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