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| Written by Terry Lacey | |
| Wednesday, 25 November 2009 | |
 Outgoing vice president Kalla throws a spanner in the works
In an illustration of Indonesia's uncertainties over energy development, the Jakarta-listed multinational PT Medco Energi Internasional has teamed up with the Libya Investment Authority to develop a potentially lucrative offshore gas and oil field in Libya's Ghadames Basin. Medco's offshore plans took on added urgency earlier this year partly because outgoing Vice President Jusuf Kalla intervened at the last minute in what was to have been a major Japanese investment in the giant Donggi Sonoro gas field in central Sulawesi and insisted that the field supply the domestic market. Kansai Electric Power Co., one of two Japanese companies involved in the project along with Chubu Power Inc, promptly pulled out, leaving Medco in a quandary, not to mention the government itself. The Donggi export program, in partnership with the privately-owned Medco, was the biggest for the state-owned energy company PT Pertamina Tbk, with proven reserves estimated at 10 trillion cubic feet. Kalla's decision nonetheless reflected a growing Indonesian energy crisis, with power cuts and bureaucracy holding back progress in the Indonesian provinces and hitting Jakarta, the capital city, with periodic blackouts. The country's US$17.25 billion "fast track" energy development program is years behind schedule and mired in corruption, red tape and other problems. Unfortunately, what Kalla didn't count on is that there does not appear to be an Indonesian corporate entity capable of or interested in handling the supply from the Donggi-Sonoro field. The former vice president's order, which appears to be coming back to bite the government, was nonetheless taken because Indonesia has to balance its limited gas supply relative to burgeoning demand and the need to diversify its energy resources away from oil, while keeping up with export obligations and demand. Inadequate downstream gas infrastructure has held back Indonesian domestic development. At the recent 10th Indonesia-Japan Energy Round Table, incoming Indonesian Energy and Mineral Resources Minister Darwin Zahedy Saleh and Evita Legowo, the director for oil and gas development, were both under pressure from a strong Japanese delegation, backed by the financial leverage of the Japan Bank for International Cooperation, over the Donggi Senoro block. Japan had been prepared to be the majority lender for the estimated US$3.4 billion project for both upstream and downstream development provided initial sales agreements went ahead with Kansai Electric and Chubu Power, each of which were to get 1 million metric tons of LNG per year for 12 years starting 2012. While Kalla's decision wasn't the end of the world, it was a shock and the Indonesian energy team and Medco are trying to rescue their deal and keep the Japanese in. Takayuki Ueda, Japan's director general for natural resources and energy told reporters in Jakarta, "The project is very much important for both sides [Indonesia and Japan] and yes [we still hope to get LNG supply from the project]." Mitsubishi Corporation holds 51 percent of PT Donggi Senoro LNG, while Pertamina owns 29 percent and Medco 20 percent. Kansai Electric Power Co has dropped out and the Japanese Bank for International Cooperation may not provide loans unless the reconfigured deal is regarded as suitable for Japan. Chubu is still in alongside Mistubishi, but Medco and Pertamina need a new domestic LNG buyer and will probably have to turn to a state-owned enterprise if one can be found. Indonesian state-owned banks may not be able to pick up the tab to back an SOE as buyer, if domestic prices are lower than for exports, as they appear to be. Also state firms don't have heavyweight blue-chip financial credentials unless the state compensates with sovereign guarantees. And they aren't particularly interested. In September, the state-owned gas distributor PT Perusahaan Gas Negara Tbk (PGN) said it had no intention of buying from the Donggi-Senoro refinery because it was too expensive. There in a nutshell is the Indonesian energy crisis, with escalating regional demand from Japan, China and South Korea, and burgeoning domestic demand, but dependent on the outside for heavy investment. ASEAN+3 is the world oil distribution and energy choke-point at the moment as Asia drives world economic recovery. But for Indonesia this makes for an impossible triangle summating international, regional and domestic energy shortages. Meanwhile Indonesia is pushing into the Middle East and Maghreb where it can get energy alongside finance and maybe growing empathy with Muslim economic partners, with the Organization of Islamic Conference (OIC) pushing trade between member states. The Ghadames Basin arrangement was struck by the Libyans buying out Medco´s previous partner in the field, Verenex Energy Inc of Canada. Medco and its Libyan joint venture partners will share 13.7 percent of the revenue while the Libyan sovereign fund will reportedly pick up the remaining 86.3 percent. Previously Medco and Verenex had shared a 50:50 stake in the block, having purchased the rights in 2005 for 30 years. Hilmi Panegoro, Medco's president commissioner, confirmed that production in the Ghadames Basin block in Libya could reach 50,000 barrels per day, estimated to contain reserves of 2.15 million barrels. Terry Lacey is a development economist who writes from Jakarta on modernization in the Muslim world, investment and trade relations with the EU and Islamic banking.
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written by mbt shoes , November 28, 2009
Indonesian state-owned banks may not be able to pick up the tab to back an SOE as buyer, if domestic prices are lower than for exports, as they appear to be
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written by danieldpk , November 25, 2009
great step for medco and hope it would be followed by state owned oil company pertamina..problem is not lack of oil resource in indonesia,butrather less of cutting edge technology to explore the oil...http://main-conspiracies.blogspot.com/2009/10/kerja-keras-adalah-energi-kita.html
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