Icelandic Firm in Indonesia Geothermal Energy Deal

Story Date: 24/10/2007

JAKARTA - Indonesian state oil firm Pertamina and Iceland's Reykjavik Energy Invest have signed a preliminary deal to develop a geothermal power plant in Indonesia, Pertamina said on Tuesday.

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

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

"Under the agreement, we will evaluate geothermal areas that are owned by Pertamina. After we find some good prospects, then we will develop them," Pertamina Chief Executive Officer Ari Soemarno told reporters.

Pertamina has around 17 areas, including in Sumatra and Java island, that have the potential for geothermal power, but lack of investment has slowed down the development.

Reykjavik chief Gudmundur Thoroddsson said the company hoped to generate 500 megawatts of geothermal energy in Indonesia by 2010 depending on the resources.

Indonesia, the Asia-Pacific's only OPEC member, is tapping alternative sources of energy to meet rising power demand and cut consumption of expensive crude oil as its own reserves dwindle.

"We need tax incentives to make geothermal energy competitive. If there is no incentive, it is very difficult to develop geothermal energy," Soemarno said.

In February, Indonesia said it planned to tender seven geothermal areas this year to generate around 575 megawatts of electricity.

An Indonesian mines and energy official said the country generates around 800 MW of electricity from geothermal energy and plans to increase that to 9,500 MW by 2025.

Chevron Corp. through its local unit, operates a geothermal plant in West Java province with a capacity of 522 MW and Pertamina generates around 280 MW of geothermal power.

Indonesian electricity firm PT Perusahaan Listrik Negara (PLN) has a monopoly over power supply in Indonesia and operates 24,000 megawatts of capacity, but most of its plants are ageing, so daily output is far below capacity. Some 30 percent of the plants use oil products such as diesel and fuel oil.

All Contents © Reuters News Service 2007

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