Cooperation on 9 geothermal blocks: Bids need to be more attractive
This article has been translated by PwC Indonesia as part of our Indonesia Infrastructure News Service. PwC Indonesia has not checked the accuracy of, and accepts no responsibility for the content.
Bisnis Indonesia - Kerja sama 9 blok panas bumi: Penawaran perlu lebih menarik
29 June 2024
By Nyoman Ary Wahyudi
Bisnis, Jakarta – PT Perusahaan Listrik Negara (Persero) or PLN needs to offer attractive terms and conditions (T&C) for prospective developers in the tender for 9 geothermal working areas (WKP). Otherwise, securing strategic partners would be challenging.
Secretary General of the Indonesian Geothermal Association (INAGA/API) Riza Pasikki said that, currently, prospective developers must pay immense costs for exploration drilling.
This huge capital is not commensurate with the risks that must be borne in exploration activities if drilling is unsuccessful.
"Meanwhile, the share given by PLN is below 50%, for example 49%, with big exploration risks. If it fails, they must bear all the losses," he said when contacted on Friday (28/6).
Moreover, Riza reckons the 9 geothermal blocks offered by PLN are relatively low in resource quality. All of them are in Central Maluku, East Nusa Tenggara (Atadei), South Halmahera (Songa Wayaua), and West Java (Tangkuban Perahu).
Then, Central Java (Ungaran), Bengkulu (Kepahiang), East Nusa Tenggara (Oka Ile Ange and Mount Sirung), Lake Ranau in South Sumatra and West Lampung. PLN noted that the 9 WKPs have an electricity capacity of up to 260 megawatts (MW).
"In terms of quality, Kepahiang is the best, but other prospects are below Kepahiang, so there is a problem with the quality of resources," he said.
Riza hopes that the Energy and Mineral Resources Ministry (EMR Ministry) can apply fair treatment to the development plan for the 9 WKPs which has been left undeveloped by PLN for a long time.
"If PLN cannot carry out development according to the given deadline, the areas must be returned to the government, then an open tender will be held," he said.
Most recently, Prajogo Pangestu Issuer PT Barito Renewables Energy Tbk (BREN) decided to withdraw from the plan to establish a joint venture (JV) together with PLN to work on Kepahiang WKP in Bengkulu.
Through its subsidiary, Star Energy Geothermal Pte. Ltd, BREN will no longer pursue the joint venture opportunity with the state-owned electricity company because the two companies did not reach a business agreement.
The Energy Shift Institute indicated that Star Energy withdrew from Kepahiang WKP because PLN was difficult to provide adequate electricity tariffs for developers.
The Energy Shift Institute Managing Director Putra Adhiguna actually regrets Star Energy's choice to withdraw as the development of several WKPs owned by PLN has stalled until now.
"This indicates that it is difficult for PLN to provide adequate tariffs for geothermal development, even though they are directly involved in the development," he said.
Putra said PLN did not have extensive experience in geothermal exploration. This means, he said, partnerships with other geothermal business entities will be important for the development of several assets which are currently stalled.
Nevertheless, he said, PLN must also provide capital intensively and bear the business risks in these geothermal development projects.
"PLN's concerns may revolve around two things, reluctance to pay higher tariffs or concerns about the risks of geothermal exploration," he said.
