VZCZCXRO1830
RR RUEHCHI RUEHDT RUEHHM
DE RUEHJA #9865/01 2190016
ZNR UUUUU ZZH
R 070016Z AUG 06
FM AMEMBASSY JAKARTA
TO RUEHC/SECSTATE WASHDC 8335
RHMFIUU/DEPT OF ENERGY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHDC
INFO RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS
RUEHKO/AMEMBASSY TOKYO 9948
RUEHBY/AMEMBASSY CANBERRA 9795
RUEHBJ/AMEMBASSY BEIJING 3553

UNCLAS SECTION 01 OF 03 JAKARTA 009865 
 
SIPDIS 
 
DEPT FOR EAP/MTS AND EB/ESC/IEC 
DEPT PASS OPIC, EXIM, TDA 
DOE FOR CUTLER/PI-32 AND NAKANO/PI-42 
COMMERCE FOR USDOC 4430 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EPET ENRG EINV PREL ID
SUBJECT: INDONESIA ENERGY AND MINING HIGHLIGHTS-JULY 2006 
 
¶1.  Summary. On June 17, the Downstream Regulatory Body BPH 
MIGAS announced the Bakrie Group won the tender for the USD 
1.2 billion, 1,120-km pipeline from East Kalimantan to 
Central Java.  On July 24, Britain's BP, Indonesia's Medco 
and a consortium of state oil company Pertamina and Amerada 
Hess signed gas supply agreements with buyers.  On July 3, 
Minister of Energy and Mineral Resources Purnomo Yusgiantoro 
announced a plan to build 11 biodiesel plants by the end of 
¶2006.  On July 14, Australia's Nullarbor announced its 
acquisition of a 40 percent interest in the Belida 
Production Sharing Contract (PSC).  On July 12, China's 
Citic Resources announced its acquisition of a 51 percent 
interest in the Seram Non-Bula PSC.  In July, Pertamina 
raised unsubsidized fuel prices by an average of 2.8 
percent.  On July 24, Australia's Agincourt Resources 
announced its acquisition of Newmont Horas Nauli, owner of 
the Martabe mine concession in North Sumatra.  On July 5, 
Kobe Steel said it would develop a pilot project to process 
Upgraded Brown Coal (UBC) in South Kalimantan. This report 
uses an exchange rate of Rp 9,070/USD. End Summary. 
 
East Kalimantan - Central Java Pipeline Project 
--------------------------------------------- -- 
 
¶2.  On June 17, the Downstream Regulatory Body BPH MIGAS 
announced the Bakrie Group won the tender for the USD 1.2 
billion pipeline from East Kalimantan to Central Java.  The 
1,120 kilometer pipeline will stretch from Balikpapan, East 
Kalimantan to Semarang, Central Java and have a capacity of 
1,000 trillion cubic feet per day.  BPH MIGAS chose the 
Bakrie Group after the company offered a toll fee of USD 
0.814 per million British thermal unit (mmbtu), beating 
offers by state gas company PGN and state manufacturing and 
engineering firm PT Barata Indonesia.  The group claimed to 
have secured several memoranda of understanding (MOU) with 
buyers in Central Java including with Indonesia Power, 
according to media reports.  Investors and industry analysts 
have given the project a mixed reception.  The main concern 
for the project is the availability of gas supply from East 
Kalimantan, according to analysts.  Most Kalimantan gas 
producers do not have sufficient reserves to fully meet 
their commitments to supply the Bontang LNG plant.  Most 
industry watchers say the Bakrie Group will need to 
negotiate with gas producers to ensure sufficient gas 
supplies for the pipeline. 
 
Gas Supply Agreements 
--------------------- 
 
¶3.  On July 24, Britain's BP, Indonesia's Medco and a 
consortium of state oil company Pertamina and Amerada Hess 
signed gas supply agreements with buyers.  The gas contracts 
involve an aggregate total of 331 trillion British thermal 
units (TBTU) and range from six to eleven years.  The 
combined value of the contracts is reportedly worth USD 1.5 
billion, with a unit price starting at USD 2.7 per mmbtu. 
BP will supply state fertilizer producer Pupuk Kujang from 
its Offshore Northwest Java field at a contract rate of USD 
3.7 per mmbtu.  The contract price sets a new benchmark for 
gas sold to fertilizer firms. Traditionally, fertilizer 
firms paid a unit price ranging from USD 1 - 2 per mmbtu. 
 
Table 1: Gas Supply Agreements 
--------------------------------------------- - 
Suppliers  Buyers        Start Contract Volume 
                         Year   Years   (TBTU) 
--------------------------------------------- - 
Medco EP   Mitra Energi  2007    6.5      6.0 
           Buana 
BP Plc     Pupuk Kujang  2007    11       1.4 
Pertamina/ PT PLN        2008    12     323.7 
Amerada 
 
Biofuel Update 
-------------- 
 
¶4. On July 3, Minister of Energy and Mineral Resources 
Purnomo Yusgiantoro announced a plan to build 11 biodiesel 
plants this year with an annual capacity of 29 million 
liters.  The country aims to increase biodiesel capacity to 
1.3 billion liters by year 2010, or 10 percent of national 
transportation fuel consumption.  Purnomo said the GOI's 
 
JAKARTA 00009865  002 OF 003 
 
 
five year plan will require investments totaling Rp 200 
trillion (USD 22 billion), including for the purchase of 6 
million hectares of land for feedstock cultivation. 
Separately, Agriculture Minister Anton Supriantono told 
reporters that the GOI will allocate 6 million tons of crude 
palm oil (CPO) for feedstock for the biodiesel plants. 
 
Table 2: Projected Biodiesel Supply 
------------------------------------- 
Year     Capacity (Million Liters) 
------------------------------------- 
2007          187 
2008          377 
2009        1,200 
2010        1,337 
 
Source: Ministry of Energy and Mineral Resources 
 
Acquisition Update 
------------------ 
 
¶5. On July 14, Australia's Nullarbor announced the 
completion of a farm-out agreement in the Belida Production 
Sharing Contract (PSC), South Sumatra.  The Australian 
company agreed to purchase PT Sele Raya Belida, a 40 percent 
interest holder in the Belida PSC.  The block is estimated 
to contain up to 200 million barrels of oil reserves. 
Separately, Nullarbor also said it reached an agreement with 
Pertamina to fund a feasibility study for the construction 
of a biodiesel plant. 
 
¶6. On July 12, China's CITIC Resources announced its 
acquisition of a 51 percent interest in the Seram (Non Bula) 
PSC, Maluku from Kuwait's KUFPEC Ltd.  KUFPEC retained a 30 
percent interest in the PSC, but Citic will take over 
KUFPEC's operatorship until the contract expires in 2019. 
The deal was valued at USD 97.4 million, according to media 
reports.  The PSC covers an area of around 4,500 square 
kilometers (kms) with an average production of 4,300 barrels 
of oil per day (bopd) in 2006.  CITIC is an integrated 
natural resources and commodity company listed on the Hong 
Kong stock exchange with assets located mainly in Australia 
and China. 
 
Fuel Market Update 
------------------ 
 
¶7. State petroleum company Pertamina increased industry fuel 
prices in July by an average 2.8 percent, owing to a rise in 
global crude benchmarks.  Pertamina left unchanged the 
prices for subsidized higher grade transportation fuels 
Pertamax, Pertamax Plus and Pertamina DEX. 
 
Table 2: Unsubsidized Fuel Price Changes in 2006 
--------------------------------------------- ------ 
Fuel Type           May    June    July    Change* 
--------------------------------------------- ------ 
Transport** 
 Pertamax          5,800   6,150   6,150     0.0 
 Pertamax Plus     6,050   6,250   6,250     0.0 
 Pertamina DEX     6,100   6,400   6,400     0.0 
 
Industry*** 
 Premium           5,469   6,174   6,502     5.3 
 Kerosene          5,664   6,182   6,373     3.1 
 Diesel            5,512   6,288   6,321     0.5 
 Diesel Oil        5,327   5,789   6,065     4.8 
 Fuel Oil          3,662   3,745   3,759     0.4 
 
*Percent change between May 2006 and June 2006. 
** Pertamax and Pertamax plus are unleaded gasoline fuel 
with 92 and 95 octane level respectively. Pertamina DEX is a 
Euro 2 standard diesel fuel. All fuels are available at 
regular retail outlets. Quoted prices are valid for Java 
Island. 
*** Industry wholesale price. 
 
 
Table 3: Pump Price Comparison (USD/gallon) 
----------------------------------------- 
Country         Unleaded       Auto 
                Gasoline      Diesel 
 
JAKARTA 00009865  003 OF 003 
 
 
----------------------------------------- 
Indonesia*       1.84          1.75 
Philippine       3.10          2.63 
Thailand         2.87          2.69 
Singapore        4.30          3.29 
USA              3.00          2.98 
 
Note: *Indonesia subsidized price. Prices as of July 31, 
¶2006. 
 
Sources: Pertamina, EPPO, Philippine DOE, EIA 
 
Agincourt Acquired Newmont's Martabe Mine 
----------------------------------------- 
 
¶8. On July 24, Australian listed gold company Agincourt 
Resources announced its acquisition of Newmont's Martabe 
gold and silver mine in North Sumatra.  The company formed a 
joint venture with Indonesia's Dharmawangsa Group, which 
will have an option of acquiring up to a 30 percent share in 
the mine.  The Martabe mine covers an area of just over 
2,500 kms with estimated gold and silver reserves of 5.3 
million ounces and 54.8 million ounces respectively.  The 
acquisition, which reportedly cost USD 80.25 million, is 
scheduled for completion by the end of August 2006. 
Agincourt plans to spend USD 165 million to develop the 
Martabe mine. 
 
Upgraded Brown Coal Project 
--------------------------- 
 
¶9. On July 5, Kobe Steel said it would develop a pilot 
project to process Upgraded Brown Coal (UBC) in South 
Kalimantan.  Low-rank coal has a high moisture content and 
low heat value, resulting in less energy value.  Indonesia 
has an estimated 57 billion tons of coal, over 50 percent of 
which is low rank, according to industry analysts.  The 
proposed plant will process low-rank coal from PT Arutmin 
Indonesia's Satui mine, South Kalimantan, turning it into a 
cleaner, higher quality coal briquette suitable for use in 
power plants.  Kobe said the initial plant capacity will be 
600 tons per day plant with construction starting by the end 
of 2006.  The project will cost USD 70 million with a 
completion date targeted in 2008, according to the company. 
 
Selected Energy, Mining and Power Statistics 
-------------------------------------------- 
 
                                 Apr    May    Jun 
Mining 
Coal Production (million tons)   10.3   10.1      - 
Coal Export (million tons)        7.4    8.4      - 
Copper concentrate (`000 dmt)   191.2  206.8  210.2 
Copper (`000 ton)                50.6   51.3   55.1 
 
Oil 
Oil production (mmbpd)           1.03   1.03   1.03 
ICP* Average (USD/barrel)        70.3   70.0   68.1 
 
Note: Preliminary 2006 figures, except for ICP. 
* Indonesian Crude Price; dmt (dry metric ton); mmbpd 
(million barrels per day); MW (megawatt) 
Sources: Directorate of Coal Enterprise, MIGAS, PETRAL 
 
PASCOE