to be sold in Indonesia by the end of this year. IGC, which is jointly owned by Geely and Indonesian and Malaysian partners, will sell sedan cars with engine capacity of 1,300 cc, 1,500 cc and 1,600 cc at cheap prices, IGC chief commissioner Suhaely Kalla said, Antara added. Malaysia's Alkauthar Eyeing Revival of Bali Air Malaysia's Alkauthar Sdn Bhd is eyeing a majority stake in Bali Air, which suspended operations in April 2005. Alkauthar told the Investor Daily it plans to convert Bali Air, which had five aircraft before it stopped operating, into a cargo carrier. Alkauthar director Dato's Bistaman Ramli said a deal is expected to be signed before the end of the year. Ramli said his company will team up with a partner from the Middle East to develop air transport business both for passenger and cargo transport in Indonesia. Malaysia's Air Asia already has air transport business in Indonesia, introducing a low-cost carrier service in cooperation with a local partner. Astra Agro to Expand Oil Palm Leading agribusiness company PT Asra Agro Lestari said it will acquire 17,000 hectares of palm oil plantation this year, mainly in East Kalimantan, Antara reported. The acquisition is part of its plan to expand its oil palm plantations by 100,000 hectares by 2010, director Bambang Palgunadi said. Palgunadi said the process of acquisition is already in progress for 20,000 hectares in Aceh, 40,000 hectares in Morowali, Central Sulawesi and 10,000 hectares in South Kalimantan. Currently the company has 200,000 hectares of oil palm plantations with crude palm oil (CPO) production totaling 917,885 tons last year. With the addition of the 100,000 hectares in 2010, its CPO production is expected to rise to 1.5 million tons a year, Palgunadi said. The company also plans to acquire 5,000 hectares of rubber plantations in Central Kalimantan. STATE CONCERNS Watch on Palm Oil Exports Trade Minister Mari Pangestu said Thursday (17/5/07) the government is watching if palm oil exports need to be taxed more to ensure domestic supply, but will wait a few more weeks to determine what it will eventually do to prevent cooking oil prices from rising further. The government has been working with palm oil producers and oil processors to ensure that there is sufficient domestic supply at a lower price, the minister said. The country exports about 80% of its CPO production. Pangestu said cooking oil prices have risen to Rp8,000 to Rp9,000 per kg in March and April from Rp6,500 at the start of the year. The administration's target range is between Rp6,500 and Rp6,800. "This price stabilization program has been running for about two weeks. (Prices are) coming down a little bit, but not to our target yet," she told Dow Jones Newswires in an interview. "We're going to give it another two to three weeks to achieve this before we evaluate whether we need to impose additional export duties." Potential drawbacks of a higher export tax include lower returns for domestic producers -- one-third of whom are small producers -- and a drop in exports, which might be hard to gain back later, she said. SOEs Govt. Hopes to Wrap Up BNI Stake Sale The government hopes to finalize by July the sale of a 30% stake in Bank Negara Indonesia (BNI), State Minister for State Enterprises Sofjan Djalil said on Wednesday (16/5/07). The stake is worth about $1.1 billion based on Tuesday's (15/5/07) market price. PT Bahana Sekuritas and JPMorgan have been appointed to handle the sale. Djalil said the government plans to speed up its privatization program, capitalizing on strong gains on the stock market, currently at record highs, Reuters reported. The minister further said that his office plans to add several more state-owned companies to its privatization program this year, in a bid to raise more cash to plug the budget deficit. "We will identify the SOEs that are ready to go public this year while taking a look at the market conditions," he was quoted as saying by The Jakarta Post on Tuesday. "If it is feasible, we'll ask for more divestment approvals from the House of Representatives." The government has already listed nine SOEs for the 2007 privatization program – among them PT Jasa Marga, BNI, contractor PT Wijaya Karya, airlines PT Garuda Indonesia and PT Merpati Nusantara Indonesia, and investment firm PT Permodalan Nasional Madani. It also plans to divest its minority stakes in six companies, including PT Jakarta International Hotel Development, PT Atmindo, PT Intirub and PT Kertas Blabak. The newly appointed minister said the government would expedite the privatization program, not only to raise cash to finance the state budget, but also to improve the performance and transparency of SOEs. He said he hopes to reorganize the executive and managerial boards at a number of state companies. Merpati Airlines to Lay Off 501 Workers State-owned PT Merpati Nusantara Airlines (MNA) said it will lay off 501 more workers starting June as part of its restructuring program. MNA president Hotasi Nababan said the early retirement program, the second so far, will cost Rp70 billion ($7.8 million), Antara reported on Wednesday (16/5/07). In March, MNA laid off 498 workers under the same program, reducing the number of its employees to 2,596. Nababan told legislators in a hearing that the program is aimed at improving the efficiency and productivity of the airline, which mainly serves domestic flights. He said MNA hopes to improve the quality of its human resources after completing the program. State Planters Set to Post $2.9b Income State-owned plantations companies are forecast to post an operating income of Rp26 trillion ($2.9 billion) this year, 24% more than last year's figures. Deputy at the Office of the State Minister for State Enterprises Agus Pakpahan said increases in the prices of major plantation commodities, such as palm oil and rubber, will raise the income of state plantation companies, Antara reported on Tuesday (15/5/07). State companies contribute 16% to the country's total production of crude palm oil (CPO), Pakpahan said. This year, Indonesia, the world's second largest producer of CPO after Malaysia, is forecast to produce 16.5 million tons of the commodity. PRIVATE SECTOR Ad Spending Up 19% in Q1 Advertising industry spending on TV and print media spots grew 19% in the first quarter, hitting Rp7.03 trillion ($798.75 million), according to ACNielsen Indonesia. This represents a significant rise from advertising spending of Rp5.92 trillion in the January-March period of 2006, and Rp5.54 trillion in the same period in 2005, reported The Jakarta Post . Of the Rp7.03 trillion spent by the advertising industry in the first quarter of this year, 66% went to 19 surveyed television stations, 30% to 82 newspapers and 4% to 127 surveyed magazines and tabloids, according to ACNielsen numbers released Tuesday (15/5/07). ACNielsen Indonesia senior manager Ika Jatmikasari said the negative impact of 2005's twin fuel price hikes had eased and businesses were putting more money into advertising. "The fuel price hikes were still affecting many companies last year, forcing them to slash their budgets for ads. But now, ad spending is picking up and will rise throughout the year as more new products fill the markets. In the meantime, businesses still need to advertise to build up brand awareness," she said. Commenting on the jump in total ad spending in the first quarter, she said businesses normally spend more money on advertising in the beginning of the year, when they introduce new products. ACNielsen data show that communication handset producers and service providers topped ad spending in all surveyed media during the January-March period, at Rp457 billion, or 51% higher than the Rp303 billion spent by the sector in the same period last year. GSM-based operator Telkomsel and cell phone manufacturer Nokia led ad spending in the sector with Rp47 billion and Rp35 billion, respectively. Telkomsel's spending increased from Rp23 billion, while Nokia's was down from Rp37 billion in the same period in 2006. BANKS Banks to Provide $555.6m for Java Toll Road Three publicly listed banks have agreed to join a syndicate to finance the construction of the Cikampek-Paliaman toll road in Java, Antara reported on Wednesday (16/5/07). Bank Danamon, Bank Internasional Indonesia and Bank Niaga will join a syndicate with lead arrangers Bank Central Asia (BCA) and Bank Mandiri to provide a loan of Rp5 trillion ($555.6 million) for the project. BCA Vice President Jahja Setiaatmadja said the banks agreed to join in the syndicate as the prospects are encouraging for the project owned by PT Lintas Marga Sedaya as holder of a 35-year concession. BCA, the country's largest private bank, alone will provide Rp1 trillion for the project, estimated to cost Rp7 trillion, he said. BCA Plans Islamic Banking Unit Bank Central Asia plans to enter the Islamic banking business next year, its president director Djohan Emir Setijoso said on Tuesday (15/5/07). The shareholders of the country's largest private bank also allowed the bank to pay 49.21% of last year's net profit, totaling Rp2.09 trillion ($237.6 million) and representing a total per share payout of Rp170. "We might acquire an existing shariah bank and plan to do it in 2008," Setijoso said, according to Reuters. POWER Medco Seeks Kyushu for Geothermal Plant Energy explorer PT Medco Energi Internasional is holding talks with Japan's Kyushu Electric Power Co. to be part of a team building a geothermal power plant, a company official said on Wednesday (16/4/07). Last year, Indonesian state electricity firm PT PLN awarded a contract to a consortium of Medco, Ormat Technologies and Itochu Corp. to build a 330-MW geothermal power plant in Sarulla, North Sumatra. "We want Kyushu to participate in Sarulla geothermal power plant, because Kyushu has experience in this field," Reuters quoted Medco chief executive officer Hilmi Panigoro as saying. He said Medco has a 62.25% stake in Sarulla, Itochu 25% and Ormat 12.75%. "Medco is ready to give up some of its stake in the Sarulla project to Kyushu," he said, but gave no details. Indonesia has the potential to produce an estimated 27,000 MW of electricity from geothermal sources but the vast potential remains largely untapped because of the high cost of geothermal energy. Panigoro said the Sarulla geothermal plant can be expanded to 1,000 MW in future. "We plan to build 110 MW as the first phase and it will be followed up by another 220 MW. We will see if it is possible to expand it to 1,000 MW in future," Panigoro said. An official at PLN said the Sarulla project will cost around $600 million. Mines and Energy Minister Purnomo Yusgiantoro has said Indonesia generates 850 MW of electricity from geothermal energy and plans to increase that to 9,500 MW in 2025. OIL & GAS President Vows Better Investment Climate President Susilo Bambang Yudhoyono on Monday (14/5/07) pledged to make Indonesia a better place for foreign and domestic investors engaged in oil and gas exploration and production. Speaking at the opening of the 31st annual Indonesian Petroleum Association Convention and Exhibition in Jakarta, Dr. Yudhoyono said the government is in the process of creating a better and friendlier investment climate for energy companies. In addition to removing monopolies in both the upstream and downstream oil and gas industry, the government is also revamping its policies to make the oil and gas industry more attractive to local and foreign investors, the president said, according the The Jakarta Post . Bids Opened for 21 Oil and Gas Blocks The government has invited bids for 21 oil and gas exploration blocks in an effort to increase national production, energy and mines minister Purnomo Yusgiantoro said Monday (14/3/07). Most of the blocks are located offshore and require considerable investment, Platts Commodity News reported. According to the oil and gas directorate general's head of working acreage at the ministry, J. Widjonarko, two blocks of the 21 blocks are for direct offer, while the remainder is offered through regular tender. Ten of the 21 blocks are categorized as available blocks, meaning that the government had offered them earlier but there was no winner, either because no company was able to the government's requirements or the terms and conditions failed to attract investors. The new blocks offered through regular tender are North X Ray block in offshore West Java, North East Lombok I and II blocks in offshore Nusa Tenggara, Semai I, II, III, IV and V blocks in Semai Barat offshore in West Papua province and South East Tual block in offshore Arafura. The available blocks offered through regular tender are Cakalang, Kerapu, Baronang, Cucut and Dolphin blocks in offshore Natuna, Bawean II block in offshore East Java, East Bawean I block in offshore East Java. There are also Gunting and Situbondo blocks in onshore/offshore East Java as well as Buton II block in offshore Buton. The two new blocks offered through direct offering are Rangkas block in onshore Banten West Java and West Timor block in onshore/offshore Timor Sea. Companies can start taking bid documents on July 16, said Widjonarko. Oil and gas director general Luluk Sumiarso said that the government plans to invite bids another 19 blocks within this year. The government is trying to boost its production by offering oil and gas fields to investor, as the output of Southeast Asia's biggest oil producer has been declining for several years. The government offered 41 blocks to investors last year. Medco to Push Aceh Gas Plan Leading Indonesian independent Medco Energi is preparing to submit a development plan for its gas-rich Block A in Aceh, Indonesia, Upstream reported on Thursday (17/5/07). The development plan will cover the Alur Rambong, Julu Rayeu and Alur Siwah fields - three of five significant gas discoveries made on the block since the 1970s. Medco is targeting production start-up in 2010 and the gas will be delivered via a 120-km pipeline to fertilizer manufacturer Pupuk Iskandar Muda. "We have signed a memorandum of understanding to develop Block A and have held preliminary meetings with BP Migas," a Medco source said. Potential reserves at the onshore block are put at 596 billion cubic feet of gas by upstream regulator BP Migas. BP to Start Drilling Wells in Tangguh BP will next month start drilling 15 gas wells to feed the Tangguh liquefied natural gas project in Papua, Asia Pulse reported. Drilling will take 18 months to be ready to supply gas for the plant, which is scheduled to start operation in the last quarter of 2008, BP Indonesia president John C. Minge said. Minge said construction of a third train of the $6 billion LNG project is being negotiated with investors. Work is now in progress to build the first and second production facilities, he said. The Tangguh project is 37.16% owned by BP Plc., 16.99% by CNOOC, 16.3% by MI Berau BV, 12.23% by Nippon Exploration Ltd, 10% by KG Berau/KG Wiriagar and 7.35% by LNG Japan Corp. However BP will not deliver its initial cargo until the first quarter of 2009 - after its long-term supply contracts are due to come into effect, an official with Indonesia's upstream regulator BP Migas told Upstream on Thursday. The Tangguh partners had been hoping to start shipments from their 3.8 million ton-per-annum (tpa) first train in the fourth quarter of 2008 as per the project's often-revised schedule. Construction work on the onshore gas handling facilities is ahead of schedule and first gas is expected to start flowing into these in October 2008. However, it will take several months for commissioning and for the LNG tanks to be filled. Tangguh has a 25-year sales agreement to supply 2.6 million tpa of LNG to China National Offshore Oil Corporation's Fujian terminal in mainland China, which currently is being built. "The first cargo will be shipped to Fujian," the BP Migas official added. The project's other long-term customers are South Korea's Posco, which is due to take 550,000 tpa, KPower of the US, which will take 600,000 tpa, and Sempra, also of the US, which is scheduled to take 3.7 million tpa, almost all of train two's output. These LNG sales contracts are all due to start before 2009. The project also has an in-principle sales agreement to supply 120,000 tpa of LNG to Japanese utility Tohoku Electric Power Company. It is understood that this contract was also scheduled to start next year. Tangguh's 3.8 million tpa train two is now due to be completed in the second quarter of 2009, according to BP Migas. The Tangguh LNG project will be supplied by gas from three production sharing contracts - Berau, Muturi and Wiriagar, which have combined proven reserves of 14.4 trillion cubic feet. These proven reserves are sufficient to fuel six trains of between 3 million and 3.5 million tpa each, while the partners have acquired sufficient land for an eventual eight trains. Expansion to this level would be dependent on further reserves being discovered. ExxonMobil in Natuna Link Talks ExxonMobil is in talks with potential pipeline gas customers for its giant off shore Natuna D-Alpha field as the development scenario offers better economics than a liquefied natural gas project, Upstream reported on Thursday (17/5/07). The US major said that pipeline gas sales to Singapore, Thailand and Malaysia are all possible as it looks to get the project - which could cost more than $30 billion - started. ExxonMobil is currently in talks with Petronas, PTT and PetroVietnam about the potentially rewarding but complicated project and upstream equity could be offered to any of these national companies were they to buy gas. The operator believes it would take about four-and-a-half years to achieve first gas from Natuna D-Alpha, where the preliminary project work scope comprises one or more drilling platforms, at least one gas treatment barge and compression support facilities. Multiple projects are envisaged depending on the gas customers, but full-field development will likely require 22 production wells and 22 injectors. The productive area of Natuna D-Alpha is more than 300 square kilometers and the gas column is greater than 1600 meters at its crest. Natuna D-Alpha is South-East Asia's largest unexploited gas field and has estimated recoverable reserves of 46 trillion cubic feet. ExxonMobil and current partner Pertamina have worked together since 1980 and spent more than $400 million on appraising and trying to commercialize the gas, but the field's remote location and high carbon dioxide content have to date resulted in no viable development. The current thinking is that the field's CO2 will be injected into the southern aquifer that lies to the north-west of the field. Mobil, Local Govt. Sign MoU on Cepu Bojonegoro's local government and Mobil Cepu Limited (MCL) signed a Memorandum of Understanding (MoU) on the acquisition of the 700-hectare Cepu block oil field covering nine villages in Ngasem and Kalitidu sub districts, Bojonegoro district, East Java, on Wednesday (16/5/07), Asia Pulse reported. Upstream Oil and Gas Regulating Body (BP Migas) Deputy Head Abdul Mu'in said the signing of the MoU made the scheduled target for commercial production feasible. The MoU contained provisions on the obligations and rights of the local government and MCL with regard to the acquisition of the Cepu block. Based on the agreement, the land acquisition process would be started two months after the signing of the MoU. The local government would act as facilitator between MCL and local residents. Eni Tees up Aster Plan Italian giant Eni will soon submit a development plan for its deep-water Aster oil and gas field off Kalimantan, which might be exploited together with its recent Tulip hydrocarbon discovery, Upstream reported on Thursday (17/5/07). The latest appraisal well on Aster tested at more than 5000 barrels per day of 28 degree-API crude. In tandem with its Aster development plan filing, Eni will begin appraising its nearby Tulip oil and gas find. Tulip lies in the Tarakan basin north-east of Kalimantan, in water depths of up to 800 meters. "We will also assess potential synergies that might support a joint development of the two discoveries," Eni said. WestSide Signs Coal Seam Gas Deal Australian coal seam gas company WestSide Corporation Ltd has signed a deal with Indonesia's largest thermal coal producer to evaluate and develop coal seam gas (CSG) opportunities. The heads of agreement was signed today between WestSide and a subsidiary of its 27.5% stakeholder, PT Bumi Resources TBK and will focus on prospects in East Kalimantan. Bumi's subsidiary PT Kaltim Prima Coal (KPC) is the world's largest exporter of thermal coal. "The KPC operation is a world class mining facility sitting on a potentially significant, but untested, gas reserve," WestSide chief executive Stephen Cullum said. "This represents a rare opportunity to participate in the development of what could be a major coal seam gas resource, just 50 km from one of the region's largest gas markets." The pair will form a joint venture company to appraise and develop CSG prospects in Bumi's 90,700-hectare coal production permit area. The permit area encompasses the Sangatta and Bengalon mines in eastern Kalimantan and is estimated to contain more than four billion tons of coal. WestSide expects to hold a 50% interest in the CSG operations, with both companies contributing equally to development and production costs. "This investment complements WestSide's Australian operations in the Bowen Basin and provides us with an early opportunity to secure access to additional prospective gas territory which is now strongly contested here in Queensland," Cullum said. "The initial investment will be modest, and the company is in a strong financial position to allocate funds from our existing provisions for reserve expansion and working capital." Bakrie Builds Biodiesel Plant PT Bakrie Rekin Bio Energy is building a biodiesel processing plant in Batam, which is expected to start operating mid next year and be able to process 100,000 tons of biodiesel annually, mainly for the overseas market, The Jakarta Post reported. State Minister for Research and Technology and chairman of the Agency for the Assessment and Application of Technology Kusmayanto Kadiman laid the cornerstone at the four-hectare factory site near Kabil Port on Monday (14/5/07). The factory and facilities will cost $22 million to build and are expected to employ at least 200 workers. PT Bakrie Sumatera Plantation will supply the plant with crude palm oil, the main raw material for producing biodiesel. Kusmayanto said the factory would not interrupt CPO demand for the production of domestic cooking oil. "It is the people who should change their dietary pattern. If they eat fried food, they should opt for boiled food, which is more healthier," he said. PT Bakrie Sumatera Plantations managing director Ambono Janurianto said 70% of total production would be allocated for the overseas market and the rest for the domestic market. MINING Tin Shipments Leave Bangka Some smelters have begun shipping refined tin from Indonesia's main producing island of Bangka, helping to ease a backlog after last year's crackdown on illegal mining curbed exports, industry sources told Reuters on Friday (18/5/07). Indonesia, the world's second-largest producer after China, has allowed 12 smelters to resume exports after the October crackdown forced dozens of independent smelters to close, sending the tin price on the London Metal Exchange to contract highs. PT Koba Tin, the second-largest miner on Bangka, shipped out 500 tons of tin last week, its second shipment since February. "Shipments of tin from Koba are proceeding normally," said a trade source, who closely watches the company. Several independent smelters also shipped 600 to 800 tons of tin last week, according to the International Tin Research Institute (ITRI). Koba Tin shipped out 475 tons of tin to Singapore in late April after it was forced to suspend delivery in February following a police investigation into alleged illegal mining and the arrests of three directors, including president director Anuar Sidek. The company is 75% owned by Malaysia Smelting Corp. and 25% by PT Timah, the world's largest integrated tin miner. Malaysian Smelting has denied its Indonesian unit obtained tin ore illegally. "It looks like the backlog is being cleared, although it's hard to say how much tin is out there on Bangka," said a dealer in Malaysia, adding that stocks had built up with smelters unable to ship out tin they had produced before the crackdown. Jakarta has issued tough rules for exports after the crackdown. Smelters must now produce refined tin with a minimum purity of 99.85%, own mining sites to source raw materials and provide proof of royalty payments. Expectations of improving supplies from Indonesia have helped pull down tin prices on the LME from a contract high of $15,100 a ton on April 18. Tin fell $100 a ton to $13,750 on the LME on Friday. The market has been closely watching Indonesia, where smuggling of tin from Bangka had been blamed for causing a glut on global markets and sending prices tumbling in 2002. Banks to Finance Bauxite Project Four foreign and local banks have offered to finance the construction of a bauxite plant in Tayan, West Kalimantan owned by state-owned mining company PT Aneka Tambang, Antara news agency reported on Monday (14/5/07). Japan Bank for International Cooperation (JBIC), Bank Mandiri, Bank Negara Indonesia and Bank Central Asia (BCA) have indicated interest in financing the project, Antam corporate secretary Bimo Budi Satriyo said. Construction of the project to cost around $255 million is to start early next year, Bimo told the newspaper Investor Daily . He said Antam wants a 10-year loan with a grace period of three years, a period needed to complete the project, which will have an annual production capacity of 300,000 tons |