VZCZCXRO2820
RR RUEHCHI RUEHDT RUEHHM
DE RUEHJA #0067/01 0090928
ZNR UUUUU ZZH
R 090928Z JAN 07
FM AMEMBASSY JAKARTA
TO RUEHC/SECSTATE WASHDC 2735
RHMFIUU/DEPT OF ENERGY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHDC
INFO RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS
RUEHKO/AMEMBASSY TOKYO 0182
RUEHBY/AMEMBASSY CANBERRA 0305
RUEHBJ/AMEMBASSY BEIJING 3783

UNCLAS SECTION 01 OF 05 JAKARTA 000067 
 
SIPDIS 
 
DEPT FOR EAP/MTS AND EB/ESC/IEC 
DEPT PASS OPIC, EXIM, TDA 
DOE FOR CUTLER/PI-32 AND GILLESPIE/PI-32 
COMMERCE FOR USDOC 4430 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EPET ENRG EINV PREL ID
SUBJECT: ENERGY HIGHLIGHTS - DECEMBER 2006 
 
 
¶1. Summary.  The Ministry of Energy and Mineral Resources (MEMR) 
announced on December 13 that 18 companies and consortia won tenders 
for 18 oil and gas blocks across Indonesia, committing $235.8 
million in exploration funds over three years.  On December 20, the 
Ministry of Finance signed memoranda of understanding (MOUs) with 
local banks to provide subsidized financing to plantations in 
support of the Government of Indonesia's bio-energy initiative.  The 
GOI sold a 5.3% stake in gas state-owned gas distribution company 
Perusahaan Gas Negara (PGN) on December 15, earning Rp 2.1 trillion 
($233 million) from the sale.  Minister of State-Owned Enterprises 
Sugiharto swore in a new Board of Commissioners for state-owned oil 
and gas company Pertamina on December 14.  Pertamina raised the 
wholesale price of liquefied petroleum gas (LPG) supplied to medium 
and large manufacturers by 10.8 percent on December 13.  On December 
12, Pertamina announced it had decided to obtain $500 million in 
loans from local banks to finance eight oil and gas projects in 
¶2007.  Severe flooding in Aceh and North Sumatra provinces near the 
end of December affected oil and gas operations of Pertamina and 
ExxonMobil.  On December 18, state electricity company Perusahaan 
Listrik Negara (PLN) opened tenders for 25 coal-fired power plant 
projects outside of Java.  Local energy and electricity company 
Truba signed an MOU with Hong Kong-based Shanghai Electric 
Generation Group on December 14 to jointly build and operate a $200 
million coal-fired power plant in Kuala Tanjung, North Sumatra.  On 
December 19, Pertamina's exploration and production subsidiary, 
Pertamina EP, the Korean oil and gas firm Kodeco Energy, and 
Indonesian energy company Lapindo signed seven supply contracts for 
695.8 trillion British thermal units (TBTU) of gas worth $2.8 
billion, of which roughly 79 percent will be allocated to gas-fired 
power plants in Java.  Bermuda's Kalimantan Gold Corporation 
finalized an option deed with Australia's Oxiana on December 18 for 
cooper and gold prospecting in Kalimantan.  This report uses an 
exchange rate of Rp 9,025/USD. End Summary. 
 
GOI Announces Winners of Oil And Gas Tenders 
-------------------------------------------- 
 
¶2. The Ministry of Energy and Mineral Resources (MEMR) announced on 
December 13 that 18 companies and consortia won tenders for 18 oil 
and gas blocks across Indonesia through a direct offer system.  A 
MEMR press statement noted that the companies have committed 
investments of $235.8 million over three years, including $25.5 
million for geological and geophysical studies, $37.8 million for 
three-dimensional seismic surveys of over 1,780 square kilometers, 
$33.6 million for two-dimensional seismic surveys of over 9,170 
square kilometers, and $138.9 million for drilling 32 exploration 
wells. 
 
--------------------------------------------- ------ 
Table 1: Exploration Blocks Awarded 
--------------------------------------------- ------ 
Block      Area      Onshore/   Winner 
                     Offshore 
--------------------------------------------- ------ 
Duyung     Natuna    Offshore Transword Exploration 
 
Pari       Natuna    Offshore Indoreach Exploration 
 
Tonga      Sumatra   Onshore  Mosesa Petroleum, 
                              Kencana Surya Perkasa, 
                              Petros 
 
Batu Gajah Sumatra   Onshore  Ranhill Jambi Inc. 
 
Lemang     Sumatra   Onshore  Hexindo Gemilang 
                               Jaya, Indelberg 
 
Batanghari Sumatra   Onshore  Gregori Gas Perkasa, 
                              CNOOC 
 
Karang     Sumatra   Onshore  Odira Energy Perkasa 
 Agung 
 
Sekayu     Sumatra   Onshore  Star Energy Holding 
 
Alas Jati  East Java Onshore  Insani Bina Perkasa 
 
North      East Java Offshore Petro Java 
Kangean                       International Inc. 
 
Sibaru     East Java Offshore Mitra Energy Ltd, 
                              Pearl Oil 
 
JAKARTA 00000067  002 OF 005 
 
 
 
West       East      Onshore  Kalimantan Kutai 
Sangata    Kal.               Energy 
 
Wain       East      Onshore  Pandawa Prima Lestari 
           Kal. 
 
Kutai      East      Onshore  Ephindo, Serica 
           Kal.        and    Energy 
                     Offshore 
 
Buton     Southeast Onshore  Japex, Premier Oil, 
          Sulawesi    and    Kufpec 
                    Offshore 
 
Budong    West      Onshore  Gema Tera, Manley NV, 
          Sulawesi           TGS Nopec 
 
Kuma      West      Offshore ConocoPhillps, Stat 
          Sulawesi           Oil ASA 
 
Karana    Makassar  Offshore Pearl Oil 
          Strait 
 
Source: Media Accounts. 
 
¶3. An initial GOI offer of 21 blocks through the direct offer system 
drew 23 bids from 8 consortia and 15 companies, including several 
foreign companies such as ConocoPhilips, Stat Oil ASA, Premier Oil, 
and Kufpec.  According to the terms of the tenders, the GOI will 
receive $31.5 million in signing bonuses from the 18 investors 30 
days after finalizing actual contracts. 
 
GOI Signs Biofuel MOUs With Local Banks 
--------------------------------------- 
 
¶4.  On December 20, Minister of Finance Sri Mulyani Indrawati signed 
memorandum of understanding (MOUs) with state-owned Bank Mandiri, 
Bank Rakyat Indonesia, Bank Bukopin, and two regional banks, to 
provide up to Rp 25.6 trillion ($2.8 billion) for the finance the 
development of agricultural crops for bio-energy and the 
revitalization of existing plantations.  The banks will disburse the 
loans in stages over the next few years according to plantations' 
needs.  Under the terms of the MOU, interest rates on loans to 
plantations will be capped at 10%, with the GOI subsidizing any 
further interest charges.  The GOI pledged in its Fiscal Year 2007 
budget to provide interest-rate subsidies of up to Rp 1 trillion 
($111 million) to support the program.  Coordinating Minister for 
the Economy Boediono, Minister of Agriculture Anton Apriyantono, 
Bank of Indonesia Governor Burhanuddin Abdullah and local government 
heads witnessed the MOU signing. 
 
--------------------------------------------- 
Table 2: Loan Commitments for Biofuel Program 
--------------------------------------------- 
Bank                     Loan Commitment 
                         (in Rp trillion) 
--------------------------------------------- 
Bank Rakyat Indonesia (1)    12.0 
Bank Mandiri (2)             11.1 
Bank Bukopin (3)              1.0 
BPD Sumbar (4)                1.0 
BPD Sumut (5)                 0.5 
 
Source: Ministry of Finance 
(1) Fourth largest bank by asset; state-owned; well-known for micro 
financing. 
(2) Largest bank; state-owned. 
(3) Fifteenth largest; partly owned by government. 
(4) West Sumatra's Regional Development Bank. 
(5) North Sumatra's Regional Development Bank. 
 
GOI Divests Shares In State-Owned Gas Firm 
------------------------------------------ 
 
¶5. On December 15, the GOI divested itself of a 5.3% stake in 
state-owned gas distribution firm Perusahaan Gas Negara Tbk (PGN), 
raising Rp 2.1 trillion ($233 million) in proceeds.  With the 
divestment, the GOI's stake in PGN decreased to 54.1%.  The GOI had 
hoped to raise as much as Rp 3 trillion ($332 million) from the sale 
to plug an expected budget shortfall this year of Rp 40 trillion 
($4.4 billion).  The GOI raised Rp 1.2 trillion ($133 million) from 
 
JAKARTA 00000067  003 OF 005 
 
 
the company's initial public offering in 2003, but cancelled plans 
to sell 7.3% of PGN's shares in 2005 following strong opposition in 
parliament. 
 
GOI Appoints New Pertamina Board 
-------------------------------- 
 
¶6. On December 8, Minister of State-Owned Enterprises Sugiharto 
swore in retired Indonesian Military General Endriartono Sutarto as 
the new Chairman of the Board of Commissioners of state-owned oil 
and gas company Pertamina.  Sugiharto also swore in two other new 
members of the Board of Commissioners:  Ministry of State-Owned 
Enterprise Assistant Deputy for Strategic Industries Irnanda and 
OPEC Representative Board Chairman Maizar Rahman.  Sutarto replaced 
Martiono Hadianto, while the other two new members replaced Energy 
and Mineral Resources Department Director General of Electricity and 
Energy Usage J. Purwono, and Iin Arifin Takhyan, who was appointed 
as Pertamina Vice CEO last March.  According to press reports, the 
GOI decided on the new Pertamina board lineup on December 5 during a 
closed shareholders meeting with President Susilo Bambang Yudhoyono. 
 
 
--------------------------------------------- ------ 
Table 3: Pertamina's Board of Commissionaires 
--------------------------------------------- ------ 
Position           December 2006   Previous 
--------------------------------------------- ------ 
Chief Commissioner Endriartono    Martiono Hadianto 
Independent 
 Commissioner      Umar Said      Umar Said 
Commissioner       Muhammad Abduh Muhammad Abduh 
Commissioner       Irnanda        J. Purwono 
                    Laksanawan 
Commissioner       Maizar Rahman  Iin Arifin Takhyan 
 
Source: Ministry of State Owned Enterprises 
 
Pertamina Raises Industry LPG Price 
----------------------------------- 
 
¶7. Effective December 13, state-owned oil and gas company Pertamina 
raised the price of bulk liquefied petroleum gas (LPG) for medium 
and large manufactures by 10.8 percent from Rp 5,280 ($0.58) per 
kilogram (kg) to Rp 5,852 ($0.64) per kg.  Pertamina spokesman 
Toharso said that the move would cut losses Pertamina incurs by 
selling LPG below the price it purchases it from suppliers. 
Pertamina said it would try to avoid increasing the price of LPG for 
households and smaller industries through the end of the year. 
 
Pertamina To Secure Local Loans For Eight Projects 
--------------------------------------------- ----- 
 
¶8. During its December 12 general shareholders meeting, Pertamina 
management agreed to secure a loan of $500 million from a local bank 
consortium including Bank Mandiri and Bank Negara Indonesia (BNI). 
The proceeds of the loan will finance eight oil and gas projects 
commencing in 2007.  Newly appointed Pertamina Board of 
Commissioners Chairman Endriartono Sutarto said that the bank 
consortium had initially offered $1.4 billion, but Pertamina decided 
to obtain only $500 million.  Pertamina Director for Finance 
Frederick T. Siahaan told the press that a portion of the loan 
proceeds will finance the Cepu Block development project ($50 
million), the construction of the Kamojang Geothermal Power Plant 
Unit 4 ($80 million), and the development of Pondok Tengah field in 
Bekasi, West Java.  Pertamina will also use a portion of the loan to 
purchase eight 70,000 deadweight tonnage capacity oil tankers; build 
a primary transit terminal in Tuban, East Java; and revamp several 
oil refineries, including those in Balongan and Cilacap on Java 
Island, and another in East Kalimantan. 
 
Aceh Flooding Affects Oil Production 
----------------------------------- 
 
¶9. Severe flooding in Aceh and North Sumatra Provinces starting on 
December 22 has significantly affected Pertamina's Rantau upstream 
oil production operations located in the border area of the two 
provinces, according to the company.  Pertamina partially suspended 
operations in Rantau where, as of December 25, 98 percent of its 
facilities were flooded by water.  Rantau is a mature Pertamina's 
oil and gas field operation, which has been supplying gas to North 
Sumatra's Belawan power plant at a declining rate.  The flooding has 
also affected facilities at the Arun block gas fields in Aceh owned 
 
JAKARTA 00000067  004 OF 005 
 
 
by ExxonMobil.  In spite of the floods, ExxonMobile has been able to 
continue its production activities at full capacity. 
 
Tender For Coal-Fired Power Plants 
---------------------------------- 
 
¶10. State-owned electricity company Perusahaan Listrik Negara (PLN) 
on December 18 opened tenders for the construction of 25 coal-fired 
power plants outside Java Island.  The tenders are part of the GOI's 
"fast track" program to build an additional 10,000 watts of 
electricity generating capacity by 2009.  Pre-qualification 
documents for construction of power plants on Java Island allow 
tender participants to provide 85 percent of project funding in the 
form of export credits.  However, the pre-qualification invitation 
for coal-fired power plants outside Java Island allows tender 
participants to propose financing through any form of export credit 
scheme or local financing to cover the entire project cost.  PLN 
Director for Finance Parno Isworo, however, said that funding 
schemes for the construction of coal-fired power plants outside Java 
Island are still under discussion. Head of the "fast track" 
program's implementation team Yoga Pratomo added that PLN would 
cover some of the projects' cost by issuing bonds through Indonesian 
banks.  PLN raised $1 billion through an international bond issuance 
in October. 
 
PLN Appoints Contractor To Build Power Plant 
-------------------------------------------- 
 
¶11. On December 14, publicly listed engineering and electricity 
company Truba Alam Manunggal (Truba) and Hong Kong-based Shanghai 
Electric Generation Group Co. Ltd. (SEG) signed an MOU agreeing to 
jointly build and operate a 2x125 megawatt, $200 million coal fired 
power plant in Kuala Tanjung, North Sumatra.  PLN directly appointed 
SEG to develop the power plant. Head of the local mining and energy 
office Washington Tambunan said that PLN made the direct appointment 
due to the acute electricity crisis in the province.  Truba 
President Director Arifin Wiguna said construction of the power 
plant would start in January 2007 and begin commercial operation in 
¶2008.  He noted that his company would soon sign an agreement 
whereby PLN would purchase electricity from the plant at $4.5 cents 
per kilowatt-hour (KwH).   Earlier in November, Truba and SED signed 
another MOU with local company Central Pertiwi Bahari to build a 
2x25, $60 million coal fired power plant in North Lampung. 
 
Natural Gas Sellers And Buyers Sign Agreements 
--------------------------------------------- - 
 
¶12. Pertamina subsidiary Pertamina Eksplorasi & Produksi (Pertamina 
EP), Korean oil and gas firm Kodeco Energy, and Indonesian energy 
company Lapindo signed seven supply contracts on December 19 for 
695.8 trillion British thermal units (TBTU) of gas, of which roughly 
79 percent will be allocated for gas-fired power plants in Java. 
Total value of the agreements is $2.8 billion.  Upstream oil and gas 
authority BP Migas Chairman Kardaya Warnika said he hopes the 
agreements will encourage other production sharing contracts (PSCs) 
aimed at meeting domestic gas supply requirements. 
 
--------------------------------------------- ------ 
Table 4: Domestic Gas Contracts Signed 
--------------------------------------------- ------ 
Agreement                            Gas Volume 
                                       (TBTU) 
--------------------------------------------- ------ 
 
Pertamina EP - Sumber Petrindo Perkasa  219 
12-year period starting 2009 
Central Java 
 
Pertamina EP - Cikarang Listrindo       394 
21-year period starting 1995 (Amended) 
West Java 
 
Kodeco Energy - MKS                     n/a 
Expected to start 2007 
East Java 
 
Kodeco Energy - PGN                     51.3 
6-year period 
 
Lapindo - Indogas Kriya Dwiguna         10.2 
10-year starting 2007 
 
 
JAKARTA 00000067  005 OF 005 
 
 
Pertamina EP - Pertiwi Nusantara         4.3 
 
Pertamina EP - Fajar Surya Wisesa       17.0 
 
Source: BP Migas 
 
¶13. Elsewhere, BP Migas said in a December 19 statement that it had 
facilitated a Cargo Loading Agreement between PT Pertamina EP and 
state-owned fertilizers PT Pupuk Iskandar Muda (PIM) in Aceh and PT 
Pupuk Kalimantan Timur (PKT) in East Kalimantan.  Under the deal, 
Pertamina will swap a total of 8.9 TBTU of gas or about 3 cargoes of 
liquefied natural gas (LNG), which was previously allocated for PKT, 
to support the operation of PIM.  According to the BP Migas 
statement, the swap will begin in January 2007 and support the 
operation of the PIM fertilizer plant for six months. 
 
Kalimantan Gold And Oxiana Close Deal 
-------------------------------------- 
 
¶14. According to press reports, Bermuda mining company Kalimantan 
Gold Corporation Limited (KGC) announced on December 18 that it had 
finalized an option agreement with Australian copper and gold mining 
company Oxiana Ltd. for exploration of Kalimantan's copper and gold 
prospects.  The agreement covers three key areas, Baroi, Beruang and 
Mansur, which form part of KGC's 941 square kilometer holdings in 
Central Kalimantan. Under the agreement, Oxiana will reportedly 
initially invest $2.5 million to drill 12 deep prospecting holes 
over a period of twelve to eighteen months. Oxiana then has an 
option for taking a 40 percent stake in completing a pre-feasibility 
study and an option for a 66.7% stake for completing a bankable 
feasibility study.  If any of the projects proceed to the mine 
development stage, the deed allows Oxiana to provide significant 
funding assistance for financing KGC's share of mine development. 
KGC reportedly starting working on the Kalimantan project in 1996, 
and has reportedly invested to date roughly $12 million for the 
drilling of 70 prospecting holes. 
 
PASCOE