Exclusive right on geothermal resources lifted

Exclusive right on geothermal resources lifted

JAKARTA (JP): The government has lifted the decade-long
monopoly by state oil and gas company Pertamina on the country's
geothermal resources and transferred the management of the
resources to the regions.

Under Presidential Decree No. 76/2000 issued won May 31, 2000,
a copy of which was made available to The Jakarta Post on
Thursday, the regional authorities hold the right to license the
development of the country's geothermal resources.

The regional authorities also have right to supervise
geothermal projects in their respective territories or cancel the
projects, according to the decree.

Geothermal contracts will be valid for 30 years but regional
administrations may extend the contracts at the request of
investors.

Both private companies and cooperatives are allowed to develop
the country's geothermal resources for power generation for
themselves or the public.

The regional administrations and the central government will
share the royalties, payable by investors.

Under the decree, geothermal investors have to comply with Tax
Law No. 10/1994 as far tax payments are concerned.

The decree noted, however, that the geothermal development
contracts signed by Pertamina prior to the issuance of the decree
were still valid. They still pay taxes to the government in
accordance with the regulations set out in Presidential Decree
No. 49/1991.

Pertamina was granted the monopoly right on geothermal
resources by the government in 1981 through Presidential Decree
No. 22/1981. Under this decree, private companies were not
allowed to generate power from geothermal steam.

In 1991, the government amended the decree with Presidential
Decree No. 45/1991 which allows Pertamina and its contractors to
explore and exploit geothermal resources as well as to generate
electricity using geothermal steam and sell the power to state
electricity firm PLN or to other industries.

Pertamina obtained part of the royalties paid by contractors
to the government as a management fee.

The 1981 decree only produced two geothermal power projects:
the Salak Units 1, 2, and 3 power plants with a total capacity of
165 Megawatts (MW) and the Darajat Unit 1 power plant with a
capacity of 55 MW. Both are located in West Java and are already
operating under PLN's subsidiary, PT Pembangkitan Tenaga Listrik
Jawa Bali I (PJB I).

Pertamina cooperated with Unocal Geothermal Indonesia to
exploit Mount Salak's geothermal resources and with Amoseas
Indonesia Inc. to exploit Darajat's geothermal resources.

The 1991 decree has thus far produced 11 contracts to develop
geothermal power plants across the country, including in Sarulla
and Sibayak, both in North Sumatra; Salak, Patuha, Karaha,
Kamojang, Wayang Windu, Cibuni and Darajat in West Java; Dieng,
in Central Java; and Bedugul in Bali.

All the project owners have signed power purchase agreements
with PLN.

But most of the geothermal projects were suspended by the
government in 1997 and 1998 as part of retrenchment measures to
cope with the economic crisis.

Indonesia has one of the world's largest potential geothermal
resources of to 19,000 MW, only about 350 MW of which has been
used for power generation.

The new decree gives Pertamina a two-year period of
transition, during which the company is still allowed to manage
the country's geothermal sector while gradually transferring all
the documents related to geothermal exploration and exploitation
to the Ministry of Mines and Energy. (jsk)