THE COORDINATING MINISTRY FOR ECONOMIC AFFAIRS

REPUBLIC OF INDONESIA

Main Building, Ministry of Finance, Jl. Lapangan Banteng Timur No.2-4 Jakarta Pusat

Tel: (021) 380-8384    Fax: (021) 344-0394    Website: http://www.ekon.go.id

 

Trade and Investment News, 13 June 2005

 

 

Highlights

 

Politics

·         Parliament urges the government to oppose Myanmar's leadership of ASEAN

·         Indonesia-Malaysia Want to Settle the Ambalat Bloc Amicably

Economy

·         The central bank says the rupiah’s weakness is only tracking movement of other currencies

·         The tight monetary policy is to continue to further rein in inflation

·         Government and parliament agreed on a strong set of forecasts for the year

 

Business briefs

Macroeconomy

·         New government bond issues this week

·         Bank Indonesia spells out more plans for the banking sector

Investment

·         Malaysia’s Asiatic Development Bhd plans to develop 98,300 hectares of palm oil plantations

·         Chinese investors have committed to investing up to $8.6 billion in the palm oil sector

Private sector

·         A new CEO at major telecommunications operator PT Indosat

·         PT Indofood Sukses Makmur buys two crude palm oil (CPO) firms

·         Automotive spare part producer PT Astra Otoparts signs a loan agreement with the International Finance Corp.

State concerns

·         President Yudhoyono launches a campaign for agricultural revitalization

·         Operators of 3G telecommunications licenses will have to pay an up-front fee

·         The Forestry Ministry raised the logging quota, winning applause from the timber industry

Banks

·         Bank Indonesia to take a new step in the enunciation of its 10-year blueprint for the industry

Power

·         Japan's Sojitz Co. Ltd. will build a $1.4 billion coal-fired power plant in South Sumatra

·         Natural gas producers and companies signed agreements worth a total of $850 million for gas for power use

Oil & gas

·         Indonesia remains a net exporter of oil and may increase output soon, Energy Minister Purnomo Yusgiantoro told a conference

·         The government hopes to soon get the Cepu block up and running

Mining

·         BHP Billiton may spend $300 million developing a new mine in Indonesia

 

 

 

 

 

 

 

POLITICS

House Frowns on Myanmar

The House of Representatives is urging the Government to oppose Myanmar's leadership of the Association of Southeast Asian Nations (ASEAN) next year, and to boycott ASEAN forums under its leadership, unless the military junta immediately puts democratic reforms into place.


A total of 35 out of the 48-member House commission I on foreign affairs signed a petition calling on the Government to step up the pressure on
Myanmar, in concert with other ASEAN nations, to miss its turn at leading the organization. 


The petition was handed to Foreign Minister Hassan Wirayuda during a hearing on Wednesday (
8/6/05).


By tradition, the chairmanship of the 10-member ASEAN is rotated in alphabetical order, with
Myanmar scheduled to take over from Malaysia next year.


"We also urge ASEAN members to tell
Myanmar that its membership could be frozen if it takes the lead spot but fails to carry out reform measures," said legislator Djoko Susilo, who heads the ASEAN inter-parliamentary caucus for democracy in Myanmar.


Commenting on the demand, Hassan said that a meeting last April of ASEAN foreign ministers in
Cebu, the Philippines, agreed to wait until July for Myanmar to decide whether or not it would take the leadership.


"All of the nine foreign ministers tried to convince
Myanmar not to take the top spot, and I have a feeling that Myanmar will bow to that request and give the spot to the Philippines instead," he said.


If that was the case, Hassan said
Myanmar would be allowed to claim the leading spot at any future time, without having to wait for its turn to come around again, after making concrete efforts to carry out reforms toward democracy and political reconciliation.


"ASEAN's stance is clear, actually. We welcome
Myanmar's road map to democracy, but also urge that the process involves all groups there, including the National League for Democracy (NLD) led by Aung San Suu Kyi," he explained.

 

Prisoner Exchange Possible

President Susilo Bambang Yudhoyono ordered his ministers on Thursday (9/6/05) to study the possibility of signing an agreement with Australia on the transfer of convicted felons.


"The President assigned the foreign minister and other concerned ministers to look into the possibility of
Indonesia signing a prisoner exchange agreement with Australia," Foreign Affairs Minister Hassan Wirayuda told reporters.


Under such a deal, Schapelle Corby, an Australian beauty therapist sentenced last month to 20 years in prison in
Bali, will be allowed to serve time in her homeland.


Such an agreement would require
Indonesia to amend its Criminal Code, which stipulates that foreigners convicted of a crime in Indonesia serve their sentences in the country,
Hassan said as was quoted by Agence France-Presse.


Any prisoner exchange deal would also pave the way for the transfer of 30 Indonesians and the repatriation of 14 other Australians.

 

Malaysia Wants Amicable Settlement

Foreign Affairs Minister Hassan Wirayuda said Wednesday (8/6/05) that Malaysia wanted to settle the Ambalat oil block dispute in an amicable manner.


Speaking to members of parliamentary commission I for defense, foreign and political affairs, Hassan said that technical teams from both sides held their last meeting on May 25-26.


Malaysia's recent claim on the Ambalat block in the Sulawesi Sea off the island of Borneo, sparked widespread demonstrations against the claim throughout Indonesia earlier this year.

 

One of the key items on the agenda is to thoroughly discuss the United Nations Convention on the Law of the Sea (UNCLOS) 1982, Hassan said. "Compromises reached during the last meeting are expected to help boost discussions toward a more concrete direction in the next negotiations," he added.


 

 

ECONOMY

Rupiah Decline ‘Temporary’

As business trembled as interest rates continued to move up, the central bank moved to reassure the market, saying the rupiah’s decline against the US dollar was only temporary, while the government went more upbeat, predicting stronger growth this year.

 

"If we consider our macroeconomic fundamentals, then the rupiah will be able to strengthen over the medium to long term," Bank Indonesia (BI) deputy governor Aslim Tadjuddin said Friday (10/6/05). He pointed out that the economy had grown by 6.35% in the first quarter and inflation was lower.

 

Parliament and government sat together to produce a more rosy view of the near future. They upped the growth figure to 6%, up from 5.4%. The revised budget will also assume an average Indonesian crude oil price of $45 a barrel, up from $24. Crude oil and condensate output estimate is still pegged at 1.125 million barrels/day.

 

The cost for the fuel subsidy, despite the 29% average rise in the price of fuel on March 1, is expected to reach Rp76.5 trillion ($7.98 billion) this year, according to the revised state budget, up from Rp19 trillion forecasted earlier.

 

BI Governor Abdullah promised that intervention on the foreign exchange market would be short-lived. "Intervention is only for a short term. We cannot stay like this. We need to keep the economy in balance to solve this problem." Bank Indonesia warned earlier this year that the high cost of oil imports is biting into the country’s reserves.

 

Abdullah added that becoming a net oil exporter once again would be an important goal in trying to maintain balance in the economy.

 

The central bank said the tight control of monetary instruments would remain in place while inflation continued high.

 

“The Bank Indonesia board of governors meeting decided that in order to maintain macro economic stability, especially for controlling inflation in the medium term, Bank Indonesia will continue its tight bias monetary policy,” the central bank said in a statement.

 

Bank Indonesia has been gradually raising the benchmark rate on its one-month Bank Indonesia Certificates (SBI) from a historic low of 7.32% in May 2004 to 8.02% in last week's auction. So far commercial banks have yet to raise their rates, still enjoying an adequate spread.

 

BUSINESS BRIEFS

MACROECONOMY

PPA Transfers Cash

State-asset management firm PT Perusahaan Pengelola Aset (PPA) turned over Rp1.3 trillion to the government during the first half, representing proceeds of the sale of minority interests in PT Bank Internasional Indonesia and PT Bank Niaga, PPA president Mohammad Syahrial said, AFX reported.

 

PPA is tasked to raise a total of at least Rp4.0 trillion this year by selling state assets left over by the now defunct Indonesian Bank Restructuring Agency (IBRA).

 

Syahrial told reporters at the Ministry of Finance that to meet the target PPA will have to sell property assets in the second half.

 

The agency still holds minority stake in several banks but Syahrial said that current market conditions are not conducive for selling the assets.

 

He said 60% of around 4,000 property units currently managed by PPA are in 'ready-to-sell' condition.

 

Bank Capital Requirement to Rise

Bank Indonesia is to issue a regulation requiring all banks to have capital of at least Rp80 billion ($8.42 million) by 2007.

 

Head of the Financial Stability Bureau at Bank Indonesia, Muliaman D. Hadad, said the regulation is issued earlier than previously scheduled to speed up banking consolidation.

 

Deputy Governor of Bank Indonesia Maulana Ibrahim said sanctions will be imposed for failure to meet the regulation on capital.

 

Ibrahim said tight competition among small banks necessitated additional capital in line with the Indonesian Banking Architecture (API).

 

Implementation of API in the next five to 10 years will require international banks to have capital at least Rp50 trillion, and local banks at least Rp10 trillion.

 

New Bond Offering

The government plans to offer up to Rp2.5 trillion ($263 million) worth of securities to public investors next week, the Ministry of Finance's Director General of State Treasury Mulia Nasution said Tuesday (7/6/05), The Jakarta Post reported.

 

The June 14 bond sale would be a two-tranche auction, in which the government will put up 11-year and 15-year treasury bonds for bidding. "The total indicative target for the bonds is Rp2.5 trillion," he said.

 

Last month, the government sold Rp4.65 trillion of two-year bonds, priced to yield 9.71%, and 11-year bonds priced to yield 11.29%.

 

Last year, Indonesia sold Rp32.5 trillion in bonds, including $1 billion of global bonds in March. The government has already sold a similar-sized global bond in April this year.

 

 

SBI

Interest rates on Indonesia's key one-month debt paper (SBIs) edged up as expected at a central bank auction on Wednesday (8/6/05).

 

The rate on one-month certificates rose four basis points to 8.02%, extending a trend that has seen the rate rise around 60 basis points so far this year as the central bank has tried to contain inflation, Reuters reported.

 

The central bank absorbed Rp12.5 trillion ($1.30 billion) from the auction, against a target of Rp7.5 trillion and Rp4.3 trillion of maturing paper in the week.

 

Analysts were divided on the future direction of Indonesian rates, with some noting that the inflation rate was falling.

 

Forex Reserves

Bank Indonesia said its foreign exchange reserves fell to $34.61 billion as of May 31 from $34.89 billion in the previous week due to foreign debt repayments.

 

Base money rose Rp3.87 trillion over the week to Rp189.23 trillion, driven by a rise in money in circulation.

 

 

 

INVESTMENT

More Malaysian CPO Activity

Malaysia’s Asiatic Development Bhd has announced plans to develop a total of 98,300 hectares of palm oil plantations in Indonesia, AFX reported.

 

Asiatic said it is moving into Indonesia through several joint ventures with the Sepanjang Group to develop a total of 98,300 hectares of palm oil plantations in West Kalimantan.

 

The land may be used for 35 years with the right of extension for another 25 years.

 

Asiatic will have 70% equity in the joint ventures with an initial investment outlay of RM1.46 million ($384,000).

 

The venture will enable Asiatic to raise its land bank by 150%, to 164,316 ha from 66,016 ha previously, at a very low entry cost, analysts said.

 

The government believes the plantation sector will grow by an average of 6.27% per annum over next five years, spurred on largely by the rapid expansion of output in key commodities, according to the Ministry of Agriculture.

 

The sector is expected to grow from an estimated 6.01% this year to 6.49% in 2009, the ministry said in its five-year plan document.

 

Chinese Interest in CPO

Chinese investors have committed to investing up to $8.6 billion in Indonesia's palm oil sector over the next five years, Coordinating Minister for the Economy Aburizal Bakrie said Wednesday (8/6/05), The Jakarta Post reported.

 

Bakrie said he had asked the Indonesian Chamber of Commerce and Industry (KADIN) to follow up on the commitment, but did not name the potential investors. 

 

KADIN chairman Mohamad S. Hidayat said the promise of investment came at a time when Indonesia desperately needs to expand its stagnant agricultural industry, including the palm oil sector.

 

KADIN would organize between 40 and 50 industry players to be involved in the projects, to be located outside Java with Sumatra, Sulawesi and Kalimantan the main options, he said.

 

Proton to Start Operations

Malaysia's former Prime Minister Mahathir Mohamad said Wednesday (8/6/05) automaker Proton Holdings Bhd. would start operation of its Indonesian car assembly plant by the end of June.

 

"We'll be starting operations this month," he said at the launch of Proton's new compact car. Mahathir is adviser to Proton, Southeast Asia's biggest carmaker.

 

The assembly plant will produce the compact Gen.2 and Wira models. Production will be 8,000 units a year initially, Mahathir said. Capacity of the plant is 50,000 units a year, he added.

 

Proton Chairman Mohd. Azlan Hashim said cars assembled at the Indonesian plant will qualify for tax breaks under the ASEAN Free Trade Area agreement.

 

The Indonesian plant is a joint venture between Proton and Malaysian auto parts-maker Tracoma Holdings Bhd.

 

 

 

 

PRIVATE SECTOR

New Chief at Indosat

PT Indosat got a new chief executive officer on Wednesday (8/6/05), as management reported a 73.1% decline in its profit for 2004, The Jakarta Post reported.

 

Shareholders appointed Hasnul Suhaimi, formerly the firm's director of consumer marketing, as president director to replace Widya Purnama, who was appointed by the government to lead state oil and gas company PT Pertamina in August last year.

 

Caretaker Ng Eng Ho was named deputy president director, while Johny Swandi Sjam was appointed to replace Hasnul as director of consumer marketing.

 

Hasnul said after the meeting that Indosat's net profit fell to Rp1.63 trillion ($171.58 million) last year from Rp6.08 trillion in 2003.  The higher 2003 figure represented additional revenue from restructuring transactions involving entities under cross-ownership transactions with PT Telkom.

 

Shareholders agreed that 50% of the net profit should be distributed to shareholders as a dividend of Rp154.23 per share.

 

Hasnul said Indosat hoped to increase the number of its cellular subscribers significantly with the introduction of new incentives, such as lower rates for new subscribers registered by family members or friends.

 

"During the April to May period alone, we were able to net 1.6 million new subscribers, as compared to 430,000 during the January to March period."

 

Indosat, with 12 million subscribers as of May, currently controls 33% of the cellular market.

 

Meanwhile Standard & Poor's Ratings Services said it has assigned a 'BB-' on PT Indosat's proposed seven-year $200-250 million senior unsecured notes due in 2012.

 

The notes will be issued by Indosat's wholly-owned unit Indosat International Finance Co B.V. and proceeds will be used mainly for funding capital expenditure, S&P said in a statement.

 

'Indosat's leverage position is likely to remain moderate, and the additional debt is within Standard & Poor's expectations,' the agency's credit analyst Yasmin Wirjawan said.

 

Indofood Takes CPO firms

Instant noodle producer PT Indofood Sukses Makmur said it has completed a Rp175 billion acquisition of two West Kalimantan-based crude palm oil (CPO) firms to expand its CPO plantation area by 46% to 86,639 hectares, AFX reported.

 

Indofood unit PT Salim Ivomas Pratama settled the acquisition by paying Rp17.5 billion rupiah to Hong Kong-based company Reserve Cash Ltd on June 1, Indofood said in a statement to the Jakarta Stock Exchange.

 

Salim Ivomas now indirectly owns stakes in CPO plantation firms PT Kebun Ganda Prima (KGP) and PT Citranusa Intisawit, it said.

 

It controls the two firms via Mauritius-based Silveron Investments Ltd, in which Salim Ivomas acquired a 100% stake from Reserve Cash, Indofood said.

 

Astra Otoparts Wins IFC Loan

Automotive and motorcycle spare part producer PT Astra Otoparts said it has signed an agreement for a $24 million loan from the World Bank's lending arm, the International Finance Corp (IFC).

 

The agreement was signed on Monday (6/6/05) and will help the company produce and develop automotive and motorcycle components, Astra Otoparts said in a statement.

 

New Ships for Fishing Co.  

Fishing processing company PT Dharma Samudera Fishing Industries said it will buy new vessels to transport fish from eastern Indonesia to its fish processing plants, Antara reported.

 

Director Andi Sutjiamidjaja said the company will spend Rp10 billion ($1 million) on the vessels, and will also build new cold storage facilities.

 

The company currently operates fish processing factories in Kendari, Southeast Sulawesi, and Jakarta, and a third in Batam is no longer active.

 

Pan Asian Water Enters Market

Singapore’s Pan Asian Water Solutions (PA Water) has formed a subsidiary in Indonesia, to become its fourth office in Asia, Business Times reported.

 

PT Pan Asian Water Solutions will import and export water-treatment products.

 

CEO Francis Koh said rapid urbanization and industrialization provided enormous scope for the company’s operations. Pan Asia is also operating in Vietnam and Hong Kong.

 

 

 

STATE CONCERNS

Pitch for Agriculture Funds

President Susilo Bambang Yudhoyono launched on Saturday the national agriculture revitalization program, an occasion preceded by much discussion of the need for massive investment in the sector. 

 

The launch of the program, which also includes the fishery and forestry sectors, at Jatiluhur reservoir on Saturday (11/6/05) saw the president hand over rice seeds, fingerlings and tree seedlings to farmers and fishermen.

 

The government is pitching for major investment in the agriculture sector, saying it needs up to Rp77.7 trillion ($8.11 billion) over the next five years.

 

The Ministry of Agriculture says the aim is to boost growth in the sector from the current level of 2.97% to around 3.58%.

 

Minister of Agriculture Anton Apriyantono said the government wanted to maintain and develop rural infrastructure as well as provide financing schemes for farmers.

 

Late last month, the government offered 10 agricultural projects worth $1.57 billion to a Middle East-based group of investors, spearheaded by the Islamic Development Bank (IDB).

 

The government said Wednesday (8/6/05) it was framing an ambitious long-term plan to create 25 million hectares of new rice paddy fields by 2025, Antara reported.

 

Coordinating Minister for the Economy Aburizal Bakrie said the new fields would make up for the loss of existing paddy areas.

 

He said the ambitious target was part of the government's general agricultural policy and spatial plan launched in April.

 

The government would also announce a general policy on village infrastructure development in October and another on trade, agriculture, fisheries and forestry in November, he said.

 

The policies would help attract new investment into the sector from farmers, the private and banking sectors and regional administrations to help support agriculture development, he said.

 

Up-front Fee for 3G

The provision of 3G telecommunications licenses took a new step last week with Communication and Information Minister Sofyan Djalil saying operators will have to pay an up-front fee.

 

“We are now finalizing the regulation as the basis to impose an up-front fee,” Bisnis Indonesia quoted him as saying.

 

Djalil said the fee amount will be a key factor in selecting the winner in an open tender for 3G licenses. “All operators must pay an up-front fee including existing operators. So, if they fail, their license should be returned,” Djalil said.

 

There are currently two operators with 3G licenses - Cyber Access Communication (CAC) and PT Natrindo Telepon Seluler (NTS).

 

The government plans to allow all existing GSM operators including PT Telekomunikasi Indonesia, PT Indosat, PT Telkomsel and Excelcomindo to bid for the spectrum.

 

Logging Quota Raised

The Forestry Ministry has raised the logging quota from 5.4 million cubic meters to 7.9 million cubic meters for this year, winning immediate applause from the industry, Antara reported.

 

Agung Nugraha, secretary general of the Association of Forestry Companies (APHI), said the policy will help the industry, which has capacity to use more than 40 million cubic meters a year. The policy aims to preserve tropical forests.

 

Forestry Minister M.S. Kaban said the logging quota is too small, contributing to rampant illegal logging.

 

Staples in EPA List

Indonesia and Japan have agreed to include rice, timber and fishery products in a commodity sensitive list under the Economic Partnership Agreement (EPA), Antara reported.

 

Trade Minister Mari Pangestu said the two countries share the same opinion and interest to protect these three commodities in their respective domestic markets.

 

She noted that import duties are not the only barrier to Japanese market, but that standard and quality (non tariff barriers) are more powerful.

 

Licensing for Fish Processors

The government will introduce a license system for the fish processing industry in the regions to prevent a raw material supply problem, an official said, Antara reported.

 

Sumpeno Putro, Director General for Marketing and Capacity Expansion at the Fisheries and Maritime Ministry, said licenses will be issued if the supply of raw material is guaranteed in each region, suggesting the possible imposition of quotas.

 

Sumpeno said too many factories could cause a shortage in raw material supply resulting in closures, Putro said. He said coordination would be needed with the Department of Industry, which had the power to issue licenses.

 

Cigarettes to Rise 15%

After setting a rise in the minimum price of cigarettes at 15%, Finance Minister Jusuf Anwar predicts sales will be around 214 billion sticks this year, compared to an estimated 219 billion without the price increase.

 

The 15% increase was at the low end of the 15-20% range indicated earlier by the government. The tobacco industry had demanded that the government should not increase the retail price, known as HJE, by more than 10%.

 

Anwar said the increase will raise revenue from excise tax to Rp32 trillion this year and to more than Rp35 trillion next year, compared to the Rp28.9 trillion initially forecast for this year.

 

Analysts said the government's decision to raise the minimum retail price of cigarettes from July 1 may cut the net profit of cigarette makers by 5.5-7.0% this year.

 

Minimum Air Fares Move

The government is to issue reference prices to set minimum fares for airline tickets to prevent unfair price competition, Kompas reported quoting Minister for Transportation Hatta Rajasa.

 

He said the government will review the price reference list every six months, based on changes in airlines' cost components.

 

The current price reference list is based on June's jet fuel price of Rp4,300 per liter, a passenger load factor of 75% and assumes the aircraft operates efficiently, he said.

 

He said airlines that cut prices to below the reference list at the expense of maintenance costs will be sanctioned.

 

Cacao Duty Lobby

The Association of Cacao Industry (AIKI) said government has pledged to seek support from other ASEAN countries on Chinese duties on cacao in negotiations scheduled next week with China, Antara reported.

 

AIKI said China discriminates against Indonesia in cacao import duty, allowing imports from Malaysia to enter with duties of 0-5%, while Indonesian producers had to pay 10-22%.

 

A statement said there should be no unequal treatment by third party countries within ASEAN.

 

World Bank Backs Cities

The executive board of the World Bank approved Tuesday (7/6/05) a project to support urban sector development reform in Indonesia, a statement from the bank said.

 

The project aims to improve urban services in key urban areas throughout the country and is the first step toward achieving the Government of Indonesia's long-term goal to develop self-reliant, competitive cities, the statement said.


The project will be financed through a soft-loan amounting to $45 million, with an additional matching fund of $13 million from the government, and a $5 million Japanese grant.

 

“Participating cities have committed themselves to significant reforms, including enhanced civic participation in decision-making and monitoring; adoption of extensive public information disclosure policies; and reform of procurement and financial management practices,” the statement said.

 

The project will also finance priority urban investments. At the central level, the project will support the implementation of the Urban Institutional Development Program (UIDP) for supporting urban reforms and institutional capacity building.

 
The project will support programs in the urban local government areas of Musi Banyuasin, Manokwari, Parigi Muotong, Sidendreng Rappang, Sleman, Blitar, Cimahi, Depok, Palu, Parepare, Palopo,
Semarang and Yogyakarta.

 

 

 

POWER

Japan’s Sojitz to Build in S. Sumatra

Japan's Sojitz Co. Ltd. will build a $1.4 billion coal-fired power plant in Musi Rawas district, South Sumatra, Antara reported.

 

The firm has been exploring coal deposits in Sungai Malam area in the district since 2001, company spokesman Eiichiro Makino said Saturday. The exploration activity was expected to be completed in 2009.

 

Sojitz would cooperate with Indonesia's PT Triaryani in building the first phase of the power plant which will have a capacity to generate 2x600 MW of electricity, he said.

 

When construction is completed, South Sumatra is expected to supply 3,600 MW of electrical power.

 

PLN Looks at 12% Hike

After earlier suggesting it should raise its rates by 15%, power utility Perusahaan Listrik Negara (PLN) says it will be proposing an average 12% rise to parliament, The Jakarta Post reported.

 

During a hearing with lawmakers on Monday (6/6/05), PLN finance director Parno Isworo said the company wanted to increase power prices to Rp659 (about 7 US cents) per kilowatt hour, from the current price of Rp588.

 

The last time PLN raised power rates was in 2003, when the policy to increase rates by an average of 6% a quarter stalled in the face of public opposition.

 

A new rise is needed to offset higher operating costs caused by high oil prices, PLN says. Oil currently accounts for about 60% of the fuel used by PLN's power plants.

 

The company last year suffered Rp2.02 trillion in losses but says the higher rate will boost the company into profit.

 

PLN has formulated plans to phase out its diesel-powered generators, but the firm's officials have repeatedly said it will take time to replace the existing diesel generators with gas or coal-fired power plants.

 

The company has said that it will be able to increase the use of natural gas to fuel its power-generating plants to about 40%, from about 27% at present, by 2007.

 

Gas Suppliers Sign Up

Several natural gas producers and companies signed sales agreements Friday (10/6/05) worth a total of $850 million for the supply of 507 trillion British thermal units of gas, Dow Jones Newswires reported.

 

Among the agreements signed was a contract extension by PT Medco Energi International to supply state-run power company PT Perusahaan Listrik Negara (PLN), with 9.65 trillion BTU of gas from its Mamburungan Block in East Kalimantan over an eight-year period.

 

Medco also signed a new pact to supply PLN's power plant in South Sumatra's Tanjung Enim with 87.4 trillion BTU of gas for 11 years, Kardaya Warnika, the head of upstream regulator BPMigas, told reporters.

 

South Korea's Kodeco Energy Co. Ltd. signed a preliminary agreement with the government of East Java's Gresik regency and PT Yudistira, Kardaya said. In all, the three gas sales agreements are estimated to be worth $300 million.

 

Meantime, Australian oil and gas company Santos Ltd. (STO.AU) and state-owned gas distribution monopoly PT Perusahaan Gas Negara (PGN) signed additional documents related to a pact inked May 31 in Jakarta, under which Santos will supply 100 million standard cubic feet a day of gas to PGN. The value of the pact is $500 million.

 

Since its establishment in 2002, BPMigas has facilitated the signing of $59.25 billion of gas sales contracts.

 

 

 

OIL & GAS

RI Still Net Exporter: Purnomo

Indonesia remains a net exporter of oil and may increase output soon, said Energy Minister Purnomo Yusgiantoro in Darwin, according to Bloomberg News.

 

He named ExxonMobil Corp., Santos Ltd. and ConocoPhillips as companies developing fields.

 

"If those fields are able to meet their targets, we are confident Indonesia will be increasing its oil production in the near future," Purnomo said in an address to open the Southeast Asia-Australia Offshore Conference.

 

Indonesia is exporting between 500,000 and 600,000 barrels a day and importing between 350,000 and 400,000 barrels a day, Purnomo told reporters.

 

Production of oil and condensates may rise to about 1.4 million barrels a day by 2010 from about 1.1 million barrels a day now.

 

Current reserves of 9 billion barrels are enough to maintain production for 18 years, Purnomo said. The nation's total oil resources that remain to be explored and proven up are estimated at 86.9 billion barrels, he said.

 

‘Early Deal’ on Cepu

The government hopes to soon resolve a serious contract row over the Cepu oil block in Central Java between state oil and gas firm PT Pertamina and US oil giant ExxonMobil, The Jakarta Post reported.

 

Coordinating Minister for Economic Affairs Aburizal Bakrie said Friday there was "progress in the negotiations" with the government offering a 15% stake to be shared between the joint contractors, ExxonMobil and Pertamina, in the contractor allocation split.

 

ExxonMobil and Pertamina are still negotiating their split of the 15% allocation.

 

"We expect to wrap up the negotiation soon. The government remains firm on its stance to offer ExxonMobil a lesser share than the usual, that is, less than 15%," Bakrie said.

 

Negotiating team head Martiono confirmed that one of the main stumbling blocks was the percentage share for ExxonMobil from the 15% allocation for the contractors.

 

Pertamina and House of Representatives Commission VII for energy and mining agreed on Wednesday to oppose any outcome resulting from the negotiation, pointing to the questionable establishment of the negotiating team.

 

A day later, Vice President Jusuf Kalla told legislators not to interfere in the government's domain, insisting that talks over the dispute would go on for the sake of the people's welfare.

 

Tangguh Moves Forward

BP Plc and its partners in the $6 billion liquefied natural gas project at Tangguh in Papua plan to begin production earlier than estimated, said Ngurah Kresnawan, deputy vice president of the venture.

 

The Tangguh venture is working to "ensure LNG can be delivered on schedule, and hopefully ahead of schedule," Kresnawan said Wednesday (8/6/05), without giving a specific date. The project, 37% owned by BP, is due to start production in 2008.

 

Tangguh has contracts to supply LNG to China's Fujian terminal, to buyers in South Korea and to a terminal being built on the western Mexican coast by Sempra Energy.

 

Kresnawan said the partners were actively seeking contracts to justify the construction of a third train at the LNG facility.

 

Bidding Opens on Blocks

The government opened bidding for the development of 27 new oil and gas blocks Friday (10/6/05), Dow Jones Newswires reported.

 

"It will be the first round of tenders for a total of 70 oil and gas blocks that the government will offer in 2005 and 2006," Iin Arifin Takhyan, Director General of Oil and Gas at the Mines and Energy Ministry, said Thursday.

 

The oil and gas blocks offered are Cakalang block in Natuna Islands, Baronang in East Java province, Lampung in South Sumatra province, Buton on Buton Island and Lhokseumawe in Aceh province, among others.

 

The Indonesian government intends to take a 60%-to-80% share in the blocks offered. Takhyan didn't say when the government will announce the winning bidders.

 

The government has set a minimum signing bonus of $500,000 each for the 27 oil and gas blocks being offered to investors, meaning a total of at least $13.5 million in proceeds if all the blocks create sufficient interest.

 

Ministry of Energy and Mineral Resources' director of exploration and production Novian M. Thaib said that before, there was no requirement of a minimum signing bonus.

 

By regulation, winning bidders have to hand over the signature bonus, which is not part of the costs to be recovered from the oil output, within 30 days after a contract is signed.

 

Analysts say that the lack of a minimum payment in the past has made it easier for companies to decide to a back out of the deal after winning the tender.

 

Total Case Thrown Out

The Supreme Court has finally dismissed a bankruptcy suit against Total SA unit PT Total E&P Indonesie, Bisnis Indonesia reported citing sources.

 

The newspaper said the Supreme Court's verdict was issued recently upholding a Central Jakarta Commercial Court ruling rejecting a bankruptcy petition against Total by two of its former contractors,

 

Total E&P lawyer Todung Mulya Lubis could not confirm the verdict, saying he has heard about it but has not been officially notified, Bisnis reported.

 

In March, the Central Jakarta Commercial Court turned down a bankruptcy petition against Total E&P's filed by contractors PT Sanggar Kaltim Jaya and PT Istana Karang Laut.

 

The two contractors filed the bankruptcy petition following Total E&P's alleged failure to pay them $7.17 million for work they had carried out at its Tunu gas field in East Kalimantan.

 

The claim was based on an audit of the Tunu project by the state Financial and Development Supervising Agency (BPKP).

 

 

 

MINING

BHP Billiton Looks at Major Mine

BHP Billiton, the world's biggest exporter of coking coal used by steelmakers, may spend $300 million developing a new mine in Indonesia to help meet rising demand for the fuel through 2010, Merrill Lynch & Co. stated, according to Bloomberg News.

 

BHP Billiton plans to start mining at the Maruwai site in Kalimantan in 2008, producing 5 million tons of coking coal a year, Merrill analysts led by Vicky Binns said in a June 2 note.

 

The Melbourne-based company also told analysts global coking coal demand will rise as much as 58% through 2010.

 

The company said China had "changed the demand landscape," and India and Brazil were emerging as major markets because of their vast iron ore deposits.

 

Of the $300 million to be spent on Maruwai, about half will be spent on mine development, and the remainder on infrastructure.

 

The site is 500 km from the coast and "infrastructure is non-existent," Binns said.

 

KPC Begins Bengalon Shipments

PT Bumi Resources said its coal mining unit PT Kaltim Prima Coal (KPC) has began coal shipments from its newly developed Bengalon mine in East Kalimantan, AFX reported.

 

It said it expects the mine to raise the group's coal output by 3 million tons by the end of 2005.

 

The Bengalon mine has an estimated deposit of 150 million tons of coal, Bumi Resources said in a statement.

 

Bengalon's mining operation began with the completion of the mine's infrastructure under a $1.2 billion project by contractor PT Darma Henwa.

 

“KPC expects that Darma Henwa will be capable of producing up to around 3 mln tons of coal by the end of 2005,” Bumi Resources said.

 

The Bengalon mine produces coal similar to KPC's Pinang coal, a low-ash thermal coal popular among Asian electricity producers.

 

Bumi Resoruces sold a total of 3.6 million tons of coal in last month, up 12.5% from April.

 

Combined with its other coal mining unit PT Arutmin, Bumi Resources is the country's largest coal producer accounting for about 29% of Indonesia's coal output in 2004.

 

 

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