Pertamina plans to raise US$300m for geothermal development

PT Pertamina website snapshot
Alexander Richter 28 Oct 2010

Indonesian PT Pertamina Geothermal Energi (PGE) is planning to raise US$300m for geothermal development mainly for drilling of around 30 wells (7 are exploration and 23 development wells) as part of the company's geothermal development projects.

In news from Indonesia it is reported that “PT Pertamina Geothermal Energi (PGE), a subsidiary of state-owned oil firm PT Pertamina, will raise capital expenditure by 50 percent next year with up to US$300 million, to finance expansion.

“We estimate the realized capital expenditure for this year will be at US$200 million. As for next year, we plan the capital expenditure to be at $300 million,” PGE’s president director Abadi Poernomo said on the sideline of a seminar on energy held by alumni of the Bandung Institute of Technology.

Abadi said the funds would be used mainly for drilling in the company’s working areas. “We plan to drill 30 wells next year. Up to seven of these wells will be exploration wells and the remaining 23 wells will be development wells,” said Abadi, adding that one geothermal well could cost the company between $6 to $7 million.

Abadi said all the required investment would be provided by Pertamina as PGE’s parent company. He added that Pertamina was in talks with several potential lenders, including the World Bank, Asian Development Bank (ADB), and Japan International Cooperation Agency (JICA). Finding lenders for geothermal projects is an easy task nowadays as the energy source is considered clean and renewable. “I receive lending proposals almost every day,” Abadi said.

PGE now manages 15 geothermal working areas with total current power generation capacity of 272 megawatts (MW). The company expects to increase this to 1,342 MW by 2014. The additional 1,070 MW is expected to come from eight projects under the government’s second phase electricity fast track program.

Under the fast track program, Indonesia expects to generate around 10,000 MW with geothermal energy expected to contribute 3,967 MW. This will be generated both by PGE and private developers.

Abadi said that at least three PGE’s geothermal projects under the program would be on stream in late 2011 to 2012. These are the Lahendong IV, Lahendong V, and Lahendong VI projects each with a capacity of 20 MW.

Indonesia has 28,000 MW of potential geothermal energy reserves, accounting for 40 percent of world geothermal reserves. But currently Indonesia only utilizes around 1,100 MW or 3.9 percent of its potential.

The government expects to boost geothermal energy use via the second electricity fast track program. During the world geothermal congress in Bali last April, President Susilo Bambang Yudhoyono pledged Indonesia would be the world’s largest geothermal energy producer.

Despite this, developers still face difficulties with bureaucracy. Abadi said PGE had problems with local administrations where its working areas are located. He cited the company’s plan to expand the capacity of the Wayang Windu Geothermal project in West Java. The project faces delays as the governor has yet to issue a recommendation allowing PGE to use more land.

“We submitted the request nine months ago, but the recommendation has yet to be issued,” Abadi said.

Last week, the Indonesian Geothermal Association (API) held a press conference, telling the media that some of its members could not begin exploration in 10 geothermal fields as state power firm PT Perusahaan Listrik Negara (PLN) is still reluctant to discuss needed power purchase agreements (PPAs).
The 10 working areas were also part of the second phase fast track program and the delay in accessing PPAs is likely to mean the government cannot meet the program’s target.

PLN said it was still waiting for a presidential decree to order the company to buy power produced by the geothermal projects. But, Luluk Sumiarso, newly appointed the director general for new and renewable energy and energy conservation at the energy and mineral resources ministry, said PLN had no reason to delay PPA negotiations. He said the ministry had issued a ministerial decree stipulating the ceiling sales price for geothermal power at 9.7 US cents.

“As long as the agreed price is below the ceiling figure, PLN has no reason to be afraid of making a deal,” he said.”

Source: The Jakarta Post