Cablegate: Indonesia Energy and Mining Highlights-July 2006
VZCZCXRO1830
RR RUEHCHI RUEHDT RUEHHM
DE RUEHJA #9865/01 2190016
ZNR UUUUU ZZH
R 070016Z AUG 06
FM AMEMBASSY JAKARTA
TO RUEHC/SECSTATE WASHDC 8335
RHMFIUU/DEPT OF ENERGY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHDC
INFO RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS
RUEHKO/AMEMBASSY TOKYO 9948
RUEHBY/AMEMBASSY CANBERRA 9795
RUEHBJ/AMEMBASSY BEIJING 3553
UNCLAS SECTION 01 OF 03 JAKARTA 009865
SIPDIS
DEPT FOR EAP/MTS AND EB/ESC/IEC
DEPT PASS OPIC, EXIM, TDA
DOE FOR CUTLER/PI-32 AND NAKANO/PI-42
COMMERCE FOR USDOC 4430
SIPDIS
E.O. 12958: N/A
TAGS: EPET ENRG EINV PREL ID
SUBJECT: INDONESIA ENERGY AND MINING HIGHLIGHTS-JULY 2006
1. Summary. On June 17, the Downstream Regulatory Body BPH
MIGAS announced the Bakrie Group won the tender for the USD
1.2 billion, 1,120-km pipeline from East Kalimantan to
Central Java. On July 24, Britain's BP, Indonesia's Medco
and a consortium of state oil company Pertamina and Amerada
Hess signed gas supply agreements with buyers. On July 3,
Minister of Energy and Mineral Resources Purnomo Yusgiantoro
announced a plan to build 11 biodiesel plants by the end of
2006. On July 14, Australia's Nullarbor announced its
acquisition of a 40 percent interest in the Belida
Production Sharing Contract (PSC). On July 12, China's
Citic Resources announced its acquisition of a 51 percent
interest in the Seram Non-Bula PSC. In July, Pertamina
raised unsubsidized fuel prices by an average of 2.8
percent. On July 24, Australia's Agincourt Resources
announced its acquisition of Newmont Horas Nauli, owner of
the Martabe mine concession in North Sumatra. On July 5,
Kobe Steel said it would develop a pilot project to process
Upgraded Brown Coal (UBC) in South Kalimantan. This report
uses an exchange rate of Rp 9,070/USD. End Summary.
East Kalimantan - Central Java Pipeline Project
--------------------------------------------- --
2. On June 17, the Downstream Regulatory Body BPH MIGAS
announced the Bakrie Group won the tender for the USD 1.2
billion pipeline from East Kalimantan to Central Java. The
1,120 kilometer pipeline will stretch from Balikpapan, East
Kalimantan to Semarang, Central Java and have a capacity of
1,000 trillion cubic feet per day. BPH MIGAS chose the
Bakrie Group after the company offered a toll fee of USD
0.814 per million British thermal unit (mmbtu), beating
offers by state gas company PGN and state manufacturing and
engineering firm PT Barata Indonesia. The group claimed to
have secured several memoranda of understanding (MOU) with
buyers in Central Java including with Indonesia Power,
according to media reports. Investors and industry analysts
have given the project a mixed reception. The main concern
for the project is the availability of gas supply from East
Kalimantan, according to analysts. Most Kalimantan gas
producers do not have sufficient reserves to fully meet
their commitments to supply the Bontang LNG plant. Most
industry watchers say the Bakrie Group will need to
negotiate with gas producers to ensure sufficient gas
supplies for the pipeline.
Gas Supply Agreements
---------------------
3. On July 24, Britain's BP, Indonesia's Medco and a
consortium of state oil company Pertamina and Amerada Hess
signed gas supply agreements with buyers. The gas contracts
involve an aggregate total of 331 trillion British thermal
units (TBTU) and range from six to eleven years. The
combined value of the contracts is reportedly worth USD 1.5
billion, with a unit price starting at USD 2.7 per mmbtu.
BP will supply state fertilizer producer Pupuk Kujang from
its Offshore Northwest Java field at a contract rate of USD
3.7 per mmbtu. The contract price sets a new benchmark for
gas sold to fertilizer firms. Traditionally, fertilizer
firms paid a unit price ranging from USD 1 - 2 per mmbtu.
Table 1: Gas Supply Agreements
--------------------------------------------- -
Suppliers Buyers Start Contract Volume
Year Years (TBTU)
--------------------------------------------- -
Medco EP Mitra Energi 2007 6.5 6.0
Buana
BP Plc Pupuk Kujang 2007 11 1.4
Pertamina/ PT PLN 2008 12 323.7
Amerada
Biofuel Update
--------------
4. On July 3, Minister of Energy and Mineral Resources
Purnomo Yusgiantoro announced a plan to build 11 biodiesel
plants this year with an annual capacity of 29 million
liters. The country aims to increase biodiesel capacity to
1.3 billion liters by year 2010, or 10 percent of national
transportation fuel consumption. Purnomo said the GOI's
JAKARTA 00009865 002 OF 003
five year plan will require investments totaling Rp 200
trillion (USD 22 billion), including for the purchase of 6
million hectares of land for feedstock cultivation.
Separately, Agriculture Minister Anton Supriantono told
reporters that the GOI will allocate 6 million tons of crude
palm oil (CPO) for feedstock for the biodiesel plants.
Table 2: Projected Biodiesel Supply
-------------------------------------
Year Capacity (Million Liters)
-------------------------------------
2007 187
2008 377
2009 1,200
2010 1,337
Source: Ministry of Energy and Mineral Resources
Acquisition Update
------------------
5. On July 14, Australia's Nullarbor announced the
completion of a farm-out agreement in the Belida Production
Sharing Contract (PSC), South Sumatra. The Australian
company agreed to purchase PT Sele Raya Belida, a 40 percent
interest holder in the Belida PSC. The block is estimated
to contain up to 200 million barrels of oil reserves.
Separately, Nullarbor also said it reached an agreement with
Pertamina to fund a feasibility study for the construction
of a biodiesel plant.
6. On July 12, China's CITIC Resources announced its
acquisition of a 51 percent interest in the Seram (Non Bula)
PSC, Maluku from Kuwait's KUFPEC Ltd. KUFPEC retained a 30
percent interest in the PSC, but Citic will take over
KUFPEC's operatorship until the contract expires in 2019.
The deal was valued at USD 97.4 million, according to media
reports. The PSC covers an area of around 4,500 square
kilometers (kms) with an average production of 4,300 barrels
of oil per day (bopd) in 2006. CITIC is an integrated
natural resources and commodity company listed on the Hong
Kong stock exchange with assets located mainly in Australia
and China.
Fuel Market Update
------------------
7. State petroleum company Pertamina increased industry fuel
prices in July by an average 2.8 percent, owing to a rise in
global crude benchmarks. Pertamina left unchanged the
prices for subsidized higher grade transportation fuels
Pertamax, Pertamax Plus and Pertamina DEX.
Table 2: Unsubsidized Fuel Price Changes in 2006
--------------------------------------------- ------
Fuel Type May June July Change*
--------------------------------------------- ------
Transport**
Pertamax 5,800 6,150 6,150 0.0
Pertamax Plus 6,050 6,250 6,250 0.0
Pertamina DEX 6,100 6,400 6,400 0.0
Industry***
Premium 5,469 6,174 6,502 5.3
Kerosene 5,664 6,182 6,373 3.1
Diesel 5,512 6,288 6,321 0.5
Diesel Oil 5,327 5,789 6,065 4.8
Fuel Oil 3,662 3,745 3,759 0.4
*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 price.
Table 3: Pump Price Comparison (USD/gallon)
-----------------------------------------
Country Unleaded Auto
Gasoline Diesel
JAKARTA 00009865 003 OF 003
-----------------------------------------
Indonesia* 1.84 1.75
Philippine 3.10 2.63
Thailand 2.87 2.69
Singapore 4.30 3.29
USA 3.00 2.98
Note: *Indonesia subsidized price. Prices as of July 31,
2006.
Sources: Pertamina, EPPO, Philippine DOE, EIA
Agincourt Acquired Newmont's Martabe Mine
-----------------------------------------
8. On July 24, Australian listed gold company Agincourt
Resources announced its acquisition of Newmont's Martabe
gold and silver mine in North Sumatra. The company formed a
joint venture with Indonesia's Dharmawangsa Group, which
will have an option of acquiring up to a 30 percent share in
the mine. The Martabe mine covers an area of just over
2,500 kms with estimated gold and silver reserves of 5.3
million ounces and 54.8 million ounces respectively. The
acquisition, which reportedly cost USD 80.25 million, is
scheduled for completion by the end of August 2006.
Agincourt plans to spend USD 165 million to develop the
Martabe mine.
Upgraded Brown Coal Project
---------------------------
9. On July 5, Kobe Steel said it would develop a pilot
project to process Upgraded Brown Coal (UBC) in South
Kalimantan. Low-rank coal has a high moisture content and
low heat value, resulting in less energy value. Indonesia
has an estimated 57 billion tons of coal, over 50 percent of
which is low rank, according to industry analysts. The
proposed plant will process low-rank coal from PT Arutmin
Indonesia's Satui mine, South Kalimantan, turning it into a
cleaner, higher quality coal briquette suitable for use in
power plants. Kobe said the initial plant capacity will be
600 tons per day plant with construction starting by the end
of 2006. The project will cost USD 70 million with a
completion date targeted in 2008, according to the company.
Selected Energy, Mining and Power Statistics
--------------------------------------------
Apr May Jun
Mining
Coal Production (million tons) 10.3 10.1 -
Coal Export (million tons) 7.4 8.4 -
Copper concentrate (`000 dmt) 191.2 206.8 210.2
Copper (`000 ton) 50.6 51.3 55.1
Oil
Oil production (mmbpd) 1.03 1.03 1.03
ICP* Average (USD/barrel) 70.3 70.0 68.1
Note: Preliminary 2006 figures, except for ICP.
* Indonesian Crude Price; dmt (dry metric ton); mmbpd
(million barrels per day); MW (megawatt)
Sources: Directorate of Coal Enterprise, MIGAS, PETRAL
PASCOE