Oil and gas investment expected to improve in 2004

Oil and gas investment expected to improve in 2004

Fitri Wulandari, The Jakarta Post, Jakarta

The government expects investment in oil and gas, as well as
power sectors, to improve next year on the back of attractive oil
and gas resources and the liberalization programs in the power
sector.

Minister of Energy and Mineral Resources Purnomo Yusgiantoro
said the government expects to sign 15 new oil and gas contracts
next year.

"We are now in the process of offering ten new oil and gas
acreages as well as processing the direct offering of five new
oil and gas blocks," Purnomo said after installing new senior
officials at the ministry on Wednesday.

This year, the government has awarded 16 contracts to oil and
gas production sharing contractors, who pledged a total
investment of around US$300 million.

Director general of oil and gas at the ministry Iin Arifin
Takhyan said the country's oil and gas sector was still
attractive because the country had huge resources which remained
unexplored.

He said of the 60 hydrocarbon basins in the country, only 38
have been explored.

In the power sector, Purnomo said investment was expected to
come from independent power producers in line with liberalization
in the power sector in 2006.

Private participation in the power sector is expected to help
increase power supplies to meet the rising demand. The country is
struggling to tackle the looming power crisis caused by the rapid
growth of power demand and the lack of new investment in power
plants since the economic crisis in 1997.

Demand for electricity now grows at 7 percent annually, higher
than the nation's gross domestic product (GDP) growth of about 4
percent.

Total installed capacity is around 21,000 megawatts (MW) with
some 18,600 MW located in Java and Bali islands. State power firm
PT PLN can only supply between 13,305 to 15,254 of the total
capacity after its own use and maintenance, while the peak load
could reach between 12,000 MW to 13,250 MW.

This leaves PLN with minimum operating reserves of 143 MW.
Ideally, it should have minimum reserves of one big power plant
with a capacity of about 600 MW.

Herman Darnel Ibrahim, PLN's director of transmission and
distribution, said that next year, the company would focus on
upgrading its transmission network to improve power distribution
to subscribers. PLN will spend Rp 2.8 trillion for the upgrading
of transmission and Rp 3.1 trillion for the improvement of
distribution.

"It aims to establish a secure power-supply system before
Tanjung Jati B power plant commences operations in 2006," he
said.

He was referring to the 1,300 megawatt power plant in Jepara,
Central Java which will be rebuilt in the near future, after
being abandoned for years due to the economic crisis.

PLN plans to have 1.5 million new subscribers in 2004, Herman
said.

Purnomo added next year, the government would set up a
regulatory body for the power market that would oversees power
sales as stipulated by Electricity Law No. 20/2002.

"It aims to separate players and referee," Purnomo remarked.

The law promotes the liberalization of the power sector by
scrapping PLN's monopoly and allowing private companies to invest
in the sector.

Starting 2006, under the law, private companies will be
allowed to generate power and sell their power directly to the
public.

They will also be allowed to set up their own distribution and
transmission networks in cooperation with the government or use
the state-owned network now operated by PLN to supply their
power.