'KBC power project unfeasible'<\/p>\n
Rendi A. Witular, The Jakarta Post, Garut<\/p>\n
State oil and gas company Pertamina has said the Karaha Bodas
\ngeothermal power project in West Java, neglected by its owner for
\nfive years, a commercial failure as it contained too small a
\ngeothermal steam to make its development profitable.<\/p>\n
Pertamina's spokesman Mochamad Harun said the state company
\nwould most likely abandon the project if the Karaha Bodas company
\ncontinued to refuse to resume the project.<\/p>\n
\"According to an assessment done by an international
\nconsultant, the geothermal project is not profitable for
\ndevelopment, because its geothermal reserve is too small.
\nPertamina will likely stop the project,\" said Harun.<\/p>\n
Harun referred to the assessment study done by New Zealand-
\nbased geothermal consultant Malcolm A. Grant in April 2000, which
\nstipulated that the project was not feasible in light of the fact
\nthat the nine-square-kilometer concession held by the Karaha
\nBodas company contained a mere 30 megawatt (MW) proven reserve
\nand a 75 MW probable reserve of geothermal steam.<\/p>\n
In comparison, KBC claimed its concession had enough
\ngeothermal steam to produce up to 400 MW of power.<\/p>\n
In the study, a copy of which was made available to The
\nJakarta Post, it stated that based on international standards, in
\norder for a geothermal power project to be profitable, it must
\nhave a proven reserve of 10 MW per square kilometer. The Karaha
\nBodas project could only be feasible if it had a 90-MW reserve.<\/p>\n
The Grant report further said the Karaha Bodas power project
\nwas also unfeasible given the high hydrogen sulfide (H2S) in its
\nsteam, which quickly causes corrosion in the power generator and
\nother exploration infrastructure.<\/p>\n
The report also said that out of the nine wells explored by
\nthe company, only two contained \"clean\" geothermal steam.<\/p>\n
The Grant report was one of the documents presented by
\nPertamina during hearings at the International Arbitration Panel
\nin Switzerland. Yet the panel of arbitrators decided in favor of
\nthe Karaha Bodas company and ordered Pertamina to pay US$261
\nmillion in compensation to the company, including $100 million in
\ncompensation for expenditures and $150 million for its loss of
\nprofits.<\/p>\n
The company filed an arbitration proceeding against Pertamina
\nas a monopoly holder of geothermal resources under the existing
\nlaw, following the government's decision to delay the project
\nalong with dozens of other power projects on the recommendation
\nof the International Monetary Fund (IMF).<\/p>\n
Pertamina has repeatedly insisted that the $100 million in
\ncosts claimed by Karaha Bodas was too high, but the company, in
\nthe document provided by its spokesman in Indonesia, APCO,
\ninsisted that the cost figures were true. The company claimed
\nthat it had spent the money for drilling, building an artery road
\nand a social center as well as a power generation unit for the
\nadjacent village.<\/p>\n
However, during a recent visit to the location, The Jakarta
\nPost could only see some plugged geothermal wells hidden behind
\nbushes, while the road leading to the location was unpaved and
\ndifficult for a motor vehicle to travel on, a condition which did
\nnot reflect a huge investment.<\/p>\n
The site is located some 8.5 kilometers from Garut, West Java,
\nin the middle of a dense forest. The nearest village is located
\nsome three kilometers away.<\/p>\n
Pertamina officials said the abandoned wells leak a high
\nconcentration of H2S, which, if inhaled during humid weather,
\nwould be fatal to humans. Fortunately, the nearest community is
\nthree kilometers away, outside the deadly range of the poisonous
\ngas, Pertamina officials said.<\/p>\n
Following the arbitration's ruling, a U.S. district court
\nordered Pertamina to pay compensation, but Pertamina has appealed
\nthe ruling.<\/p>\n
Pertamina has also reportedly persuaded Karaha Bodas to resume
\nthe project, but it has been reluctant to do so, which, according
\nto some local analysts, is due to the project's unfeasibility.<\/p>\n
In a related development, a source at Pertamina said the
\ncompany had recently received $80 million from an insurance claim
\nfrom Britain's insurance firm Lloyd's of London.<\/p>\n
It is unclear if this will stop Karaha Bodas from demanding
\nthe $271 million in compensation from Pertamina.<\/p>\n
When asked to comment, an APCO official said he had yet to
\ndiscuss the issue with KBC.<\/p>",
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"sponsor": "Okusi Associates",
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