VZCZCXRO9478
RR RUEHCHI RUEHDT RUEHHM
DE RUEHJA #1009/01 1000851
ZNR UUUUU ZZH
R 100851Z APR 07
FM AMEMBASSY JAKARTA
TO RUEHC/SECSTATE WASHDC 4257
RHMFIUU/DEPT OF ENERGY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHDC
INFO RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS
RUEHKO/AMEMBASSY TOKYO 0462
RUEHBY/AMEMBASSY CANBERRA 0640
RUEHBJ/AMEMBASSY BEIJING 4038

UNCLAS SECTION 01 OF 04 JAKARTA 001009 
 
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 4430/BERLINGUETTE 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EPET ENRG EINV PREL ID
SUBJECT: INDONESIA ENERGY AND MINING HIGHLIGHTS - March 2007 
 
¶1. Summary. The Government of Indonesia (GOI) awarded 37 energy 
contracts worth at least a reported seven billion dollars in Subang, 
West Java on March 21.  The contracts included exploration deals 
worth $4.1 billion, domestic gas supply agreements worth $1.61 
billion and oil and gas contracts amounting to $1.39 billion.  On 
the same day, the agriculture ministers of Indonesia and Brazil 
signed a biofuels cooperation agreement aimed at starting large 
scale ethanol production in Indonesia.  On March 16, state petroleum 
company Pertamina abandoned its attempt to have a Cayman Islands 
court intervene in its long-running dispute with the Karaha Bodas 
Company (KBC) and announced it would pay KBC's claim.  On March 11, 
state gas company PGN and state coal firm PT Tambang Batubara Bukit 
Asam signed a memorandum of understanding to develop coal bed 
methane in South Sumatra.  On March 8 and March 16, Pertamina 
announced its interest in acquiring stakes in deepwater blocks in 
East Kalimantan.  Local energy firm Bumi Resources signed a 
memorandum of understanding on March 16 to purchase a 3% stake in 
the Sumbawa-based copper and gold mining firm Newmont Nusa Tenggara. 
 Effective March 1, Pertamina raised retail prices for several oil 
based fuels for industry due to higher global oil prices.  Local oil 
and gas firm Energi Mega Persada signed agreements with Mitsubishi 
Corporation and Japan Petroleum on March 7 to become partners to 
explore the Kangean PSC.  India's Tata Power announced on March 30 
that it would pay $1.3 billion to purchase 30% equity stakes in 
Indonesian coal producers PT Kaltim Prima Coal and PT Arutmin 
Indonesia.  This report uses an exchange rate of Rp 9,105/USD. End 
Summary. 
 
Energy Projects Unveiled in West Java 
-------------------------------------- 
 
¶2. On March 21, the GOI awarded 37 energy contracts worth a reported 
$7 billion at a ceremony in Subang, West Java, according to press 
reports.  The contracts reportedly included exploration deals worth 
$4.1 billion, domestic gas supply agreements worth $1.61 billion and 
oil and gas contracts amounting to $1.39 billion. It also included 
engineering, procurement, and construction (EPC) contracts for 
coal-fired power plants.  Chinese-led consortia won four of the five 
EPC contracts. 
 
Table 1: Coal-Fired Power Plants Awarded on 3/21 Under GOI 
Electricity Acceleration Program 
--------------------------------------------- ------ 
 Project   Contractor       Location 
($million) 
(Units X MW) 
--------------------------------------------- ------ 
PLTU Jabar I  China National Machinery  West- 
($863.22)    Industry Corp,China National  Java 
(3 X 330MW) Electric Equipment Corp, 
   PT Penta Adi Samudera 
 
PLTU Rembang  Zelan, PT Prianamaya and  Central- 
($558)     Tronoh      Java 
(2 X 316MW) 
 
PLTU Banten II Chengda Engineering Corp,  Banten 
($492.94)  Truba Jurong Engineering 
(2 X 316MW) 
 
PLTU Jatim II Harbin Power Engineering, East- 
($466.25)    PT Mitra Selaras Hutama   Java 
(1 x 660MW) Energy 
 
PLTU Banten I  China National Technical     Cilegon 
($428.79)  Import and Export Corp, 
(1 x 625MW) China National Machinery 
   Import and Export Corp, 
   Zhejiang Electric Power 
      Design Institute and 
      PT Rekayasa Industri 
 
Source: MEMR 
 
The GOI also announced four coal-mining investment projects in 
Kalimantan and Sumatra, worth a reported $236 million. 
 
Table 2: Coal Mine Projects Awarded on 3/21 
--------------------------------------------- ------ 
Project     Location   Investment 
            ($million) 
--------------------------------------------- ------ 
 
JAKARTA 00001009  002 OF 004 
 
 
PT Asmin Coalindo Tuhup  Central Kalimantan 129 
 
PT Interex Sacra Raya  South Kalimantan  44.2 
 
PT Karya Bumi Baratama Jambi    40 
 
PT Singlurus Pratama East Kalimantan  22.5 
 
Source: MEMR 
 
At the signing ceremony, Ministry of Energy and Mineral Resources 
Purnomo Yusgiantoro said investment commitments in the energy sector 
through the first quarter have reached $19.4 billion. 
 
Oil and Gas Blocks Awarded 
-------------------------- 
 
¶3. Also in Subang, on March 21, nine companies or consortiums signed 
production sharing contracts as part of the GOI's latest tender 
round for oil and gas blocks. Earlier, Director General of Oil and 
Gas Luluk Sumiarso said on March 2 that the government would receive 
$30.09 million in signing bonuses from the tender winners.  The 
winners committed to investing $411 million over the first year 
three years of exploration, including $12.9 million for geological 
and geophysical surveys, $58.8 million for 3D seismic surveys, $13.9 
million for 2D seismic surveys, and $325.5 million to drill 22 
wells. 
 
Table 3: Oil and Gas Tender Winners 
--------------------------------------------- ------ 
Block      Location    Contractors      Bonus 
(million$) 
--------------------------------------------- ------ 
Mandar  Off.West    Esso Exploration     10.8 
       Sulawesi    International 
 
South   Off.East    Consortium Total      5 
East   Kalimantan  E&P - Inpex Corp. 
Mahakam 
 
Karama  Off.South   Consortium Pertamina  5 
       Sulawesi    - StatOil ASA 
 
Tuna   Natuna     Consortium 
       Sea     Premier Oil Ltd      2 
           - Mitsui Oil 
   Exploration Co Ltd 
 
Lampung 1  Off.     PT ANP Energy      1.53 
       Lampung 
 
Ujung   On/Off.     M3nergy Berhad      1.26 
Kulon   West Java 
 
Sageri  Off.South   Talisman (South      1 
       Sulawesi    Makassar)Ltd 
 
Enrekang   On West     PT Sigma Energy       1 
       Sulawesi    Petrogas 
 
West Air  On.South    PT Tiara Bumi       - 
Komering  Sumatra    Petroleum 
 
Source: BPMIGAS 
 
 
Indonesia - Brazil Biofuels Agreement 
-------------------------------------- 
 
¶4. On March 15 in Jakarta, GOI Agriculture Minister Anton 
Apriyantono and Brazilian Agriculture Minister Luis Carlos Guedes 
Pinto signed a bilateral agreement aimed at intensifying biofuels 
cooperation to allow Indonesia to start large scale ethanol 
production.  Under the agreement, Brazil pledged to provide the GOI 
with technical help to produce ethanol from sugarcane and manioc. 
The agreement came a week after President Bush and Brazilian 
President da Silva agreed to promote ethanol use and increased 
production in Latin America and the Caribbean. 
 
Pertamina Accepts Defeat in Karaha Bodas Case 
--------------------------------------------- - 
 
 
JAKARTA 00001009  003 OF 004 
 
 
¶5. On March 16 Pertamina abandoned its attempt to have a Cayman 
Islands court intervene in its long-running dispute with the Karaha 
Bodas Company (KBC).  The decision followed a March 16 ruling by the 
U.S. District Court of the Southern District of New York refusing to 
allow Pertamina to move forward with its fraud claims against KBC in 
the Caribbean island.  Pertamina had been seeking to stop KBC from 
collecting $305 million in GOI funds frozen in the U.S.  The suit 
resulted from the GOI's decision in 1998 to cancel the construction 
of the Karaha Bodas geothermal power plant in Garut, West Java as a 
result of the regional financial crisis.  KBC won a $261 million 
international arbitration award in 1999 that Pertamina had been 
fighting since that time.  On March 16, Pertamina's Managing 
Director Ari Soemarno told reporters that the company would respect 
the court's decision.  With accrued interest Pertamina currently 
owes KBC $319 million.  KBC is a consortium owned by the U.S. firms 
Florida Power and Light (40.5%) and Caithness Energy (40.5%), 
Japan's Tomen (9%), and local firm PT Sumarah Daya Sakti (10%). 
 
PGN and Bukit Asam Sign Coal Bed Methane MOU 
-------------------------------------------- 
 
¶6. State-owned gas firm PGN and State coal firm PT Tambang Batubara 
Bukit Asam (PTBA) signed a memorandum of understanding (MOU) on 
March 11 to develop coal-bed methane (CBM) at PTBA's mining 
concession in Tanjung Enim, South Sumatra.  Minister of Energy and 
Mineral Resources Purnomo Yusgiantoro said that CBM from the scheme 
would be used to supply PGN's South Sumatra-West Java pipeline. 
PTBA claims it has a CBM potential of 2.6 trillion cubic feet at its 
concession, equivalent to 468 million barrels of oil.  Industry 
watchers are uncertain how much of that gas will actually be 
recoverable with current technology. 
 
Pertamina Eyes Offshore Blocks in East Kalimantan 
--------------------------------------------- ---- 
 
¶7. On March 8, Pertamina officials expressed interest in acquiring 
non-operational 10% stakes in Chevron's offshore East Kalimantan 
Rapak and Ganal PSCs, according to local press reports.  Currently, 
Chevron owns 80% of the two blocks while Italy's ENI holds 20%. 
Under GOI law a local firm may acquire up to a 10% interest in any 
block prior to its development.  The Ganal PSC contains the Gehem 
and Gendalo gas fields; Rapak is home to the Ranggas gas field. 
Chevron expects to start production in the two PSCs in 2013. 
Separately, a Chevron spokesperson on March 9 said that it would 
have no objection to taking on Pertamina as a partner, but 
emphasized that the decision on who should get shares in the blocks 
rests solely with the GOI.  In addition, Pertamina Upstream director 
Sukusen Soemarinda said on March 16 the company is also interested 
in acquiring a 10% share in the offshore Mahakam PSC.  France's 
Total and Japan's Inpex each own 50% of the block, which produces 
20,000 barrels per day of crude and 2.5 billion cubic feet per day 
of gas. 
 
Bumi to Purchase Stake in Newmont Mine 
--------------------------------------- 
 
¶8. On March 16 Bumi Resources, a mining company affiliated with the 
Bakrie Group, signed an MOU with the West Nusa Tenggara provincial 
government and the West Sumbawa regency government to finance their 
purchase of a 3% stake in the Newmont Nusa Tenggara (NNT) gold mine. 
 Bumi and the local goverments will buy the 3% stake under the GOI's 
mandatory divestment program for mines.  Bumi will own 85% of the 
shared stake while the local administrations will own 15%.  The 3% 
share is worth $109 million.  Based on its mining Contract of Work 
signed in 1986, NNT is obligated to offer over 25 years up to 51% of 
its shares to the GOI or local companies.  Local firm, PT Pukuafu 
Indah already owns 20% of the company.  NNT must divest the 
remaining 31% by 2010. 
 
Pertamina Raises Retail Fuel Prices 
------------------------------------ 
 
¶9.  Pertamina raised retail prices of certain fuels for industrial 
users beginning March 1 due to higher global oil prices, according 
to a company spokesperson.  Industrial users saw the cost of their 
main fuels, premium gasoline and diesel oil, jump by 14 and 12 
percent, respectively.  The adjustment was inline with the changes 
in the Mid Oil Platts Singapore index for February 2007, according 
to local and international market analysts. 
 
Table 5: Non-Subsidized Fuel Price Changes (in Rp) 
--------------------------------------------- -- 
 
JAKARTA 00001009  004 OF 004 
 
 
Fuel Type   Mar 07 Apr 07 Change 
--------------------------------------------- -- 
Transport 
 Pertamax   4,900 5,600  14.3 
 Pertamax Plus  5,250 5,850  11.4 
 Pertamina Dex  5,750 5,900   2.6 
 Biopertamax  4,900 5,600  14.3 
 
Industry 
 Premium    4,651 5,459  17.4 
 Kerosene   5,152 5,370   4.2 
 Gas Oil   4,983 5,126   2.9 
 Diesel Oil  4,773 5,038   5.6 
 Fuel Oil   3,205 3,222   0.5 
 
Source : Pertamina 
 
Exploration agreements into the Kangean PSC 
-------------------------------------------- 
 
¶10.  Local firm Energi Mega Persada (EMP) announced on March 7 that 
it had signed Heads of Agreements (HOA) on March 1 with Mitsubishi 
Corporation and Japan Petroleum Exploration (Japex) to make them 
partners in EMP's Kangean PSC offshore block (East Java).  Under the 
HOA, Mitsubishi and Japex each paid $360 million for their 
respective 25% share in the Kangean PSC.  EMP will retain the 
remaining 50%.  EMP, which is controlled by the Bakrie Group, 
estimates that the PSC holds reserves of 1.74 TCF of gas and 1 
million barrels of oil and condensate. 
 
Bumi Sells Stake To India's Tata 
-------------------------------- 
 
¶11.  India's Tata Power announced on March 30 that it will pay $1.3 
billion to purchase 30% equity stakes in two major Indonesian coal 
producers, PT Kaltim Prima Coal, and PT Arutmin Indonesia, and a 
related trading company, all of which are owned by the Indonesian 
energy firm Bumi Resources.  Together, KPC and Arutmin produced 
approximately 53.5 million tons of coal in 2006 with over 95% 
exported.  Bumi has said it plans to increase coal production by 50% 
over the next three years. As part of the deal, Tata Power said it 
would also buy 10 million tons of coal from Kaltim Prima Coal for 
two proposed power projects, totaling 7,000 MW, it plans to build in 
India by 2012.  Bumi paid a total of $685 million for the two coal 
mining firms in 2001 and 2003.  The current deal values those assets 
at $4.3 billion.