Cablegate: Indonesia Energy and Mining Highlights - March 2007

DE RUEHJA #1009/01 1000851
R 100851Z APR 07





E.O. 12958: N/A

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

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
(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
--------------------------------------------- ------

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

Table 3: Oil and Gas Tender Winners
--------------------------------------------- ------
Block Location Contractors Bonus
--------------------------------------------- ------
Mandar Off.West Esso Exploration 10.8
Sulawesi International

South Off.East Consortium Total 5
East Kalimantan E&P - Inpex Corp.

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

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


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
--------------------------------------------- --
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

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.

© Scoop Media

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