Scoop has an Ethical Paywall
License needed for work use Register



Cablegate: Indonesia Energy and Mining Highlights-June 2006

DE RUEHJA #8618/01 1910903
R 100903Z JUL 06





E.O. 12958: N/A

1. Summary. On June 2, the Ministry of Energy and Mineral
Resources' Directorate of Oil and Gas announced four foreign
companies as winners in the 2005 oil and gas regular tender
round. On June 15 the Minister of Energy and Mineral
Resources issued revised regulations designed to increase
the transparency and clarity of the oil and gas tender
processes. The private Indonesian energy firms Bumi
Resources and Energi Mega Persada (EMP) officially announced
their long-rumored merger plan on June 14. Throughout the
month of June, EMP subsidiary Lapindo Brantas battled a well-
head accident that is having significant environmental
consequences in the communities surrounding the Brantas
Production Sharing Contract (PSC) near Sidoarjo, East Java.
On June 26, Britain's Sound Oil announced its acquisition of
Indonesian oil and gas firm Mitra Energia Limited, an
interest holder in the Bangkanai and Citarum PSCs. State
petroleum company Pertamina raised unsubsidized fuel prices
in June by an average of 7.7 percent. On June 12, BP
resumed supplying gas to Jakarta's Muara Karang and Tanjung
Priok power plants after pipeline maintenance interrupted
gas flows. On June 14, Australia's Amerod Resources Limited
and Indonesia's Bayan Resources entered into a joint venture
agreement to develop a coal briquette plant in East
Kalimantan. This report uses an exchange rate of Rp
9,300/USD. End Summary.

Advertisement - scroll to continue reading

Are you getting our free newsletter?

Subscribe to Scoop’s 'The Catch Up' our free weekly newsletter sent to your inbox every Monday with stories from across our network.

Oil and Gas Tender Winners

2. On June 2, the Directorate of Oil and Gas announced four
winners of the 2005 regular tender round (Table 1). During
the first three years of development the four companies said
they plan to spend up to a collective USD 203 million for
exploration activities, including geological studies,
seismic surveys and the drilling of 11 wells. The winners
will also pay signature bonuses to the government totaling
USD 13 million. Companies entered bids for seven of the 14
blocks put out for tender, according to the directorate.
Industry observers noted the results of the round signal a
positive trend in the upstream investment climate.

Table 1: Oil and Gas Tender Winners
Winners Block Name Location Size
Petronas Lampung II South 4,140
ExxonMobil Surumana Makassar 5,340
Husky E.Bawean II E. Java 4,255
Marathon/ Pasangkayu Makassar 4,708
Talisman Strait

Source: Directorate of Oil and Gas

Tender Regulation Revisions

3. On June 15, Minister of Energy and Mineral Resources
Purnomo Yusgiantoro issued Ministry Regulation 40/2006 on
Procedures for Oil and Gas Blocks Allocation and Offering.
The new regulation effectively replaced the previous
Ministrial Decree 1480/2004. It aims to provide increased
transparency and clarity regarding tender procedures,
including the selection criteria for tender winners. The
regulation also includes provisions aimed at securing
exploration commitments from tender winners. Tender
participants now must provide at least a 20 percent bank
guarantee of the proposed value of the signature bonus when
bidding for an oil and gas block under the regular tender
process or USD 500,000 for a direct offer bid. A winning
bidder must also provide an additional bank guarantee equal
to the value of the budget for three years of seismic

Bumi and EMP Announce Merger Plan

JAKARTA 00008618 002 OF 004

4. On June 14, the private Indonesian energy firms Bumi
Resources and Energi Mega Persada (EMP) officially announced
their long-rumored merger plan. EMP is Indonesia's second
largest oil and gas producer; Bumi was Indonesia's leading
coal exporter in 2005. Bumi is in the process of divesting
coal subsidiaries Kaltim Prima Coal and Arutmin to Borneo
Lumbung Energy. Bumi and EMP are closely affiliated with
the Bakrie Group, though it does not have a majority stake
in either firm. When completed, the merger will create
Indonesia's largest energy company with more than USD 2
billion in assets. The companies said they expect to
complete the merger by August 2006.

Mud Flow Continues from East Java Well

5. EMP subsidiary Lapindo Brantas continued to battle a
well-head accident that is having significant environmental
consequences in the communities surrounding the Brantas
Production Sharing Contract (PSC). Since May 2006, mud has
flooded roads and villages near a Lapindo gas well in
Sidoarjo, East Java, 38 kilometers from Indonesia's second
largest city, Surabaya. On June 15, the Ministry of Energy
and Mineral Resources formed a special team to investigate
the mud breach. A preliminary investigation reportedly
found that a mud breach happened at a depth of 6,000 meters
below the company's Banjar Panji-1 well. So far Lapindo has
built a mud confinement dam in the area and said it plans to
bring in a mud snubbing unit to try to control the breach.
Lapindo owns a 50 percent interest in the PSC, while
Indonesia's Medco Energy and Australia's Santos own 32 and
18 percent respectively.

Acquisition Update

6. On June 26, UK-based Sound Oil announced the acquisition
of local energy firm Mitra Energia Limited. Mitra has 34
and 20 percent interests respectively in the Bangkanai and
Citarum PSCs, located in Central Kalimantan and Central
provinces. Sound Oil's shareholders must still approve the
acquisition, reportedly worth 16.2 million pounds sterling
(USD 28.5 million). Mitra is currently exploring in both
PSCs and has drilled six wells.

7. Pertamina subsidiary Elnusa Bangkanai Energy won the
Bangkanai PSC in 2003. It contains the undeveloped Karendan
gas field with estimated gas reserves of up to 400 billion
cubic feet (BCF). Elnusa now holds a 51 percent interest in
the block with Medco Energy owning 15 percent to Mitra's 34
percent. The Indonesian-Malaysian joint venture company
Bumi Parahyangan Ranhill Energy Citarum (BPREC) won the
Citarum PSC last year through a direct offer tender.
Malaysia's Ranhill Berhad owns a 60 percent stake in BPREC,
with Indonesia's Bumi Parahyangan and Mitra each owning 20

Fuel Market Update

8. State petroleum company Pertamina raised industry fuel
prices in June by an average 7.7 percent based on a rise in
global crude benchmarks. At the same time, the company
continued its strategy of selling its premium unleaded
Pertamax and Pertamax Plus fuels at a lower price in
selected fuel stations in the greater Jakarta area in
response to competition from nearby Shell and Petronas
retail stations. Pertamina sells Pertamax and Pertamax Plus
at an average discount of 2.5 percent in these locations
compared to stations where no competition exists.

9. In a sign that Indonesia's higher domestic fuel prices
continue to crimp consumption, Pertamina has reduced its
daily fuel sales target for the summer holiday period to
175,000 kiloliters (KL) from its initial target of 185,000
KL. The company also reported lower than anticipated
consumption for the June, which currently stands at 144,000
KL per day.

JAKARTA 00008618 003 OF 004

Table 2: Unsubsidized Fuel Price Changes in 2006
--------------------------------------------- -----
Fuel Type April May June Change*
--------------------------------------------- -----
Pertamax 5,300 5,800 6,150 6.0
Pertamax Plus 5,400 6,050 6,250 3.3
Pertamina DEX 5,800 6,100 6,400 4.9

Premium 5,099 5,469 6,174 12.9
Kerosene 5,507 5,664 6,182 9.1
Diesel 5,129 5,512 6,288 14.1
Diesel Oil 4,983 5,327 5,789 8.7
Fuel Oil 3,673 3,662 3,745 2.3

*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 prices.

Table 3: Pump Price Comparison (USD/gallon)
Country Unleaded Auto
Gasoline Diesel
Indonesia 1.83 1.75
Philippine 3.07 2.59
Thailand 2.73 2.84
Singapore 4.31 3.27
USA 3.07 2.87

Sources: Pertamina, EPPO, Philippine DOE, EIA
Prices as of June 30, 2006.

BP Resumes Gas Supply

10. On June 12, BP completed maintenance of the underwater
pipeline from its offshore South East Sumatra (SES) fields
to West Java, resuming gas supply to Jakarta's Tanjung Priok
and Muara Karang power plants. A pipeline leak in May 2006
cut gas supply to the two power plants to half of the normal
flow capacity of 260 million standard cubic feet per day
(mmcfd). As a result, the electric power reserve margin in
the Java-Bali grid shrank by almost 300 megawatts during the
past month. The resumption of BP's gas in part helped to
increase the reserve margin to an average of 1,500 megawatt
(MW) or an 8 percent margin during June.

Coal Briquette Joint Venture

11. On June 14, Australia's Amerod Resources Limited and
Indonesia's Bayan Resources signed a joint venture agreement
to build a coal briquette plant in East Kalimantan. Bayan
and White Energy Technology Limited said they intend to
exploit a patented briquetting process using coal from
Bayan's Tabang Mine in East Kalimantan. The two companies
hope to use the process to convert relatively poor quality
coal into a higher quality and more environmentally friendly
coal briquette. The plant will have an initial capacity of
1 million tons of coal briquettes per year with a possible
upgrade up to 3 million tons capacity per year in the
offing. The joint venture also includes a 5-year off-take
agreement by Bayan for USD 100 million of coal briquette.
Both companies are now completing a feasibility study of the
project. Amerod owns 51 percent of the joint venture while
Bayan holds the remainder.

Selected Energy, Mining and Power Statistics

Mar Apr May
Coal Production (million tons) 11.3 10.3 -
Coal Export (million tons) 9.3 7.3 -

JAKARTA 00008618 004 OF 004

Copper concentrate (`000 dmt) 198.5 191.2 206.8
Copper (`000 ton) 53.1 50.6 51.3

Oil production (mmbpd) 1.04 1.03 1.03
ICP* Average (USD/barrel) 61.3 70.3 70.0

Power (Java-Bali)
Peak Load (MW) 14,285 14,178 14,279
Average Reserve (MW) 1,488 590 825
Average Reserve margin (percent) 8.1 3.2 4.4

Note: Preliminary 2006 figures, except for ICP and power.
* Indonesian Crude Price; dmt (dry metric ton); mmbpd
(million barrels per day); MW (megawatt)
Sources: Directorate of Coal Enterprise, MIGAS, PETRAL, PLN


© Scoop Media

Advertisement - scroll to continue reading
World Headlines

UN News: Aid Access Is Key Priority

Among the key issues facing diplomats is securing the release of a reported 199 Israeli hostages, seized during the Hamas raid. “History is watching,” says Emergency Relief Coordinator Martin Griffiths. “This war was started by taking those hostages. Of course, there's a history between Palestinian people and the Israeli people, and I'm not denying any of that. But that act alone lit a fire, which can only be put out with the release of those hostages.” More

Save The Children: Four Earthquakes In a Week Leave Thousands Homeless

Families in western Afghanistan are reeling after a fourth earthquake hit Herat Province, crumbling buildings and forcing people to flee once again, with thousands now living in tents exposed to fierce winds and dust storms. The latest 6.3 magnitude earthquake hit 30 km outside of Herat on Sunday, shattering communities still reeling from strong and shallow aftershocks. More

UN News: Nowhere To Go In Gaza

UN Spokesperson Stéphane Dujarric said some 1.1M people would be expected to leave northern Gaza and that such a movement would be “impossible” without devastating humanitarian consequences and appeals for the order to be rescinded. The WHO joined the call for Israel to rescind the relocation order, which amounted to a “death sentence” for many. More

Access Now: Telecom Blackout In Gaza An Attack On Human Rights

By October 10, reports indicated that fixed-line internet, mobile data, SMS, telephone, and TV networks are all seriously compromised. With significant and increasing damage to the electrical grid, orders by the Israeli Ministry of Energy to stop supplying electricity and the last remaining power station now out of fuel, many are no longer able to charge devices that are essential to communicate and access information. More


Join Our Free Newsletter

Subscribe to Scoop’s 'The Catch Up' our free weekly newsletter sent to your inbox every Monday with stories from across our network.