Cablegate: Bilateral Energy Dialogue Back On Track

VZCZCXRO5050
RR RUEHCHI RUEHDT RUEHHM
DE RUEHJA #1657/01 1651052
ZNR UUUUU ZZH
R 141052Z JUN 07
FM AMEMBASSY JAKARTA
TO RUEHC/SECSTATE WASHDC 5100
RHMFIUU/DEPT OF ENERGY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHDC
INFO RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS
RUEHKO/AMEMBASSY TOKYO 0545
RUEHBY/AMEMBASSY CANBERRA 0825
RUEHBJ/AMEMBASSY BEIJING 4117

UNCLAS SECTION 01 OF 03 JAKARTA 001657

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: Bilateral Energy Dialogue Back On Track

1. Summary. (SBU) A U.S. Department of Energy Delegation led by
Principal Deputy Assistant Secretary (PDAS) for Policy and
International Affairs Katharine Fredriksen reached agreement with
the Government of Indonesia (GOI) to resume the U.S.-Indonesia
bilateral Energy Policy Dialogue (EPD), which has been dormant since
the last meeting in Jakarta in August 2005. In a series of meetings
on June 6 and 7 with top GOI energy officials PDAS Fredriksen
received the clear message that Indonesia wishes to re-engage on the
EPD. She proposed holding a meeting in September or October 2007,
perhaps in conjunction with a mission to Indonesia by the U.S.-ASEAN
Business Council/U.S.-Indonesia Business Council to ensure extensive
private sector participation. Minister of Energy and Mineral
Resources Purnomo Yusgiantoro said Director General of Oil and Gas
Luluk Sumiarso would lead the talks for the GOI. The Indonesians
offered to host the meeting in Jakarta or Bali to discuss coal and
coal bed methane (CBM), nuclear power, electricity, biofuels and
renewable energy, oil and natural gas development, and the
environment and energy efficiency. PDAS Fredriksen said the GOI's
broad draft agenda for the EPD would require a robust U.S.
delegation, possibly including several DOE offices, Ex-Im Bank,
OPIC, Environmental Protection Agency, Department of Interior, and
the U.S. Geological Survey. End Summary.

Meeting with Energy Minister Purnomo
------------------------------------

2. (SBU) A U.S. Department of Energy Delegation visited Jakarta from
June 5 to 9 led by Principal Deputy Assistant Secretary for Policy
and International Affairs Katharine Fredriksen. The delegation
reached agreement with the GOI to resume the U.S.-Indonesia
bilateral EPD, which has been dormant since the last meeting in
Jakarta in August 2005. The DOE delegation reached tentative
agreement on a broad and ambitious agenda encompassing a gamut of
issues from biofuels to nuclear power (see para 6). Minister
Purnomo quickly accepted PDAS Fredriksen's offer to resume the EPD
when he received the delegation on June 7. Purnomo said the GOI
would welcome talks on technical cooperation and policy dialogue on
a host of topics. In particular he mentioned the desire to discuss
best practices for fiscal policy in the upstream regulatory
environment to properly align incentives that promote increased
petroleum exploration and production, which has been on a steady
eleven year decline. PDAS Fredriksen emphasized the importance that
the USG attaches to energy security and the vital role that a
healthy Indonesian energy sector plays in that strategy. Purnomo
said that while petroleum and coal will remain crucial to the GOI's
own energy security needs, it is also determined to develop new fuel
sources like biofuels, CBM, coal liquefaction, and nuclear power.

3. (SBU) PDAS Fredriksen said that she hoped that Assisant Secretary
of Policy and International Affairs Karen Harbert would lead the
U.S. delegation. If she was unavailable then PDAS Fredriksen would
lead. Regardless of the head of delegation, she said the agenda
would require a robust U.S. delegation including several offices of
DOE, encompassing clean coal technology, nuclear energy,
electricity, and energy data. She said, for example, the Department
of Interior's Minerals Management Service, which controls oil and
gas and geothermal leases on the U.S. continental shelf and federal
land, could best speak about U.S. best practices in the upstream
exploration and production sector. PDAS Fredriksen also said that
any discussion of the environmental aspects of energy production
should include the U.S. Environmental Protection Agency.

4. (SBU) Fredriksen closed by offering to host a follow-on visit to
the U.S. by Purnomo. In response to Purnomo's comments on the GOI's
determination to boost electricity generation through nuclear power
and more coal fired power plants, Fredriksen offered the possibility
of a tour of the Calvert Cliffs nuclear plant and the DOE's National
Energy Technology Laboratory, as well as the National Renewable
Energy Laboratory. Purnomo also asked that the USG consider
including a member of the FERC on the EPD delegation. In closing
the meeting Purnomo named Director General of Oil and Gas Luluk
Sumiarso as the GOI delegation leader.

Meeting with Oil and Gas DG Luluk Sumiarso
------------------------------------------

5. (SBU) The DOE delegation met later in the afternoon on June 7
with Sumiarso where we agreed on a preliminary format and named
respective sherpas to do the working level preparations. Sumiarso
named Edy Hermantoro, Director of Oil and Gas Program Preparation as
the GOI Sherpa, while PDAS Fredriksen nominated herself and Tom
Cutler on her staff. Both sides agreed that the business community

JAKARTA 00001657 002 OF 003

should be integrated into the talks but also that the two
governments need time devoted purely to policy discussions without
business at the table to promote candor and free exchange.

6. (SBU) On June 8, DOE delegation members engaged with Hermantoro
for over 90 minutes sharing ideas and collecting feedback on the
initial draft agenda tabled by DOE. The outcome of this meeting was
the draft agenda below, which both sides agreed still needs to be
approved by DOE headquarters in Washington and the MEMR.

Day One
-------

I. Plenary Opening Session (industry invited)
- Address by Minister Purnomo.
- Address by Head of U.S. Delegation.
- Opening remarks by Indonesian business leader.
- Opening remarks by U.S. business leader.

II. Group Photo Session

III. Energy Outlook Presentations. (industry invited).
- World Energy Outlook by U.S. experts.
- Southeast Asia Energy Outlook by Indonesian experts.
- U.S. Energy Outlook by U.S. experts.
- Indonesian Energy Outlook by Indonesian experts.

IV. Lunch (industry invited)

V. Concurrent Break-Out Sessions (G-to-G only)

Room 1 - Coal and Coal Bed Methane.

Room 2 - Electricity and Nuclear Power.

Room 3 - Biofuels and Alternative Energy.

Room 4 - Oil and Natural Gas Sector Development.

Room 5 - Environment and Energy Efficiency.

VI. Welcoming Dinner.

Day Two
-------

VII. Reports from Break Out Sessions (G-to-G only).

VIII. Energy Trade and Investment (industry invited).

IX. Closing remarks by heads of delegations (industry invited).

X. Press Conference

XI. Closing Luncheon (industry invited).

Day Three
---------

The Indonesians suggested the following Site Visit options:
- LEMIGAS Oil and Gas Laboratory in Jakarta.
- LEMIGAS CBM Project, Jakarta.
- PT Rajawali Biofuels Plant, Jakarta.
- IPP or Electricity Power Plant in North Jakarta or Banten
Province.
- Gas Pipeline at Bojonegara, Banten.
- Suralaya Coal-Fired Power Plant, Banten.
- Mini NPP Project, Serpong, Tangeran, Banten.
- Geothermal Power Plant (Kamojang or Gunung Salak) West Java.

7. (SBU) The U.S. delegation had broached the idea of convening the
EPD in September or October. The GOI representatives welcomed that
time frame but cautioned that most Indonesians will be fasting for
Ramadan from 13 September until 15 October. In our experience this
time of year is less than optimal in terms of productivity.
Consequently, Embassy recommends that we schedule the EPD outside of
those four weeks. As has also been the GOI custom in recent years
to aid the struggling tourism sector, our GOI interlocutors made
several references to the possibility of holding the EPD in Bali.
DOE delegation members said a Bali venue complicates participation
by U.S. private sector participants, who are based in Jakarta and
would be reluctant to fly to Bali for the limited amount of time

JAKARTA 00001657 003 OF 003

allocated for the their participation in the talks. Our GOI
interlocutors took this onboard with equanimity, but are likely to
continue pushing to help the Bali tourism sector.

8. (SBU) Comment: Conditions in the energy sector in Indonesia are
far from ideal, but the GOI has made some bold policy moves in the
last two years. Our GOI interlocutors are the first to admit they
still have much work to do in the energy sector. Still, we believe
the Yudhoyono administration is genuinely committed to improving the
policy and investment climate for foreign energy companies, which
will be vital to reaching the GOI's goal of 1.3 million bpd
petroleum production. We have observed a noticeable upturn in
optimism from U.S. energy companies in the last six to eight months.
They are broadly supportive of President Yudhoyono and encouraged
by the GOI's rhetorical commitment to improved execution and
efficiency by the upstream regulator. We believe reinvigorating the
EPD will be a concrete and warmly welcomed sign of USG commitment to
helping Indonesia meet its energy security needs while lowering
poverty through increased economic growth. Our GOI interlocutors
reacted uniformly with enthusiasm to the idea of technical and
policy formulation cooperation. We encourage Washington agencies to
participate as broadly as possible.

9. PDAS Fredriksen cleared this cable.

Heffern

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