[Marinir] Trade & Investment News, 27 June 2005

[Yap Hong Gie]

THE COORDINATING MINISTRY FOR ECONOMIC AFFAIRS 

REPUBLIC OF INDONESIA

Main Building, Ministry of Finance, Jl. Lapangan Banteng Timur No.2-4 Jakarta Pusat

Tel: (021) 380-8384    Fax: (021) 344-0394    Website: http://www.ekon.go.id

 

Trade and Investment News, 27 June 2005

 

 

Highlights 

 

Politics

·         Next round of talks on Aceh 

·         The government stands firm on a new regulation to ease infrastructure development

Economy

·         Bank Indonesia pushed up interest rates to correct the slide of the rupiah

·         Foreign investment went into high gear with more than $5 billion in approvals

·         The government hands Pertamina cash to buy more fuel

·         The World Bank praises economic reform in Indonesia 

·         Citigroup raises its growth projection for the economy 

Business briefs

Macroeconomy

·         Parliament's Budget Commission approves the government's 2005 state budget revision

·         No more measures to curb foreign exchange trading for the time being 

Investment

·         Foreign direct investment (FDI) approvals surge 95% during the five months to May 

·         Investment expected to reach 28% of gross domestic production (GDP) in 2005

State concerns

·         Regulations tightened on airline industry

·         The rice import ban stays at least until the end of this year

SOEs

·         Shareholders in PT Telkom appoint a career banker as the firm's new chief

Banks

·         Bank Indonesia (BI) prepares new incentives to encourage consolidation

Private sector

·         Domestic car sales in 2005 could reach 550,000 units, the leading distributor says 

·         Toyota Motor Corp. to use more kenaf, widely grown in Indonesia

Mining

·         Australia's New Hope completes the sale of its interests in the Adaro mine and nearby coal terminal

Oil & gas

·         Deal on an extension of ExxonMobil's contract at the Cepu field is reached

·         OPEC urges Indonesia to stay in the organization

 

 

 

 

 

POLITICS

Aceh Negotiators Press On

Minister of Justice and Human Rights Hamid Awaluddin confirmed Tuesday (21/6/05) that the Government will join the next round of peace negotiations with the Free Aceh Movement (GAM) in Helsinki from July 12 -14.


"The president's commitment must go on, it means that we welcome and will join the last round of peace talks," Awaludin told reporters after a meeting with Vice President Jusuf Kalla to discuss the talks. 

 

."Our position is that the meeting with GAM is a must," said Awaludin, who is also the chief negotiator of the Indonesian delegation. "We will discuss the substance of what is to be discussed at the meeting, such as what measures can be taken if peace is achieved and the amnesty that will be offered to GAM members."


The talks, now going into their fifth round, are being facilitated by the Helsinki-based Crisis Management Initiative (CMI).


Defense to Get More Funds

The defense sector will receive Rp2 trillion ($208.3 million) in additional state funds in the revised  2005 State Budget, Defense Minister Juwono Sudarsono said Wednesday (22/6/05).


"We will observe efficiency and a scale of priorities in the spending of the additional budget," he said after a limited cabinet session chaired by Vice President Jusuf Kalla.


In the original 2005 State Budget, only Rp21.9 trillion was allocated for defense, not much more than it has received in the past.


The meeting, attended among others by National Development Planning Minister Sri Mulyani Indrawati, Armed Forces chief Gen. Endriartono Sutarto and Finance Minister Jusuf Anwar, also dwelt on the standard payment for defense equipment bought from both local and foreign companies.


"There should be a more intensive cooperation between the Ministry of Defense, Ministry of Finance and the National Development Planning Board (Bappenas), " said Sudarsono. "This is a basic principle relating with the procurement of equipment and efficient usage of state money," he said.


Sutarto said he prefers that the Government meet the basic needs of troops, such as barracks, clothing and weapons, most of which were in poor condition. 


Meanwhile, Army commander Gen. Djoko Santoso, said Thursday that the army would focus its weapon procurement on domestic manufacturers.


"We will buy weapons mainly from local manufacturers, like state-owned weapon manufacturing company PT Pindad, as the quality of locally made arms is already good enough," Santoso told reporters at the handover of the hand over of the Brawijaya Military Command from Maj. Gen. Achmad Djunaedi Sikki to Maj-Gen Syamsul Mappareppa.


Santoso said that the procurement of hardware from domestic manufacturers, mostly light weapons, transport and communications gear, was aimed mainly at reducing Indonesia's high dependence on foreign countries. 

 

 

The Government firms on Infrastructure Regulation

The government says it will not withdraw or revise a new regulation on land acquisition for public development purposes, despite protests from critics who say it may be misused. 

 

The regulation is seen as vital to press forward with infrastructure projects, which in the past have been able to be blocked by a handful of property owners and speculators. 


Public Works Minister Djoko Kirmanto said that because many infrastructure projects had run aground due to land-purchase problems, there was no other course of action open to the government. 


"There are many cases in which the construction of infrastructure projects has been stalled because of the objections of a single landowner," Djoko told a press conference on Tuesday (21/6/05) after a meeting with Vice President Jusuf Kalla and other government officials to discuss the issue.


Issued last month, Presidential Regulation No. 36/2005 effectively allows the Government to acquire land for crucial infrastructure projects even if the landowners have not agreed on the amount of compensation offered to them.


The head of the National Land Agency (BPN), Muhammad Lutfi, said the Government was committed to provide competitive compensation to landowners whose land is affected by development projects. 

 

 

 

ECONOMY

Benchmark Rate Jumps 

Bank Indonesia (BI) pushed up the rate of its benchmark paper at the weekly auction, firming the rupiah, while the government paid Rp10 trillion ($1.05 billion) to state oil distributor Pertamina to quell fears of power cuts and fuel shortages. 

 

And in the oil and gas sector, news of agreement between the government and ExxonMobil raised hopes of an early return for Indonesia to full oil exporter status. 

 

BI sold Rp11.25 trillion worth of its one-month Sertifikat Bank Indonesia (SBI) notes at a weighted average rate of 8.17%, up from 8.06% a week earlier. 

 

Vice President Jusuf Kalla urged the public to conserve fuel, and there was debate on a vehicle fuel tax or other means of reducing consumption. "In this problem of oil fuel scarcity, one thing we have to realize is that we should handle the problem of expensive fuel together. The first and easiest way is to economize oil fuel use," Kalla said.

 

Kalla also stated that the government would cap expenditure on fuel subsidies at Rp70 billion ($7.2 billion), and would not meet some predictions of a total annual bill of Rp110 trillion ($11.3 billion). 

 

Indonesia is in a relatively benign position as global energy prices rise. It has enormous stockpiles of both LNG and coal and is developing a widespread pipeline network to feed its industrial areas and power plants. 

 

Investors clearly believed that the prospects for the economy are sound. Foreign direct investment (FDI) approvals during the five months to May surged 95% year-on-year to $5.47 billion, up from $2.81 billion a year earlier.

 

Projects approved were of higher net value than those in the same period last year, the National Investment Coordinating Board (BKPM) said.

 

BKPM said 568 of the approved investments in the five-month period were new FDI projects worth $3.05 billion, compared with 410 projects worth $1.02 billion approved a year earlier.

 

Approved FDI expansion projects numbered 145, worth $1.13 billion, which were higher than the 107 projects worth $979.7 million approved a year earlier.

 

Domestic investment approvals rose 13% to Rp20.89 trillion from Rp18.47 trillion a year earlier, with the rise in the value of expansion projects offsetting the decline in the value of new projects.

 

Pharmaceuticals and chemicals absorbed $2.24 billion of FDI, followed by mining at $510.6 million and transportation, storage and communication in third with $509.6 million. 

 

In domestic investment, the food industry was highest with Rp4.23 trillion in proposed investments, followed by services at Rp3.07 trillion and food crops and plantations at Rp2.99 trillion. 

 

The Consultative Group on Indonesia (CGI), a grouping of major foreign donors, was also satisfied with Indonesia's economic progress. World Bank vice president Jemal-ud-din Kessum said Friday (24/6/05) the economic reform was progressing well, especially on efforts to improve the investment climate. The World Bank chairs the CGI.

 

"The government is very committed to improving the business climate, we have seen strong anti-corruption efforts recently," Kessum told reporters ahead of the CGI mid-year meeting in Jakarta, The Jakarta Post reported. A World Bank survey noted that corruption has dropped sharply.

 

Citigroup also raised its forecast for Indonesia's growth this year to 5.63% from its earlier estimate of 5.30%, saying investment was improving. The government's budget, due to be approved by a plenary session of parliament, aims for 6%.

 

The Citigroup upgrade followed a week after another upward revision from Morgan Stanley, which pushed its prediction to 5.4% from 4.5%. 

 

In a bid to keep investment moving, the government will hold a second infrastructure summit in November, chairman of the Indonesian Chamber of Commerce and Industry (Kadin) MS. Hidayat said.

 

There were also plans to initiate programs to raise the capacity of Indonesia's regional governments to improve their marketing skills. 

 

 


MACROECONOMY

Budget Approved 

The House of Representatives Budget Commission approved the government's 2005 state budget revision on Tuesday (21/6/05) night, The Jakarta Post reported.

 

Minister of Finance Jusuf Anwar and Bank Indonesia Governor Burhanuddin Abdullah along with Budget Commission chairman Emir Moeis announced that the commission had in principle agreed with the government on all revisions to the budget's allocations and macroeconomic assumptions, despite the need to finalize several specific details. 

 

The commission asked the government to explain in detail its disbursements of welfare assistance funds for the education and health sectors. 

 

"We hope to be able to work out these details within the next two days, and then bring the budget revision to the House's plenary session next week," Emir said. 

 

The Budget Commission agreed to set aside a total of Rp11 trillion ($1.14 billion) for welfare payments, up from Rp10.78 trillion proposed by the government. 

 

Of the funds, Rp6.27 trillion will go to reduce basic education fees, Rp3.87 trillion to improve public health services and Rp3.34 trillion for rural infrastructure development. 

 

State expenditures will amount to Rp511.91 trillion, while state revenues will total Rp491.6 trillion. The budget deficit will amount to Rp20.33 trillion, up from Rp17.39 trillion. 

 

'Wait and See' on Forex Curbs

Indonesia will not introduce any more measures to curb foreign exchange trading until the impact of steps announced earlier becomes clear, the central bank chief said in Kuala Lumpur Wednesday (22/6/05), Dow Jones Newswires reported. 

 

Bank Indonesia (BI) introduced a ruling that limits dollar-rupiah trading by foreign players. The ruling takes effect July 14.

 

"The measure is still at a preliminary stage," BI Governor Burhanuddin Abdullah told reporters at a Kuala Lumpur seminar on Islamic finance.

 

Separately, another top BI official said the new ruling is intended not to deter foreign investors, but to make their local investments safer by keeping the rupiah stable.

 

Rasmo Samiun, director of reserve management, said the BI ruling is aimed at limiting inflows of the speculative offshore money and not at foreign investors generally.

 

The new rule will limit dollar purchases by onshore banks from offshore counterparts through derivative transactions at $1 million. These types of transactions previously weren't subject to any cap.

 

SBI 

Bank Indonesia auctioned Rp11.25 trillion worth of its one-month notes, known as Bank Indonesia Certificates (SBI), at a weighted average interest rate of 8.17% compared to 8.06% at the week before auction. The auction absorbed 94.64% of bids.

 

Forex Reserves 

Foreign exchange reserve dropped to $34.27 billion in the second week of June after rising slightly in the first week to $34.62 billion, Bank Indonesia said. The decline was caused by foreign debt repayments.

 

The central bank said the amount of primary money in circulation totaled Rp192.11 trillion on June 15, up from Rp188.31 trillion a week before.

 

 

 

 

 

 

INVESTMENT 

Approvals Surge 

Foreign direct investment (FDI) approvals during the five months to May surged 95% year-on-year to $5.47 billion from $2.81 billion a year earlier, largely due to the higher value of new projects, the National Investment Coordinating Board (BKPM) said.

 

Over the same period, domestic investment approvals rose 13% to Rp20.89 trillion from Rp18.47 trillion in the same period a year earlier, with the rise in the value of expansion projects offsetting the decline in the value of new projects.

 

"In 2005 at least 16 foreign and domestic investment projects are expected to start production," BKPM chairman M. Lutfie said.

 

The domestic investment projects licensed in the January-May period were mostly in food, chemical, pharmaceutical, textile and paper industries, he said.

 

Most of the foreign investment projects dealt with chemical, pharmaceutical, metal, machinery, electrical, gas and food industries, he said.

 

Investment growth in 2005 is expected to reach 28% of gross domestic production (GDP), compared with 25% at the moment.  

 

"Of the total economic growth of 6.35%, consumption contributed only 3.22%, with the rest coming from investment. This is good," Lutfie added.

 

 

Japan Backs Autos, Motorcycles 

Japanese car and motorcycle makers plan to invest some $450 million in Indonesia, mainly to raise motorcycle production capacities amid strong demand here, Bisnis Indonesia reported, quoting Minister of Industry Andung Nitimihardja.

 

Nitimihardja said Japanese firms expressed their interest to invest in Indonesia during his recent visit to Japan, although some of the projects he mentioned had already been announced.

 

Suzuki Motor Corp plans to invest $200 million to raise its motorcycle production capacity in Indonesia to 2 million units a year by 2006 or 2007, he said.

 

He said Suzuki produced 800,000 motorcycles last year and is targeting an output of 1.5 million vehicles this year.

 

The company also plans to make Indonesia the production base for worldwide sales of its APV multipurpose vehicle, Nitimihardja said.

 

Yamaha Motor Co plans to open its second motorcycle plant in Indonesia next January with a capacity of 600,000 units a year and an investment of $80 million, he said.

 

Honda Motor Co, which controls about half of Indonesia's motorcycle market, will start operating its third motorcycle plant in October following an investment of $100 million.

 

To meet Honda's expanded production capacities the spare parts industry will invest some $70 million, he added. Motorcycle sales are estimated to hit 5 million units this year, up from 3.98 million last year.

 

 

Korea's Sam-An Looks at Rail Deal 

South Korea's Sam-An Corp. expects to sign an agreement with the Indonesian government next month to provide consulting services and help modernize Jakarta's train system, a project that could be valued at up to $300 million, the company's top executive said.

 

Under the plan, Sam-An will design and organize a plan to improve the train system in and around the city of Jakarta, the engineering consulting firm's President Lim Jong-Ah told Dow Jones Newswires in an interview.

 

The Indonesian government plans to finalize the upgrade of the train system by 2008. The project will include improvement and construction of railways and station facilities.

 

Sam-An was first asked by the city of Jakarta to conduct studies on the upgrade in 2003 and the Indonesian government indicated in a letter earlier this year its intention to allow the South Korean company to go ahead with the project.

 

"As Indonesian government officials are pushing hard to materialize this project, we expect to sign a memorandum of understanding with the transportation ministry in July and a final agreement is expected to be reached by the end of 2005," said Lim.

 

Sam-An will serve as the construction manager and coordinate all processes including financing, he said.

 

Sam-An plans to improve the traffic system of the crowded city by rearranging Jakarta's existing railway connections.

 

The Indonesian government and Sam-An haven't yet determined how they will arrange financing for the project, but Lim said his company plans to arrange project financing from international investors, including South Korean investors.

 

 

Sugar Factory to Operate

A double refined sugar factory of PT Dharmapala Usaha Sukses at Cilacap, West Java, will start operation next month, a company official said, according to Antara.

 

The factory has been built with investment of Rp225 billion ($23.3 million) and will have a capacity of 400-400 tons per day, a company Director Nugroho S. Darsono told reporters.

 

In September the factory is expected to operate at full capacity with production of 800 tons per day, Darsono said.

 

The factory will process raw sugar imported from Australia, Brazil, Thailand, and Africa and production will be supplied to various domestic industries.

 

 

 

STATE CONCERNS

New Rules on Fishing  

The government will allow foreign fishing vessels to resume operation in the country, but they will have to sell 70% of their production to feed local fish processing industry.

 

Maritime and Fisheries Minister Freddy Numberi said 800 foreign fishing vessels from Thailand, China and the Philippines will have their operating licenses terminated in 2006-2007.

 

The government has decided not to renew bilateral fishing agreements with the three countries.

 

The 800 ships would be allowed to continue operation in the country under a joint investment scheme with 70% of their catch to feed the local fish processing industry, Numberi said.

 

He said Philippine, Thai and Chinese fishing companies have agreed to the scheme.

 

Around 800 foreign fishing ships will have their operating licenses to operate in Indonesia's exclusive economic zone (EEZ) terminated in 2006 and 2007, Antara reported.

 

 

Air Safety Tightened 

The government has issued a regulation banning airlines from using aircraft older than 35 years or planes that have landed more than 70,000 times, Antara reported. 

 

The regulation, to be effective in December this year, also rules that passenger aircraft must not have landed more than 50,000 times when they commence their first flight in the country.

 

Transport Minister Hatta Rajasa said the regulation is aimed at guaranteeing greater safety for passengers.

 

The National Air Carrier Association said many aircraft operated by new airline companies in the country have made more than 70,000 landings. 

 

 

Rice Ban Extended 

The government has decided to extend a rice import ban until the end of this year, Minister of Agriculture Anton Apriyantono said Wednesday, Dow Jones Newswires reported. 

 

"We aren't worried about our rice stocks, so we've decided not to import rice unless conditions become extreme," he said. "This policy will be reviewed at the end of the year to see if it will be extended again."

 

Indonesia will have rice stocks of 4.2 million tons by the end of this year, Apriyantono said, citing ministry projections.

 

The government initially imposed the ban from January 2004 to July 2004, then extended it in August of that year until end-2004, due to expectations of robust domestic output. In December 2004, the government extended the ban to June 2005 due to official assessments of sufficient stocks and a good rice harvest.

 

 

SOEs

Telkom Changes Guard

Shareholders in PT Telekomunikasi Indonesia (Telkom), Indonesia's largest telecoms operator, appointed a career banker as the firm's new chief, Reuters reported. 

 

The state-controlled firm's shareholders approved a government proposal to appoint banker Arwin Rasyid as its new chief, replacing Kristiono. Telkom retained Rinaldi Firmansyah as finance director and Abdul Haris as director for network solutions

 

Rasyid was previously vice president director at the country's third-largest lender, PT Bank Negara Indonesia (BNI).

 

The new president director said he will seek to use his experience to expand the business. "I won't pretend that I know much about Telkom, about the technicalities of the telecommunications industry but I want to learn," Rasyid said. 

 

"I hope that I bring synergy from the consumer banking background to this company so that it will make Telkom a bigger, better company in the future." He added that the company would cooperate fully with any investigation, alluding to an as yet unspecified probe into its dealings.  

 

Telkom, through mobile phone unit PT Telkomsel, which it owns jointly with Singapore Telecommunications Ltd, has slightly over half of Indonesia's mobile communication market.

 

The number of cellular users is expected to expand by 50% this year, bringing the total number of subscribers to 45 million by the end of 2005.

 

    

Bid for Krakatau Steel Expansion

A consortium comprising South Korea's Samsung Corp, POSCO and Italy's Danieli & C SpA plan to join a tender for state-run PT Krakatau Steel's production capacity expansion project, said Danieli vice president Antonello Mordelia.

 

Mordelia said the consortium will bid for an engineering procurement and construction (EPC) contract from Krakatau, AFX reported.

 

The contract calls for expansion of Krakatau's unrolled coil production capacity by 1.0-1.2 million tons a year, he told reporters. Mordelia declined to estimate the value of the project.

 

 

 

BANKS

BI to Offer Merger Incentives 

Bank Indonesia (BI) is preparing new incentives to encourage banks to speed up the consolidation of the domestic banking sector, Governor Burhanuddin Abdullah said, according to Bisnis Indonesia. Senior Deputy Governor Miranda Goeltom also urged quick implementation of the merger plan, pointing to Malaysia's success in cutting the number of its banks by half. 

 

The central bank was talking to the Ministry of Finance about the new incentives BI could provide to support any merger plan but agreement was still some way off.

 

He said the central bank would announce the criteria for anchor banks under its new sectoral architecture on June 30. While names of existing anchor banks would not be mentioned, the criteria would make it clear enough. "The domestic banks could get the message on which banks are eligible to be such anchor bank," he said. 

 

"The bank should be healthy. The financial system of the bank should be sound and it has to apply good corporate governance," he said.

 

Senior Deputy Governor Miranda Goeltom also urged quick implementation of the merger plan, pointing to Malaysia's success in cutting the number of its banks by half. 

 

 

Property Loans Up

Bank loans for the property sector jumped 45% in April to Rp74.08 trillion ($7.8 billion) from Rp50.98 trillion a year ago, Antara reported. 

 

The loan portion for the property sector has increased against total bank loans in the past several years, data at Bank Indonesia showed.

 

In April this year, the property sector accounted for 12.6% of total bank loans, up from 11.2% in the same month last year.

 

 

PRIVATE SECTOR

Auto Sales 'May Hit 550,000'

Automotive distributor PT Astra International said Thursday (23/6/05) domestic car sales by all companies in 2005 could reach 550,000 units, up from an earlier forecast of 510,000, Reuters reported.  

 

High oil prices, a rise in interest rates and the weakness of the rupiah were negative factors, but the car market was growing, as was the economy, Astra director Johnny Darmawan said.

 

"Looking at those factors, I am confident that we can reach 540,000-550,000. We can even get bigger than that," he added.

 

Last year, 483,295 cars were sold and in the first five months of 2005, 246,421 cars were sold, some 34% higher than in the same period of 2004. Astra accounted for around 47% of sales.

 

Darmawan said that further weakness in the rupiah could slow sales growth. 

 

 

Kenaf for Toyota 

Toyota Motor Corp. group companies are to increase the production of automotive components made from kenaf, widely grown in Indonesia, Nihon Keizai Shimbun reported.

 

Toyota Boshoku Corp. intends to double annual production at its kenaf processing factory in Surabaya from the current 1,500 tons to 3,000 tons by 2007.

 

The output is expected to be exported mainly to Japan and the US in the form of materials for car door interiors. The company aims to double the kenaf field acreage to 3,000 hectares and contract the farming to local workers.

 

Toyota Auto Body Co. plans to work with Toyota Motor to develop bumpers and other car exterior materials that are made from kenaf. Toyota Auto Body has already started growing kenaf in Indonesia and is now considering building a mass-production plant in 2006 or later.

 

Toyota Motor has targeted replacing 15% of resin-based autoparts with those made from plants and other more environmentally friendly materials by 2010.

 

 

Adam Air Looks to Airbus 

Low-cost carrier PT Adam Sky Connection Airlines (Adam Air) plans to buy 10 Airbus jets in 2008 to replace some of its Boeing fleet as it seeks to open new routes to Malaysia, Singapore, Australia, India and China, Investor Daily reported.

 

'At the start of 2008 Adam will buy around 10 Airbus jets of the 321, 320 or 319 series,' the paper quoted Adam Air chief communication officer Dave Laksono as saying.

 

Adam Air currently operates 14 Boeing jets of B-737-200 and B-737-300 types. 

 

 

Arpeni IPO Succeeds 

Shipping company PT Arpeni Pratama Ocean Lines sold a 33% stake in its enlarged capital via a initial public offering (IPO) at Rp625 a share, raising Rp312.50 billion to help it fund ship purchases, Antara reported.

 

The IPO was oversubscribed by four times, with foreign investors accounting for 60% of the 500 million offered shares. 

 

Finance director Ateng Suhendar said the company expects its sales to more than double this year from Rp845.87 billion in 2004 as it plans to add 14 new ships to its fleet.

 

Company president Oentoro Surya said the planned purchases will bring its fleet to 38 vessels.

 

Arpeni has 10 additional ships rented but now plans to return them once the new ships have been delivered.

 

The 14 new ships will cost about $126 million, 30% of which the company hopes to finance from the IPO proceeds, Surya said, with the remainder financed by bank loans.

 

 

Barclays Capital Opens 

Barclays Capital, the investment banking division of Barclays Bank Plc, officially opened an office in Jakarta on Wednesday (22/6/05), The Jakarta Post reported.

 

Robert Morrice, chairman and chief executive of Barclays Capital in Asia Pacific, said the opening of the "is a clear signal of our firm commitment to Indonesia, which we view as an important market for us in Asia Pacific." 

 

British Ambassador to Indonesia Charles Humfrey, who attended the opening ceremony, said, "the opening is another example of the strengthening ties between British and Indonesian business." 

 

 

 

POWER

Chevron Back to Geothermal Work 

Chevron Texaco Energy Indonesia Ltd. (CTEI) will be able to resume the construction of its geothermal power plant, Dradjat III, in the regency of Garut after receiving a go ahead from the district administration, Antara reported.

 

Earlier the Garut administration withheld the principle license for the project due to a delay in working out the compensation amount for the local community.

 

Field Community Development Coordinator of CTEI Deddy Supardi said contractor PT Thiess has resumed work on the project.

 

Construction of the 105 MW power plant with an investment of around $130 million is expected to be completed as scheduled in June 2006.

 

 

 

MINING

New Hope Completes Sale 

New Hope Corp Ltd said Thursday (23/6/05) it has completed the sale of its Indonesian coal assets for $406 million, AFX reported. 

 

A 40.83% interest in the Adaro mine and coal trading businesses and a 50% interest in a bulk loading terminal were sold to a consortium led by Indonesian businessman Edwin Soeryadja. 

 

New Hope said it will now complete a strategic review, including reviewing options to utilize proceeds from the sale, with an announcement to be made by the time New Hope's annual results are released in September.

 

The Government of Singapore Investment Corporation (GIC) is part of the consortium taking the New Hope share. 

 

Business Times said it was understood that GIC will buy a direct stake worth about $50 million in the Adaro coal mine and the Indonesian Coal Terminal (IBT) via Alam Tri Abadi, a company set up by consortium leaders Edwin Soeryadjaya, Teddy Rachmat, Benny Subianto and Garibaldi Boy Thohir.

 

The deal was struck despite a legal dispute over ownership of the mine, with a challenge currently pending in the Singapore courts.  

 

 

 

OIL & GAS

Pertamina Gets Injection 

The government said it will give Rp10 trillion ($1.05 billion) to Pertamina on Monday (27/6/05) to pay for fuel imports as fears grew that power and gasoline supplies could quickly run short.  

 

"So far we have paid (Pertamina) Rp15 trillion in the first quarter," Mulia Nasution, Director General of Treasury at the Finance Ministry, told reporters, Dow Jones Newswires reported. The payments are part of a total of Rp76 trillion the government has budgeted for fuel subsidies in 2005. 

 

Nasution said the government has enough liquidity to cover Pertamina's subsidy payments. "We don't have any cash flow problem," he said without elaborating. 

 

Early last week, the country had domestic stockpiles of premium petrol and diesel fuel of just 12.7 and 14.5 days respectively. Another 3.2 million barrels of fuel had been unloaded and were being distributed. 

 

"We are making a serious effort to ensure that there is no prolonged fuel shortage," advisor to Coordinating Economics Minister Lin Che Wei told Business Times. He added that there was no question that the government would fund fuel imports, but said procedural issues needed to be addressed. 

 

 

ExxonMobil 'Deal' on Cepu 

Oil company Exxon Mobil Corp. has accepted a revenue-sharing agreement with state-owned oil company Pertamina over the Cepu block on the Central-East Java border, but talks on a final deal are ongoing, the government said Thursday (23/6/05).

 

Rizal Mallarangeng, spokesman of the government team negotiating the dispute over revenues from the Cepu block, told reporters that progress had been achieved, the Associated Press reported.

 

Deva Rachman, a Jakarta-based spokeswoman for ExxonMobil's local unit, declined to comment on whether the company had reached a revenue-sharing agreement, saying that it had "a constructive engagement" with the government in resolving the Cepu dispute. She added that several weeks of further discussions over technical terms would lie ahead, even after agreement on a broad outline was reached. 

 

Mallarangeng said Exxon Mobil had accepted a 6.5% share of revenue from Cepu's output if oil prices are above $45 a barrel and a 13.5% share of revenue if the prices fall below $35.

 

"If the oil price is lower we'll give them a higher revenue split, so they can still make reasonable profit," he said.

 

Malarangeng said the talks, which began in April, had focused on updating Indonesia's longstanding model for production-sharing contracts with foreign energy producers to give more incentives for companies to pursue sometimes risky oil-and-gas exploration investments, The Wall Street Journal said.

 

Exxon Mobil bought the rights to the Cepu block in 1988. It soon discovered that the block contained significant oil and wants a new agreement to replace its current contract, which expires in 2010, before committing to investment. 

 

The Cepu block contains estimated reserves of some 600 million barrels of crude oil and production would assist Indonesia to return to a net oil exporter position. 

 

 

Stay a Member: OPEC 

The Organization of Petroleum Countries has asked Indonesia's government to reconsider any plans it may have to downgrade its membership, government officials told Dow Jones Newswires Friday. 

 

OPEC's acting Secretary General Adnan Shihab-Eldin wrote on June 17 to Minister of Energy and Mineral Resources Purnomo Yusgiantoro, urging Indonesia to remain a full OPEC member.

 

"Indonesia will enjoy and continue to have the full support of OPEC members," the letter seen by Dow Jones Newswires said.

 

The letter is a reaction to a recommendation earlier this year by a government panel that the country downgrade its OPEC membership to 'observer' status.

 

The panel said a downgrade in Indonesia's OPEC status would reduce the country's financial commitments to the organization at a time when falling output has brought Indonesia, Southeast Asia's sole OPEC member, to a net oil importer position.

 

Indonesia is in no rush to make a decision on its OPEC membership. A special adviser to the Minister for Energy, Rachmat Sudibjo, has said a decision will be made on the panel's recommendations within two years.

 

OPEC members also expressed their desire that Indonesia remain in the grouping during the organization's meeting in Vienna last week, a government official said, Dow Jones added.

 

Member states offered to help Indonesia boost oil production, including assistance in the construction of new oil refineries, the official said, without elaborating.

 

 

Thailand's PTT Looks at Natuna Gas

The Petroleum Authority of Thailand PCL (PTT) is considering buying gas from the East Natuna D-Alpha block operated by ExxonMobil Oil Indonesia Inc, The Jakarta Post reported, quoting Minister of Energy and Mineral Resources Purnomo Yusgiantoro.

 

Yusgiantoro said PTT expressed its interest in building a gas pipeline connecting Thailand with the East Natuna D-Alpha block in the South China Sea.

 

"They also want to buy LNG (liquefied natural gas) as they're building an LNG terminal," Yusgiantoro said after he met a visiting PTT delegation.

 

He said a number of undeveloped fields in East Kalimantan may supply the gas for Thailand, where a LNG terminal project will be ready to receive LNG shipments by 2010 with an initial capacity of 5.0 million tons a year, which is expected to double within three years of operation.

 

PTT executive vice president Tevin Vongvanich was quoted as saying that natural gas is expected for delivery into Thailand by 2015.

 

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