Indonesia: New policy to allow direct assignment of areas to state-owned firms

Kamojang geothermal complex, West Java, Indonesia (Pertamina Geothermal)
Alexander Richter 5 Oct 2015

Indonesia is working on a new policy that would allow the direct assignment of geothermal working areas to state-owned firms, without a tender. This is aimed at speeding up development of projects.

The Indonesian government is working on a new policy aimed at speeding up development of geothermal projects. The Energy and Mineral Resources Ministry’s director general for new and renewable energy and energy conservation, Rida Mulyana, confirmed the plan, saying that the regulation was expected to be completed before the end of the year, according to the Jakarta Post.

The government is preparing a legal instrument that will allow PT Pertamina Geothermal Energy (PGE), a subsidiary of oil and gas company Pertamina, to develop geothermal-fueled power plants without a tender.

“We have met Pertamina to discuss giving a direct assignment for geothermal working areas to state-owned enterprises. We will give it to Pertamina, but operations will be carried out by PGE as the company’s subsidiary,” Rida said.

Under current practice, the new and renewable energy and energy conservation directorate general regularly holds bids for concessions on a number of geothermal working areas in the country.

In July, for example, the directorate general opened tenders for five geothermal working areas with a total estimated potential of 730 megawatts (MW). The areas are in Kepahiang in Bengkulu, Marana in Central Sulawesi, Way Ratai in Lampung, Mount Lawu on the border between Central and East Java and Lake Ranau on the border between Lampung and South Sumatra.

The directorate general’s chief of geothermal power, Yunus Saifulhak, said the direct appointment of PGE to carry out the projects was expected to boost geothermal utilisation in Indonesia.

“This is a breakthrough to accelerate geothermal projects. To date, geothermal development is left to stagnate in tenders. When the regulation is passed, we will have several options, from open bids to appointing Pertamina,” Yunus said.

He added that as long as Pertamina, through PGE, considered itself capable of working on a given geothermal working area, the government would give the direct assignment to the company, avoiding a protracted tender.

According to Yunus, there are currently 27 geothermal working areas available, with five tendered this year. Eight working areas will be available for bids next year.

“Once we have issued the regulation as a legal instrument, we won’t have to put all of the working areas out to tender. Instead we can assign a state-owned firm,” he said.

PGE president director Irfan Zainuddin, meanwhile, has said his company aims to be the biggest producer of electricity from geothermal resources, with total production of 682 MW by 2017.

The company’s current capacity is 437 MW and it is aiming to produce up to 2.3 gigawatts of electricity from geothermal power plants by 2025.

Source: The Jakarta Post