Pertamina, Unocal, PLN in geothermal talks

Pertamina, Unocal, PLN in geothermal talks

SINGAPORE (Dow Jones): Unocal Corp. is in continued discussions with Indonesia's oil and gas company Pertamina and power utility PT Perusahaan Listrik Negara to "move forward" the Sarulla geothermal project in North Sumatra, Unocal's Vice President for Commercial Affairs Barry Andrews told Dow Jones Newswires late Thursday.

Unocal has drilled 13 wells on the site, which has confirmed resources in excess of 400 megawatts, Andrews said. The company has identified two development areas: Silangkitang with a capacity of 100 MW, and Namora-I-Langit, which can support three generation units totaling 210-290 MW.

The Sarulla project, which was postponed following the 1997 devaluation of the rupiah, could meet a growing need for power in the area south of Lake Toba, Andrews said.

Negotiations are taking place on two fronts. Unocal North Sumatra Geothermal Ltd. must negotiate its contract with Pertamina to develop and operate the plant. Pertamina, together with Unocal, must reach an agreement with PLN on the terms of the energy sales contract.

Unocal is also in talks with PLN over the Salak geothermal project in West Java. A Unocal unit provides steam to Salak's six units, each with a capacity of 55 MW, and operates three of them through a joint venture.

The Salak project is in operation while talks continue over billing rates, Andrews said.

After 1997, PLN was unable to fulfill the terms of many power purchase agreements signed with independent power producers. Some projects were put on hold, while many others are currently being renegotiated.

However, increased country risk and the need for sufficient return to finance new projects mean PLN will have to agree to higher rates if it wishes to attract future power sector investment, Andrews warned.