Government Outlines 5-year plan to ‘Cut Oil Use 25%'

Jakarta Globe, Reva Sasistiya & Agence France-Presse, April 26, 2010

A worker at a geothermal energy plant. The Energy Ministry has announced an ambitious plan to reduce oil use by 25 percent by using the alternative energy.

The government plans to cut national oil consumption by more than a quarter within five years by turning to Indonesia’s vast, untapped geothermal power sources, an Energy Ministry official said on Sunday.

As the World Geothermal Conference opened in Bali, Sukhyar, the ministry’s head of geology, told the Jakarta Globe that developing 4,000 megawatts of geothermal capacity by 2014, as planned under the second phase of a “fast-track” generating program, would save 60 million barrels of oil a year. It would thus offset slipping national oil production and help Indonesia trade millions of tons of carbon credits generated by the cleaner energy.

Sukhyar said the country’s energy road map called for more than 9,000 MW of geothermal power — extracted from natural heat stored deep in the earth — to be developed by 2025, saving a total of four billion barrels of oil. “That is magnificent,” he said.

It won’t be easy. If there is any country in the world where geothermal makes sense it is Indonesia. Yet despite its natural advantages, it lags behind the United States and the Philippines in geothermal energy production.

An estimated 40 percent of global geothermal power reserves are in Indonesia. That is about 27,000 MW in annual capacity, but Energy Ministry data says only 1,198 MW has so far been tapped.

One of the biggest obstacles is cost. The nation currently relies mostly on dirty coal-fired power plants using locally produced coal. A geothermal plant costs about twice as much, and can take many more years to get onstream.

“An investment of $12 billion is needed to add 4,000 MW of capacity,” energy analyst Herman Darnel Ibrahim estimated, putting into context a promise late last year of $400 million in financing from lenders including the World Bank and the Asian Development Bank.

“Field exploration can take three to five years, suitability studies for funding takes a year, while building the plant itself takes three years,” he added.

The government hopes to raise $12 billion in investment in the fast-track program’s second phase. It is also seeking help from private investors and partners including Japan and the United States, and it is making its case at this week’s conference in Bali, at which 2,000 participants from 85 countries are expected.

Surya Darma, head of the Indonesian Geothermal Association, said developing the country’s capacity meant $50 billion worth of investment opportunities.

Energy Minister Darwin Zahedy Saleh said the Bali forum would be useful for Indonesia to attract investors, as corporate chief officers from around the world would leave with a greater appreciation of the benefits of geothermal power and the opportunities that Indonesia offered.

Geothermal fans welcomed the recent completion of negotiations between a consortium of US, Japanese and Indonesian companies and state electricity firm PT PLN over a 340 MW project in Sumatra. The Sarulla project will be Indonesia’s second biggest geothermal plant, after the Wayang Windu facility in West Java.

Meanwhile, several firms such as Tata and Chevron have submitted bids to build a plant of up to 200 MW in North Sumatra.

Editorial here

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