KBC power project unfeasible: Pertamina<\/p>\n
Rendi A. Witular
\nThe Jakarta Post
\nGarut<\/p>\n
The Karaha Bodas geothermal power project in West Java, which
\nhas been neglected by its owner for five years, was a failure
\ncommercially as it contained too small geothermal steam to make
\nits development profitable, state oil and gas company Pertamina
\nsaid.<\/p>\n
Pertamina's spokesman Mochamad Harun said the state company
\nwould most likely abandon the project if Karaha Bodas Co. (KBC)
\nkept refusing to resume the project.<\/p>\n
\"According to an assessment by an international consultant,
\nthe geothermal project is not profitable for development, because
\nits geothermal reserve is too small. Pertamina will thus likely
\nto stop the project,\" said Harun.<\/p>\n
Harun referred to the assessment study made by New-Zealand
\nbased geothermal consultant Malcolm A. Grant in April, 2000,
\nwhich stipulated that the project was unfeasible in light of the
\nfact that the nine-square-kilometer concession held by KBC
\ncontained a mere 30-Megawatt (MW) proven reserve and a 75
\nprobable 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
Grant, in its study, whose copy was made available to The
\nJakarta Post, stated that based on the international standard, in
\norder to be profitable, a geothermal power project must have a
\nproven reserve of 10 MW per one square kilometer. The Karaha
\nBodas project could thus only become feasible it had a 90-MW
\nreserve.<\/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 to the power generator and
\nother exploration infrastructure.<\/p>\n
The report also said out of nine wells explored by KBC, only
\ntwo 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
\nKBC, ordering Pertamina to pay US$261 million in compensation to
\nKBC, including $100 million in compensation for spending and $150
\nmillion in compensation for loss of profits.<\/p>\n
KPC filed an arbitration proceeding against Pertamina, as the
\nmonopoly holder of geothermal resources under the existing law,
\nfollowing the government's decision to delay the project along
\nwith dozens of other power projects on the recommendations of the
\nInternational Monetary Fund (IMF).<\/p>\n
Pertamina has repeatedly insisted that the $100 million costs
\nclaimed by KBC was too high, but KBC, in the document provided by
\nits spokesman in Indonesia APCO, insisted that the cost figures
\nwere true. The company claimed it had spent the money for
\ndrilling, building an artery road and a social center and power
\ngeneration unit for the adjacent village.<\/p>\n
However, during a recent visit to the location, The Jakarta
\nPost only saw some plugged geothermal wells hidden behind bushes,
\nwhile the road leading to the location was unasphalted and barely
\npassable. A condition which did not 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 located some
\nthree kilometers away.<\/p>\n
Pertamina's officials said the Karaha Bodas abandoned wells
\nnow leak out a high concentration of H2S, which, if inhaled
\nduring humid weather, could kill men. But, fortunately, the
\nnearby community live three kilometers away -- outside the impact
\narea of the dangerous gas, Pertamina officials said.<\/p>\n
Following the arbitration's ruling, a U.S. district court has
\nordered Pertamina to pay the compensation, but Pertamina has
\nappealed the ruling.<\/p>\n
Pertamina has also reportedly persuaded KBC to resume the
\nproject, but KBC was thus far reluctant to do so, which according
\nto some local analysts due to the unfeasibility of the project.<\/p>\n
In related development, a Pertamina source said KBC had
\nrecently received $80 million in insurance claim from Britain's
\ninsurance firm Lloyd of London.<\/p>\n
It remains unclear if this would stop KBC from demanding the
\n$271 million compensation from Pertamina.<\/p>\n
When asked for comments, an APCO official said he had yet to
\ntalk with KBC on the issue.<\/p>",
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