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Will geothermal exploration in Indonesia see introduction of a cost recovery scheme?

Drilling rig on site of Sokoria geothermal project, Indonesia (source: KS Orka)
Alexander Richter 14 Jan 2020

The geothermal industry and investors are waiting to receive certainty of the Indonesian government's plan related to compensation in geothermal exploration activities. The compensation plan is planned to be similar to the cost recovery scheme applied to the oil and gas sector.

As reported locally past week, the geothermal sector and international investors are waiting for the certainty of the government’s plan related to compensation in geothermal exploration activities. The compensation plan is planned to be similar to the cost recovery scheme applied to the oil and gas sector.

Minister of Energy and Mineral Resources (ESDM) Arifin Tasrif said geothermal exploration has the same properties as oil and gas (oil and gas), which are both conducting exploration activities to find energy sources.

So far, the production sharing scheme has been applied to oil and gas exploration and exploitation activities to cover operational costs. That is, geothermal exploration activities can also be applied to similar policies.

According to him, the application of the cost recovery scheme in geothermal exploration will be set forth in a presidential regulation (perpres) geothermal which is currently being studied. However, the government plans not to explicitly mention cost recovery in the regulation.

The regulation is to provide details on the approach to developer risk reduction in conducting geothermal exploration so that it can produce electricity at a cheap long-term price.

“We did not explicitly mention cost recovery, but reduced the risk of developers in the future and in essence could get long-term low cost electricity prices,” he said recently.

Director General of New and Renewable Energy and Energy Conservation of the Ministry of Energy and Mineral Resources F.X. Sutijastoto said that exploration in finding geothermal steam sources is indeed the biggest component affecting electricity prices.

Source: Bisnis/ Ekonomi