Indonesia Energy Firms Welcome Government Forest Decree

Muklis Ali, PlanetArk 4 Mar 10;

JAKARTA - Indonesia's new decree, allowing mining, power plant, transport and renewable energy projects in protected forests, was welcomed by several companies in those sectors.

PT Pertamina Geothermal Energy (PGE), a unit of state oil firm Pertamina, said it could now proceed with the construction of geothermal projects that could produce 1,340 megawatts (MW).

"We welcome the government decree to allow such projects, especially geothermal power plants in the protected forest," said Adiatma Sardjito, PGE spokesman.

"We are optimistic that we can achieve our target to build 1,340 megawatts of geothermal power plant projects by 2014," he said.

Indonesia has established two crash programs to increase power generation by 10,000 megawatts (MW) in a bid to resolve chronic power shortages and frequent blackouts.

About 40 percent of the first program should be completed by the middle of this year. It will rely on coal-fired power plants, while the second program, due to start this year, has 3,900 MW of power slated to come from geothermal sources.

Pertamina's projects are part of the second phase. Sardjito said Pertamina was still in talks with the state-backed Japan Bank for International Cooperation (JBIC) to finance its geothermal projects.

PGE currently operates geothermal plants in West Java and North Sulawesi, with a combined capacity of 272 MW.

Usman Slamet, a manager at Chevron Indonesia, a unit of Chevron Corp, said the company is joining a tender to build a geothermal project in North Sumatra as part of the second phase.

Chevron operates a geothermal plant producing about 600 MW in Indonesia.

Increasing exploitation of mineral resources and the acceleration of infrastructure development are seen as key for boosting growth and creating jobs in Southeast Asia's biggest economy.

But the decree, which was obtained by Reuters and came into effect on February 1, has angered green groups given Indonesia already has one of the fastest rates of deforestation in the world.

Bustar Maitar, Greenpeace forest campaigner, said the decree would not improve legal certainty, accusing the government of being inconsistent by coming up with regulations clashing with other policy aims such as on climate change.

"These are clearly protected areas, areas that have been deemed to have conservation values and should be preserved. Even if there are very valuable mining deposits there, that doesn't mean it can be opened for economic interests," he said.

The decree said the use of forest areas for development activities can be done for unavoidable strategic purposes and said key development projects included power plants, renewable energy, toll roads and railways.

Indonesia is tapping alternative sources of energy to meet rising power demand and cut consumption of expensive crude oil as its own reserves dwindle.

The vast archipelago, with hundreds of active and extinct volcanoes, has the potential to produce an estimated 27,000 MW of electricity from geothermal sources.

However, that potential remains largely untapped because the high cost of geothermal energy makes the price of electricity generated this way expensive.

Indonesia's state electricity firm PT Perusahaan Listrik Negara (PLN) has 25,000 MW of generating capacity but daily output is far less because most of its plants are old and inefficient.

(Editing by Sara Webb and Ed Davies)