PLN Next in Line for Management Shake-Up After Pertamina, Minister Says

Jakarta Globe, Dec 08, 2014

Two workers fix an electricity network operated by state-owned electricity firm
Perusahaan Listrik Negara (PLN) in Semarang. (JG Photo/Dhana Kencana)

Jakarta. State Enterprises Minister Rini Soemarno confirmed on Monday that the government was planning a management shake-up at the state power utility.

The move is part of a series of reforms initiated by the administration of President Joko Widodo aimed at boosting confidence in Indonesia’s economy.

The minister said the management of Perusahaan Listrik Negara (PLN) would be restructured similar to that of state energy firm Pertamina, which last month saw its entire board of directors dismissed and a new chief appointed. Six new directors were added this week.

“We first performed an analysis in terms of restructuring Pertamina’s management and we’ll try to do the same for other SOEs in the future,” Rini told reporters, declining to elaborate on the time frame of the planned changes.

“The extent of the changes will depend on the activities of the SOEs themselves,” she said, adding that PLN, which has a monopoly on electricity distribution across the archipelago, would be next.

The management changes could come this month and would include a partial or total replacement of PLN’s board, the Wall Street Journal reported, quoted by Reuters.

Joko’s administration seeks to accelerate electricity connectivity in the country to support his 7 percent annual growth target.

The government plans to build new power plants to add an additional 35,000 megawatts to the national grid between 2015-2019, boosting Indonesia’s electricity generating capacity to 85,7000 MW.

The plan will reportedly cost around Rp 980 trillion ($80 billion), with Rp 545 trillion expected from PLN. The remainder is expected to come from the private sector.

PLN plays a key role in Indonesia’s economy as it is not only a power producer, but also the biggest electricity distributor.

Rini, former head of Indonesia’s biggest auto distributor Astra International, also called for an end to SOE dividend payments to the government, saying profits will be used for capital expenditure.

Reuters & JG

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Former SKK Migas Chief Sentenced to 7 Years in Prison for Graft

Jakarta Globe, Novianti Setuningsih, Apr 29, 2014

Rudi Rubiandini, former head of Indonesian energy regulator SKKMigas,
 speaks during an interview with Reuters at his office in Jakarta in this March 6,
2013 file photo.(Reuters Photo/Enny Nuraheni)

Jakarta. The Anti-Corruption Court sentenced Rudi Rubiandini to seven years in prison on Tuesday, after the former head of oil-and-gas regulator SKK Migas was found guilty of accepting bribes from energy companies.

“The defendant has been found guilty of corruption and money laundering,” presiding judge Amin Ismanto told the court on Tuesday.

The court also ordered Rudi to pay Rp 200 million in fines or serve an additional three months in prison.

Rudi cried in court when the verdict was read. He said he accepted the decision and would not file an appeal.

Judge Purwono Edi Santosa said Rudi had received S$200,000 ($159,591) and $900,000 from Widodo Ratanachaitong, the president director of Kernel Oil, and from Fossus Energy, through Kernel’s operational director, Simon Gunawan Tanjaya.

Rudi was also found guilty of receiving $522,500 from Artha Meris Simbolon, the director of Kaltim Parna Industri, a manufacturer of ammonia.

Rudi allegedly used the money buy a Volvo XC90 worth Rp 1.6 billion ($142,400); a house in Tebet, South Jakarta, worth Rp 2 billion; a Rolex Datejust watch worth $11,500 for his wife Elin Herlina; a Citizen Echo Drive Saphire watch for himself; and a Toyota Camry worth Rp 669 million.

Prosecutors had sought 10 years for Rudi, who had admitted taking bribes but denied the money-laundering charges.

In a separate trial, Rudi’s golf trainer, Deviardi, was found guilty of delivering the bribe money and sentenced to serve four years and six months in prison.

Jakarta Anti-Corruption Court presiding judge Matheus Samiaji said the trainer was also guilty of money laundering on Rudi’s behalf.

Prosecutors said Deviardi had taken cash from Widodo and Artha and delivered it to Rudi.

Constitutional Court Invalidates BP Migas

Jakarta Globe, November 13, 2012

Constitutional Court chief Mahfud MD. (JG Photo/Yudhi Sukma Wijaya)

           

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The Constitutional Court on Tuesday annulled select articles within the Oil and Gas Law that allowed BP Migas to act as a state upstream oil and gas regulation company.

In a ruling published on the court’s website, chief judge Mahfud MD noted that all provisions within the law and the explanatory portion related to the phrase “regulator company” was both unconstitutional and not legally binding.

“The function and role of the Upstream Oil and Gas Regulator Company should be carried out by the government or a related ministry until a new law related to the matter is issued,” Mahfud said.

The court declared invalid various articles that gave BP Migas, the country’s upstream oil and gas regulator company, the right to represent the government, manage its oil and gas resources and sign contracts with foreign companies.

Several Muslim activists, including Muhammadiyah chairman Muhammad Din Syamsuddin, former Nahdlatul Ulama chairman Hasyim Muzadi, the chairman of the Indonesian Ulema Council Amidhan, Muslim politician Ali Mochtar Ngabalin, former Manpower and transmigration minister Fahmi Idris and twelve Islamic organizations filed for the judicial review of the law.

According to them, the existence of BP Migas was violating Article 33 of the Constitution which stated that “the land, the waters and the natural resources within shall be under the powers of the State and shall be used to the greatest benefit of the people.”

The court agreed, and stated that some articles within the law were nullified in order to liberate the management of the oil and gas sector, which is highly influenced by foreign parties and therefore antithetical to the provision that such resources should be under state control.

Hikmahanto Juwono, an international law expert on the government’s side, previously said that the law placed the government in a safe position since contracts were only signed between BP Migas and the other business involved.

“It’s indeed good, because there’s a fear that if the state makes the agreement it could cause state losses,” Hikmahanto said. “The state’s assets could be taken away [if a losing dispute in international arbitration]. This way, it’s limited to the assets of BP Migas.”

Din Syamsuddin said that the court’s ruling represented a triumph for all Indonesian people.

“This oil and gas law caused losses for [Indonesian] people, so, this is a victory for the people,” Din said, as quoted by Detik.com. “We hope that with this ruling, oil and gas resources will be better managed.”

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Norway to double carbon tax on oil industry

Extra funding for climate change mitigation and forestry programmes also part of oil-rich nation's radical programme

guardian.co.uk, Severin Carrell, Scotland correspondent, Thursday 11 October 2012

Ekofisk oil platform in the North Sea, Norway. The Norwegian government has
 proposed increasing its carbon tax on offshore oil companies. Photograph:
Ulrich Baumgarten/Getty Images

Norway is to double carbon tax on its North Sea oil industry and set up a £1bn fund to help combat the damaging impacts of climate change in the developing world.

In one of the most radical climate programmes yet by an oil-producing nation, the Norwegian government has proposed increasing its carbon tax on offshore oil companies by £21 to £45 (Nkr410) per tonne of CO2 and a £5.50 (Nkr50) per tonne CO2 tax on its fishing industry.

Norway will also plough an extra £1bn (Nkr10bn) into its funds for climate change mitigation, renewable energy, food security in developing countries and conversion to low-carbon energy sources, Environmental Finance reported.

It will step up spending on new projects to combat deforestation in developing countries to £44m, taking up its spending overall on forestry programmes to £327m. Previous forestry projects have involved Brazil, Indonesia and Ethiopia.

The Oslo government is also to spend £69m on buying carbon credits in 2013, to help offset its emissions, force through new building regulations to make all new homes carbon-neutral by 2015 and increase efforts to heavily cut emissions from cars, switching to electric vehicles.

The scale of these initiatives will pose a significant political challenge to other oil-producing nations, who are also investing in low-carbon technologies and cutting their own emissions, but not yet investing heavily in tackling the impacts of climate change on developing countries.

The UK and Scottish governments estimate there are up to 24bn barrels of oil left to be exploited over the next 40 years from the UK's oil and gas fields in the North Sea, west of Shetland and smaller sites off western England.

But that would lead to total CO2 emissions of an extra 10bn tonnes – dwarfing the UK's annual 500m tonnes of CO2 emissions, at a time when many climate scientists urge cutbacks in oil, gas and coal use to avoid significant global warming and to meet climate targets.

Neither the UK or Scottish government has supported a carbon tax on the oil and gas industry.

The Scottish government, which often looks to Norway as a model for its independence plans, has greatly increased its funding and support for renewable energy investment. It announced a £103m investment fund for marine renewables and community power schemes on Wednesday and has a £4m "climate justice fund" to help developing countries.

But fields in Scottish waters account for about 80% of the UK's North Sea oil and gas fields, which produced 1m barrels of oil a day in August.

Alex Salmond, Scotland's first minister, said on Wednesday that oil economies have a"moral obligation" to increase low-carbon energy and tackle climate change, but says there is no contradiction in maximising oil, gas and coal production.

He told a conference on low-carbon investment: "As countries such as Denmark show, there's no contradiction between making use of substantial in their case gas reserves which will be needed by the rest of the world in the coming decades by the rest of the world, while leading the transition to a low-carbon economy."

After speaking at the same conference on Thursday, Ed Davey, the UK energy and climate secretary, told the Guardian he believed the UK's actions on climate change and green energy were also world-leading. The UK government was putting £3bn into the new green investment bank, and aims to cut CO2 emissions by 34% by 2020, he said.

Asked about Norway's new programme, Davey said: "I would say that the UK government has very ambitious climate change targets and carbon emission reduction targets.

"We were one of the first countries in the world to pass legally binding targets on ourselves, with the Climate Change Act 2008 which had cross party support. And the government has introduced on the back of that, the fourth carbon budget and the whole electricity market reform, the green deal, the green investment bank.

"These are all our tools to deliver on those targets; these are incredibly ambitious and maybe some countries are catching us up."

Ranking third among the world's oil exporters, with production peaking at 3m barrels of oil a day, Norway has 51 active oil and gas fields in the North Sea, and believes it has more than 7bn barrels of undiscovered reserves. Its oil and gas sector is the world's richest: its employees earn $180,000 on average a year.

With a population of 5 million - the same as Scotland - it is the third wealthiest country per capita in the world thanks to its oil and gas exports. Norway's plans to offset the impacts of its oil exports on the world's climate come as it also proposes to expand oil exploration into the Barents Sea to the far north.

Richard Dixon, director of WWF Scotland, said: "Norway is showing how you can use oil income to fund the transition out of oil, we should be doing the same with UK oil revenues. The Scottish National Party have always been keen on the Norwegian oil fund, and now it is setting an example really worth following."

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"Recalibration of Free Choice"–  Mar 3, 2012 (Kryon Channelling by Lee Caroll) - (Subjects: (Old) Souls, Midpoint on 21-12-2012, Shift of Human Consciousness, Black & White vs. Color, 1 - Spirituality (Religions) shifting, Loose a Pope “soon”, 2 - Humans will change react to drama, 3 - Civilizations/Population on Earth,  4 - Alternate energy sources (Geothermal, Tidal (Paddle wheels), Wind), 5 – Financials Institutes/concepts will change (Integrity – Ethical) , 6 - News/Media/TV to change, 7 – Big Pharmaceutical company will collapse “soon”, (Keep people sick), (Integrity – Ethical)  8 – Wars will be over on Earth, Global Unity, … etc.) - (Text version)

“…  4 - Energy (again)

The natural resources of the planet are finite and will not support the continuation of what you've been doing. We've been saying this for a decade. Watch for increased science and increased funding for alternate ways of creating electricity (finally). Watch for the very companies who have the most to lose being the ones who fund it. It is the beginning of a full realization that a change of thinking is at hand. You can take things from Gaia that are energy, instead of physical resources. We speak yet again about geothermal, about tidal, about wind. Again, we plead with you not to over-engineer this. For one of the things that Human Beings do in a technological age is to over-engineer simple things. Look at nuclear - the most over-engineered and expensive steam engine in existence!

Your current ideas of capturing energy from tidal and wave motion don't have to be technical marvels. Think paddle wheel on a pier with waves, which will create energy in both directions [waves coming and going] tied to a generator that can power dozens of neighborhoods, not full cities. Think simple and decentralize the idea of utilities. The same goes for wind and geothermal. Think of utilities for groups of homes in a cluster. You won't have a grid failure if there is no grid. This is the way of the future, and you'll be more inclined to have it sooner than later if you do this, and it won't cost as much….”

Going ‘Green’ Key to Drawing Investment in Indonesia

Jakart Globe, Dion Bisara, February 03, 2012

Indonesia has been warned it may not fully benefit from its recent investment
 grade status to draw significant offshore funding if it fails to impress investors
looking for environmentally sustainable investments.

               

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Indonesia has been warned it may not fully benefit from its recent investment grade status to draw significant offshore funding if it fails to impress investors looking for environmentally sustainable investments.

Two international rating agencies have in the past month granted Southeast Asia’s largest economy investment-grade status, improving its chances of attracting long-term foreign funds.

However, Elmar Bouma, the director of the Indonesia Netherlands Association, cautioned that pension funds and investment managers, which together account for an estimated $30 trillion in capital, had strict sustainability requirements in line with the UN Principles for Responsible Investment.

“Its hard to say how much of that would come to Indonesia, because they apply much stricter standard regarding sustainability,” Bouma told a news conference on Thursday.

Data from Towers Watson and UNPRI’s Web site show that big funds include Norway’s Government Pension Fund Global, the world’s second-largest sovereign fund with more than $550 billion in assets, and South Korea’s National Pension, the world’s third largest with around $290 billion.

Indonesia, with its $706 billion economy, is fast becoming a magnet for foreign investors as its growth continues amid a global crisis marked by European debt and the US economic slowdown.

Indonesia’s prudent fiscal and monetary position, coupled with its demographic bonus — a productive population that outnumbers its unproductive one — provides a foundation for accelerating growth over the next decade.

“Indonesia promises growth in the long term, but the scope of those pension funds is longer,” said Poltak Hotradero, the head of research at the Indonesia Stock Exchange.

Bouma said Indonesia’s banking system should take the  initiative to spearhead sustainable banking practices. There are 120 commercial banks operating in Indonesia.

“The banking sector of Indonesia must anticipate this development to tap the new source capital,” he said.

Sakariza Qori Hermawan, group head of corporate sustainability at Bank Negara Indonesia, said Bank Indonesia, the central bank, may soon issue a regulation on green banking.

Lenders would be required to assess customers based on social and environmental sustainability standards as well as financial.

Thus far, he said, social and environmental sustainability were low priorities for Indonesia’s banks and businesses.

Sakariza said his Jakarta-based lender had only disbursed Rp 7.7 trillion ($862.4 million) in “green category” loans in 2010, or around 5.7 percent of its total outstanding loans valued at Rp 136.4 trillion. Some green loans financed geothermal power plants.

“Looking for excellent green companies is quite hard,” he said.

Sakariza said green banking would force corporations to comply with the UNPRI framework.

Rubin Japhta, a senior officer at the International Finance Corporation, said Indonesian companies and banks would need time to change their business paradigm.

While waiting for the shift, he said, Indonesian banks could try to tap the funds while committing themselves to transformation along the way.

The IFC, the investment arm of the Washington-based World Bank, has implemented these “flexible” policies with its investment partners in Indonesia including Bank Tabungan Pensiunan Negara, Bank Maybank Indonesia, Hana Bank and Bank Danamon.

Kadin Says Renewables the Key to Heading Off Energy Crisis

Jakarta Globe, Faisal Maliki Baskoro, July 15, 2011

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The Indonesian Chamber of Commerce and Industry has called on the government to show its commitment to developing renewable energy resources through regulations and pricing as the nation tries to reduce its reliance on fossil fuels.

The government had yet to issue any regulations to set the price of renewable energy, which has hampered business plans for developing the resource, said Harry Salman F. Sohar, the deputy for new and renewable energy at the chamber, also known as Kadin.

“Renewable energy is still seen as an alternative, not a solution,” he said. “Developing renewables is necessary, and the government needs to be more serious about this.”

The importance of moving away from fossil fuels and natural gas for electricity generation has been acknowledged in legislation that prioritizes shifting energy use to new and renewable resources, including coalbed methane, nuclear, gasified coal, geothermal, solar and wind.

“There’s still a lack of regulation that is pro-renewables, especially on the pricing mechanism,” Harry said. “Kadin will form a working committee that will provide input to the government.”

Kadin, he said, will propose a feed-in tariff payment plan, which would pay those who operate renewable electricity systems for every kilowatt hour generated based on the cost of production by technology. That means homeowners who have solar panels installed on their roofs would be paid for the surplus electricity that is generated and transmitted to the power grid.

The FIT scheme is already widely used in Europe, Asia and Africa.

According to government data, Indonesia has up to 40 percent of the world’s geothermal reserves, with the potential to produce the equivalent of 28,000 megawatts.

Harry said countries had already committed to helping develop Indonesia’s renewable energy potential, including $364 million coming from the United States. Finland has also set aside $40 million to develop renewables in South Kalimantan and Riau, he added.

According to Shinta Widjaja Kamdani, Kadin’s deputy for the environment and climate change, the government needs to act on developing renewables because fossil fuel reserves could run out as soon as in the next 15 years, leaving the country with an energy crisis. “A major breakthrough needs to happen soon,” she said.

Indonesia’s oil reserves are estimated at 4.7 billion barrels, the equivalent of 15 years’ worth with average domestic consumption of 1,126 million barrels per day, she said, citing data from the BP Statistical Review of World Energy.

At the same time, the use of renewable energy by way of solar, wind and biodiesel has increased significantly over the past four years, she said, citing the International Energy Agency.

Powered-Up Pertamina to Be World-Class by 2023: CEO

Jakarta Globe, S.K. Zainuddin, June 13, 2011

'Mergers and acquisitions are the best options to increase
our production and reserves,' Pertamina chief executive Karen
Agustiawan told the Jakarta Globe on the sidelines of the East
Asia World Economic Forum on Sunday.

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The Jakarta Globe spoke with Pertamina chief executive Karen Agustiawan on Sunday on the sidelines of the World Economic Forum in Jakarta and asked her about Indonesia’s future energy needs and the state oil and gas firm’s role in meeting them.

What is your vision for the firm for the next 20 years?

We want to be a world-class national oil company by 2023 — meaning being respected by oil companies, having a major role in the global energy business and becoming one of 15 best oil companies in the world.

How do you intend to achieve those goals?

There is much to be done. First, we have to increase operational objectives. Our strategy in increasing upstream production is focusing on domestic operations, aggressive international expansion and improving our capability through strategic alliances.

Our focus is on domestic operations. Some of our [oil] fields are mature. It is natural that production at mature fields declines, so we will use sophisticated technology, such as secondary recovery alternative methods to retrieve oil such as water or gas flooding.

Mergers and acquisitions are the best options to increase our production and reserves.

We will invest in production and exploration in undeveloped areas with production capabilities. These assets can either be in the country or abroad.

In terms of downstream production, we must have competitive refineries and we must be able to lead in the domestic retail market, expanding it as well.

Second, we must have a competitive advantage in all business areas and high health and safety standards.

Third, we are also improving our capabilities and promoting a competitive working culture for our employees. We also have to fulfill the expectations of our shareholders.

How will you encourage a shift to green energy?

At Pertamina, we are always trying to use more efficient and environmentally friendly technologies. For example, we are in the process of investing direct-current electric drills to replace the existing, high energy-consumption mechanical drills.

We support various policies and programs that have been implemented and are being developed by the government.

These include the use of liquefied petroleum gas for households and compressed natural gas for transportation, as well as coal and gas for electricity. We also support the increasing use of new and renewable low-polluting energy sources.

We also aim to focus on supplying geothermal energy as an alternative for traditional power sources. For this plan, Pertamina will continue to develop the country’s geothermal reserves. Currently, the installed capacity is only around 4 percent of the country’s geothermal potential.

Is nuclear energy a viable option in order to meet the nation’s energy needs?

We have options. Indonesia’s national energy policy focuses on diversifying its energy resources.

By 2025, the target energy mix should be 33 percent coal, gas and coal-bed methane at 30 percent, oil at 20 percent and renewable energy — including geothermal energy, biofuel and solar power — at 17 percent.

My opinion is that we have to optimize the sources of energy that we have, which is why Pertamina focuses more on alternatives such as geothermal and coal-bed methane.

What is your forecast for Indonesia's energy sector during the next five years?

Southeast Asia’s regional energy security framework has been promoted as one strategic element of the Master Plan on Asean Connectivity adopted in 2010.

In line with the master plan, President Susilo Bambang Yudhoyono recently launched the Indonesian Economic Development Expansion and Acceleration Master Plan 2011-15. The plan aims to establish six economic corridors, each with specific competitive advantages.

The plan aims to help Indonesia become one of the world’s 10 largest economies by 2030 through inclusive, sustainable and high economic growth.

One of the plan’s objectives is to improve energy security for households, industries, and transportation through energy diversification, energy conservation, energy prices and green policies.

Various programs to be developed by the government are to provide LPG for households, CNG and LPG for cars and increase the use of new and renewable low-polluting energy sources.