Volcanic benefits
The Nov. 22 eruption of the Merapi volcano near Yogyakarta that killed more than 50 people reminded us of the potential for disaster in the 127 volcanoes that ring our country. Indeed, the nature of Indonesia's geology is such that the country is often dubbed a ring of fire.
On the positive side, however, it is the large andesitic volcanic cones that generate huge geothermal resources, which will produce power to fuel the country's economic growth.
It might simply be a coincidence that only a few weeks after we were shocked by the horror that a volcano could cause, two new geothermal power stations in West Java will be dedicated on Thursday, and four contracts were signed early this month for the exploration and development of geothermal resources in West Java and Central Java.
The contracts involving Pertamina, the State Electricity Company and Indonesian-American joint ventures will eventually bring in total investments of more than US$3 billion and produce an additional power generating capacity of about 1,400 megawatts.
Even though the full benefits of the deals will be felt only within the next seven to eight years, the projects are surely a greatly welcomed development at a time when the doomsday scenario for the country's oil resources, which now supply more than 70 percent of its commercial power, seems to be coming closer and closer to reality. Almost all analysts predict that Indonesia could become a net oil importer by the year 2010 at the latest. That grim scenario is of course based on the assumptions that the oil consumption will continue to grow by six percent a year and that no new significant oil reserves will be discovered.
The additional power from the four geothermal power plant projects will surely help delay the predicted "oil doomsday". Since one megawatt to be generated by the geothermal power projects will save the equivalent of 12,775 barrels a year, the four projects will thus be able to save around 17.8 million bbl a year worth US$303 million at the current average price.
The conclusion of the four contracts is expected to attract more foreign investors to tap more geothermal resources in Java, Bali, Sumatra and Sulawesi. Pertamina and the geology department have thus far identified more than 8,000 MW of possible, probable and proven geothermal resources on the four islands. Now that the standards of contracts have been established, negotiations with new investors are expected to be much more expedient.
Contractual terms have thus far been the main barriers to the harnessing of the geothermal resources, which actually started in 1982 with the startup of a 30-MW plant at Kamojang in West Java. Two contracts were awarded in 1982 and 1984 to Union Oil Co. and Amoseas for geothermal resource development, also in West Java. But it took about 10 years before the four new contracts were concluded. Today, only about 300 MW of the resources have been developed, including the two new plants which will be dedicated by President Soeharto.
The latest deals also have produced a new, better concept. Different from the 1982 and 1984 contracts that required the State Electricity Company to build the power plants because the foreign contractors are responsible only to supply the steam, the new contracts call for the contractors to bear all the costs of geothermal development and power stations. This new arrangement should speed up the development of geothermal power resources.
There are more benefits from the harnessing of geothermal resources. Since geothermal resources are usually located in rural areas their development also will contribute greatly to rural development. Moreover, geothermal steam can be used not only to generate power, but also for heating rooms for drying agricultural produce and fishery products. So all in all, the special nature of the geology of our country, with its extensive chain of volcanoes, does not only spell potential danger. It also provides us with an alternative source of large amounts of commercial energy.