VZCZCXRO3294
RR RUEHCHI RUEHCN RUEHDT RUEHHM
DE RUEHJA #2223/01 3460246
ZNR UUUUU ZZH
R 110246Z DEC 08
FM AMEMBASSY JAKARTA
TO RUEHC/SECSTATE WASHDC 0910
INFO RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS
RUEHBJ/AMEMBASSY BEIJING 5713
RUEHUL/AMEMBASSY SEOUL 5213
RUEHKO/AMEMBASSY TOKYO 2827
RUEHNE/AMEMBASSY NEW DELHI 2496
RUEHJS/AMCONSUL SURABAYA 2327
RHMFISS/DEPT OF ENERGY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

UNCLAS SECTION 01 OF 04 JAKARTA 002223 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR EAP/MTS and EEB/ESC/IEC/ENR 
DOE FOR PI-32 CUTLER AND GILLESPIE 
COMMERCE FOR 4430/NADJMI AND 6930/HUEPER 
DEPT PASS USTR EHLERS 
 
E.O. 12958: N/A 
TAGS: ENRG EPET EINV EMIN ID
SUBJECT: DOE'S ENERGY PARTNERSHIP DIALOGUE WITH INDONESIA 
 
JAKARTA 00002223  001.2 OF 004 
 
 
¶1. (SBU) Summary.  The U.S.-Indonesia Energy Policy Dialogue (EPD) 
was held in Jakarta on October 21 and 22, 2008.  The last EPD was 
held in 2005. The U.S. delegation was led by Department of Energy 
Deputy Assistant Secretary (DAS) for International Energy 
Cooperation Dr. Phyllis Yoshida, and the Indonesian delegation was 
led by Ministry of Energy and Mineral Resources Director General for 
Oil and Gas Dr. Evita Legowo. Minister of Energy and Mineral 
Resources Purnomo Yusgiantoro gave the opening plenary statements. 
Both sides discussed global and national energy outlooks, 
electricity power generation, geothermal and renewable energies, 
nuclear power, as well as fossil fuel production and use, including 
coal, oil, and gas.  Both sides agreed on some areas for future 
cooperation, such as in the areas of geothermal, renewable and 
energy efficient technologies, and committed to holding the next 
meeting in late 2009 or early 2010.  End Summary. 
 
----------------------------- 
MEETING WITH MINISTER PURNOMO 
----------------------------- 
 
¶2. (SBU) In a pre-dialogue courtesy call with Minister for Energy 
and Mineral Resources Purnomo Yusgiantoro, U.S. government 
representatives discussed a wide range of issues with Minister 
Purnomo and other Indonesian counterparts.  Both sides acknowledged 
uncertainties in the current investment climate, and they praised 
private sector interest and participation in the EPD.  Minister 
Purnomo encouraged U.S. cooperation and investment in its geothermal 
and renewable energy efforts, including carbon capture and storage 
(CCS). Regarding geothermal energy, Minister Purnomo specifically 
asked for assistance in technology development to determine the 
optimal size of the borehole. The United States discussed the 
International Partnership for Geothermal Technology (IPGT) and noted 
that the partnership is open to international partners. Minister 
Purnomo expressed interest in both the Carbon Sequestration 
Leadership Forum and GE's coal gasification technologies, to reduce 
carbon emissions. 
 
¶3. (SBU) The U.S. side encouraged energy efficiency efforts, and 
asked about Indonesian government policies preventing foreign 
ownership of power plants smaller than 10 megawatts, although 
Indonesian officials, including the Minister, were unclear on the 
specifics of the investment barrier. 
 
------- 
PLENARY 
------- 
 
¶4. (U) In the Indonesian government's plenary statements, Director 
General of Oil and Gas Evita Legowo highlighted Indonesia's history 
of energy consultations with the United States and other countries. 
She stressed Indonesia's goal of increasing domestic energy 
production, and hoped that greater bilateral cooperation could help 
them achieve this goal. 
 
¶5. (U) DAS Yoshida acknowledged that it had been "much too long" 
since both sides had met but stressed that both governments have 
been committed to bilateral talks since 2005.  She noted that, as 
the second and third largest democracies in the world, the United 
States and Indonesia should cooperate to spur development based on 
ample supplies of affordable, clean energy. 
 
¶6. (U) In his plenary opening statement, Minister Purnomo observed 
that there had been a "slowdown" in U.S.-Indonesian bilateral energy 
talks, but he was hopeful that this dialogue meeting signaled a 
return to more consistent engagement.  He stressed that the United 
States had originally been the biggest energy investor in Indonesia, 
and he expressed appreciation for the United States as a continuing 
pioneer in the energy field.  He called for greater cooperation 
between the countries to strengthen company-to-company and 
sector-to-sector cooperation. 
 
-------------- 
ENERGY OUTLOOK 
-------------- 
 
¶7. (U) In an overview of its energy outlook, Indonesia stressed that 
its growth would require more energy.  Their national plans call for 
a change in their energy mix from the current reliance on petroleum 
to a greater use of coal, geothermal, biofuel and renewable 
 
JAKARTA 00002223  002.2 OF 004 
 
 
energies.  They also hope that the shift of energy sources will 
result in a reduction of carbon dioxide emissions over baseline 
projections. 
 
¶8. (U) In his overview of the global and U.S. energy outlook, Acting 
Assistant Secretary (Acting A/S) for Fossil Energy James Slutz 
projected increased energy use outside the OECD, with a growth in 
liquid fuels, gas, and coal.  Although there will be growth in 
renewable energies, and biofuels will remain a part of the energy 
mix, there will also be significant CO2 growth. 
 
¶9. (U) Acting A/S Slutz stressed that U.S. energy goals include 
maximizing production worldwide; working toward greater energy 
security; and promoting greater technical development, including 
greater energy efficiency and improved fuel economy standards. 
 
-------------- 
ELECTRIC POWER 
-------------- 
 
¶10. (U) The Indonesian presenters summarized Indonesia's electricity 
goals:  1) increase electrification from 64% in 2008 to 76% in 2015 
and 93% in 2025; 2) add generating and distribution capacity, 
equaling nearly $100 billion by 2025; and 3) change the energy mix 
to favor alternative and renewable energies. 
 
¶11. (U) To accomplish these goals, the Indonesians noted that they 
must address some daunting challenges, including shifting from a 
system of subsidized electricity to a market-based system, and 
encouraging Independent Power Producers (IPPs) to enter the 
electricity generation market.  It does not yet have timetables for 
the accomplishment of either goal, and the PLN (Indonesia's 
state-owned power company) representative acknowledged that 
currently, PLN's fuel costs exceed its tariff revenue.  PLN's 
current Phase I expansion plans, adding 10,000 MW of coal-fired 
generating capacity, must be entirely financed by the company, 
although the bonds for that project are backed by an Indonesian 
government guarantee. 
 
---- 
COAL 
---- 
 
¶12. (U) Indonesian officials stressed the need to increase the use 
of coal in their energy mix, due to the country's large deposits of 
this fuel.  They encouraged foreign investment and capital, although 
they also pointed out that future investment will likely be subject 
to new licensing requirements under the new mining law (not yet 
passed by the legislature), which will give fewer protections to 
mine operators than current contracts of work. 
 
¶13. (U) To maximize the use of coal, Indonesians seek to develop 
coal liquefaction and gasification, both in electricity generation 
and industries such as fertilizer.  Officials claimed significant 
government interest in coal liquefaction, and they hope to start 
building a plant next year and begin producing in 2013.  Indonesian 
officials also highlighted the importance of geothermal energy in 
their future energy mix. 
 
¶14. (U) The U.S. discussed its ongoing efforts advancing clean coal 
technologies and presented a brief history of coal beneficiation 
technologies developed in the United States.  U.S. clean coal 
technologies include the restructured FutureGen, the Clean Coal 
Power Initiative, and carbon sequestration programs.  Coal 
beneficiation is a process by which low-ranked coal can be upgraded 
by removing moisture and ash, sodium, and other impurities. 
 
------------------------- 
GEOTHERMAL AND RENEWABLES 
------------------------- 
 
¶15. (U) Indonesians hope to maximize their use of geothermal energy, 
of which they currently have 1,052 MW of installed capacity. 
Indonesia is estimated to have about 27,000 MW in geothermal energy 
reserves, although observers estimate that only about 10,000 MW of 
it is commercially viable.  DOE EERE Program Manager for Geothermal 
Technologies Ed Wall pointed out that U.S. geothermal capacity was 
also concentrated geographically in less-populated western states, 
requiring upgrades to distribution systems to maximize the benefits. 
 
JAKARTA 00002223  003.2 OF 004 
 
 
 However, he highlighted a number of government-funded projects in 
the United States that seek to maximize geothermal efficiency and 
facilitate its integration into the market.  Wall also advocated the 
International Partnership for Geothermal Technology that enables 
countries to share information on geothermal development strategies, 
and collaborate on new projects, thereby maximizing the 
effectiveness of their research. 
 
¶16. (U) U.S. officials also highlighted other renewable energy 
goals, including energy efficiency programs, promotion of hybrid 
cars, geothermal, wind, solar, and biomass programs.  They also 
underscored renewable energy facilitation efforts through programs 
at the Department of Energy that seek to overcome barriers to 
commercialization of new technologies by reducing financial barriers 
to the production and distribution of new technologies. 
 
¶17. (U) Indonesian officials detailed their goal of changing their 
energy mix by 2025 to decrease reliance on oil and increase other 
sources, including new and renewable sources.  They highlighted 
three key goals of this policy:  1) rural electrification through 
small-scale generation, including micro hydro and solar; 2) 
interconnection of renewable energy power generation; and 3) the 
Phase II 10,000 MW electricity program, 70% of which will be from 
renewable energy sources, primarily geothermal and hydro power. 
 
¶18. (U) Indonesian officials gave an overview of their efforts to 
change Indonesia's energy mix, including increasing the proportional 
use of gas and coal, as follows: 
 
- Current Mix:  Oil 52%; Gas 29%; Coal 18%; New and Renewable Energy 
4%. 
 
- 2025 Business as Usual:  Oil 41%; Gas 21%; Coal 35%; Hydro 2%; 
Geothermal 1% 
 
- 2025 Goal:  Oil 20%; Gas 30%; Coal 33%; Renewables 5%; Biofuel 5%; 
Geothermal 5%; CTL 2% 
 
Although biofuel use will soon become mandatory in Indonesia, 
officials acknowledged that most of their programs are in the 
experimental stages. 
 
------- 
NUCLEAR 
------- 
 
¶19. (U) Indonesia made a presentation on its planned nuclear energy 
development.  The GOI is in the process of developing the technical 
capacity and regulatory structure for nuclear energy, although they 
have not made the political decisions as to whether or not to go 
forward. 
 
¶20. (U) DAS Yoshida pointed to a similar renewal of interest in 
nuclear energy in the United States, and she advocated for Indonesia 
to participate in the Global Nuclear Energy Partnership (GNEP). 
Luluk Sumiarso indicated that the Indonesian government was still 
having "internal discussions," and had not yet made a decision as to 
whether or not to participate in GNEP. 
 
----------- 
Oil and Gas 
----------- 
 
¶21. (U) The EPD's final session dealt with oil and gas, and had the 
most robust private sector participation.  The Indonesians stressed 
the need for increased investment and greater production.  In their 
overview of their sector, they stressed their reserves, as follows: 
 
Oil Reserves: 
Proven - 3,747.5 MMSTB 
Potential - 4,471.7 MMSTB 
Total - 8,219.2 MMSTB 
 
Gas Reserves 
Proven - 112.5 TSCF 
Potential - 57.6 TSCF 
Total - 170.1 TSCF 
 
¶22. (U) In order to increase production, Indonesians stressed the 
 
JAKARTA 00002223  004.2 OF 004 
 
 
investment opportunities in production, including exploration, 
enhanced recovery at old wells, deepwater exploration, LNG 
production and receiving terminals, and coal bed methane. 
 
¶23. (U) They also highlighted downstream sectors, which 
traditionally have not received as much foreign investment, and in 
some cases were only recently opened to foreign investment.  They 
sought investment in refining, pipelines, fuel storage and 
transportation, and gas distribution infrastructure 
 
¶24. (U) The U.S. delegation also gave an overview on the 
Methane-to-Markets (M2M) and Global Gas Flaring Reduction programs 
and encouraged the GOI increased participation in GGFR and in 
joining M2M.  A presentation on coal bed methane (CBM) development 
noted the increasing use of CBM in the United States.  Indonesia has 
not yet developed this vast (estimated at 450 trillion cubic feet) 
domestic energy resource, but seeks to expand its use.  The two 
sides agreed to share more information on CBM technology. 
 
¶25. (U) Acting A/S James Slutz gave an overview of the National 
Petroleum Council'sreport "Hard Truths," which states that 
increasing global energy needs requires the use of all energy 
sources, both traditional fossil fuels as well as new and renewable 
energies.  He stressed that it is therefore important for countries 
to have policies that maximize production as well as use energy 
efficiently.  Slutz concluded with a strong warning against the 
erosion of contract sanctity that some observers have noted in the 
Indonesian energy sector, indicating that it may reduce the 
participation of private sector companies as the competition for 
financing and investment dollars increases. 
 
----------------------------------------- 
Closing Statements and Future Cooperation 
----------------------------------------- 
 
¶26. (U) In closing statements Indonesia's Abdul Muin, Vice Chairman 
of BP MIGAS, stressed the need for the United States and Indonesia 
to address issues such as the recent spike in oil prices, and the 
impact on our societies, together.  He also pushed for a commitment 
for the next meeting of the Energy Policy Dialogue, to ensure that 
they are held regularly.  DAS Yoshida indicated that, because of 
pending elections in both countries, the next round would most 
likely occur in late 2009 or early 2010.  She suggested that the 
United States host the next meeting. 
 
¶27. (SBU) Both delegations agreed to hold interim meetings on areas 
of mutual benefit, including through digital video conferences. 
They will seek cooperation in several areas, including: 
 
- The development of conventional, renewable and energy-efficient 
technologies; 
 
- Geothermal technology development through multilateral agreements 
such as the International Partnership for Geothermal Technology; 
 
- Additional cooperation through multilateral partnerships such as 
Methane to Markets; and 
 
- The exchange of experiences and information on policies and 
activities that support and improve the investment climate, build 
capacity, and promote economic development. 
 
¶28. (U) This cable has been cleared by U.S. Department of Energy 
Deputy Assistant Secretary Phyllis Yoshida. 
 
HUME