ASEAN Energy News Service

Source: The Jakarta Post, 11 Apr 2008

Medco Energi Group is investing in a joint venture with Singapore’s Biofuel Industries (BI) to develop a biomass cogeneration power plant in Jurong, Singapore, worth an estimated US$55 million.

The plant, the first of its kind in Singapore, will depend on horticultural and industrial wood waste as fuel and will be able to generate 25 megawatts of power.

“We signed an agreement with BI on Wednesday to establish a company called Biofuel Power, of which Medco will be the majority shareholder with 65 percent,” said Fazil Alfitri, president director of Medco Power Venture (MPV), a subsidiary of Medco Energi.

BI chairman Er Kwong Wah said in a statement MPV had considerable expertise in developing, operating and maintaining power plants.

“We are pleased to enter into this agreement with Medco Power on this landmark development for Singapore,” he said.

Last year, BI announced plans for a smaller biomass power project, worth $30 million with an output of 14.9 megawatts. The plans were dropped and replaced by the joint venture.

Construction will begin in the middle of this year and is scheduled for completion sometime in 2010.

“This is our first experience in developing this kind of biomass power plant,” Fazil said.

“We want to turn this into a success story for the company, so that someday we can build one in eastern Indonesia, where there is so little access to energy.”

According to Fazil, Singapore is seeking to reduce its dependency on gas by generating electricity and to manage its construction waste better.

He said BI approached Medco about the venture nine months ago.

In 2006, BI was granted a 30-year license to manage Singapore’s industrial wood waste, which is estimated to reach between 700 and 800 tons by 2010.

Because the project relies on renewable energy, Fazil said, his company had hired a consultant to apply for a carbon credit certificate through the United Nations Clean Development Mechanism.

“According to estimates by officials from Singapore, the plant could generate up to 135,000 carbon credits a year,” Fazil said.

Carbon credits are currently priced at an average of $10 per ton in the Asian market.

MPV is an investment company under Medco Group, through Medco Power Indonesia (MPI). The company’s major business activities include a thermal power plant, a renewable fuel power plant and power plant services such as project management, operation and maintenance.

MPI owns majority stakes in and operates three gas-fired power plants in Batam with a combined capacity of 150 megawatts. The firm is currently developing a 330-megawatt geothermal power plant in Sarulla, North Sumatra.

In 2004, the Singapore government’s investment arm Temasek was keen to buy a 38 percent stake in Medco Energi, but was forced to abandon the plan when the founding Panigoro family exercised its preemptive right to buy the shares.

Source: The Jakarta Post, 09 Apr 2008

House of Representatives’ Commission VII for energy and mineral resources on Monday named R. Priyono the new chairman of upstream oil and gas regulator BPMigas, as the agency grapples with continued inefficiency in managing the energy sector.

Priyono, currently the director for upstream activities at the ministry of energy and mineral resources, will replace Kardaya Warnika two years before his term was scheduled to end at the troubled agency, which was set up in 2002.

Forty-two lawmakers on the commission voted in favor of Priyono, while seven voted for Hadi Purnomo, the director of a research and development center for the oil and gas sector.

Another candidate, Evita H. Legowo, an expert at the ministry of energy and mineral resources, received no votes.

Priyono will officially take over BPMigas after President Susilo Bambang Yudhoyono signs the inauguration decree.

Yudhoyono, who proposed the three candidates, had received intense pressure from lawmakers to fire Kardaya over the agency’s perceived lack of supervision of firms involved in gas and oil production sharing contracts.

Analysts estimate lack of supervision at the agency caused the state trillions of rupiah in losses from dubious transactions revolving around cost recovery expenses enjoyed by companies.

Under existing regulations, companies operating under production sharing contracts can claim back operating costs from the government related to the production of oil and gas.

However, in practice, many firms inflated the figures or create fictitious transactions to receive larger government rebates than they would otherwise be entitled to.

In some cases, companies have passed on costs having no connection with the production of oil and gas, including bills for golf clubs and the haj pilgrimage to Saudi Arabia.

“There will be breakthrough measures to prevent the misuse of the cost recovery scheme should the House give me a chance to manage the agency,” said Priyono during a so-called “fit and proper test” at the commission.

One of these proposed measures is to require companies to list all of the expenses on their development plan before production starts. If the firms then claim expenses not in the plan, we will not grant them, he said.

Another task facing the agency is to raise the country’s declining oil output, blamed on a lack of investment and aging fields.

Priyono pledged to gradually increase the output to one million barrels a day by optimizing around 13,000 aging oil wells in Cepu, East Java, in a bid to produce around five to 15,000 barrels per day.

Indonesia cut its oil output target by 7.3 percent to 927,000 barrels a day this year.

Priyono also pledged to simplify investment procedures for oil and gas companies, expedite approval for production and exploration activities, as well as mending the agency’s strained relationship with the ministry of energy and mineral resources.

Chairman of Commission VII, Airlangga Hartarto, said lawmakers were impressed by the concrete programs Priyono proposed during his presentation.

“We voted for him based on his actual target of producing up to one million barrels of oil per day,” he said Airlangga.

BPMigas supervises and manages oil and gas exploration and production.

Source: Bangkok Post, 09 Apr 2008

Governments and automakers need to work together on an ‘’energy security roadmap'’ focusing on many different energy resources, according to Steve Carlisle, the Thailand-based chief of operations for General Motors in Southeast Asia.

Addressing an industry forum on alternative fuels, Mr Carlisle said that GM was challenging the automobile’s ‘’98% dependence on petroleum'’ by adopting a strategy to displace petroleum through energy diversity.

‘’Clearly, the roadmap that Thailand and other countries have followed to this point, which relies on internal combustion engines powered almost exclusively by petroleum, is not sustainable over the long term,'’ said Mr Carlisle, who is also the president of Chevrolet Sales Thailand.

According to Mr Carlisle, what is required is a new roadmap that incorporates alternative fuels as well as a full range of technologies that can ensure the sustainable development of the nation’s automotive industry.

‘’This will also help ensure Thailand’s energy security,'’ he added.

Alternatives such as ethanol, hybrids, electricity and natural gas are important near-term solutions as the cost of crude oil continues to skyrocket, but according to Mr Carlisle the ultimate goal for displacing petroleum is hydrogen, which is abundantly available and generates no hydrocarbon emissions.

But the road to hydrogen-powered vehicles is still years away so in the meantime, governments and companies should continue to look at interim solutions.

To illustrate the important role governments can play, Mr Carlisle cited the situations in Brazil and Sweden where demand for ethanol was increased through the use of incentives and taxes. Smart policies led to a growth in demand for ‘’flex fuel'’ vehicles which in Brazil now represent 80% of the market.

Adoption of ethanol in the United States has not been as successful because while the government offered incentives to vehicle manufacturers to produce flex fuel vehicles, demand lagged because the infrastructure was not in place and no discounts were applied to ethanol.

Source: Associated Press, 07 Apr 2008

Oil prices rose Monday in Asia as prospects for further cuts in U.S. interest rates seemed more likely after poor U.S. jobs data at the end of last week.

The U.S. Labor Department said Friday that employers cut payrolls by 80,000 jobs last month, much more than analysts had expected. The news that the U.S. unemployment rate rose to 5.1 percent is consistent with forecasts that the U.S. is experiencing a sharp pullback in economic growth in the first half of the year.

“The dollar fell because investors figured that the U.S. Federal Reserve would cut interest rates even further to help bolster the economy,” said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.

The Fed has cut its key rates several times since the middle of last year in an effort to shore up the U.S. economy against fallout from the subprime housing loan crisis. And each reduction has pulled investors to oil, gold and other hard commodities as a hedge against inflation and a weakening currency.

“The falling dollar has been one of the key factors supporting oil prices in the past weeks,” Shum said.

Light, sweet crude for May delivery rose 31 cents to $106.54 a barrel in Asian electronic trading on the New York Mercantile Exchange by midafternoon in Singapore. The contract rose $2.40 to settle at $106.23 a barrel.

While oil demand in the world’s largest energy consumer has slowed along with the U.S. economy, oil prices have not.

Many analysts believe that’s partly because weak economic data has hastened the decline of the dollar, whose weakness sustains the purchasing power of oil consumers using other currencies, and prods oil exporters to raise prices for the dollar-denominated commodity.

“The weakening fundamentals exert a lid on how high oil pricing can go, but the weak dollar continues to prop up oil pricing,” Shum said. “We have this tug of war going on … I think that fundamentals will eventually prevail and pull back oil prices as you can defy the gravity of fundamentals only for so long.”

In other Nymex prices, heating oil futures rose 1.55 cents to $3.0076 a gallon while gasoline futures added 0.51 cent to $2.7618 a gallon.

Natural gas futures rose 13.1 cents to $9.453 per 1,000 cubic feet.

Brent crude futures rose 5 cents to $104.95 a barrel on the ICE Futures exchange in London.

Source: The Brunei Times, 07 Apr 2008

WITH oil prices near record highs, Malaysia could cut subsidies for higher grades of petrol in order to keep prices down for middle income groups and the poor, reports said yesterday.

The government expects to spend US$10.7 billion on fuel subsidies this year if oil stays around US$100 per barrel, and has already indicated there would be some cuts ahead.

Consumer Affairs Minister Shahrir Samad was quoted saying the bulk of the subsidies would go for a new octane 95 fuel for use in most vehicles, while a higher octane petrol for luxury cars and SUVs would get less state support.

According to the New Straits Times, Shahrir said the government would save costs by mainly subsidising only one type of fuel. It currently subsidises two types, octane 92 and octane 97.

“The goal is to have subsidies targeted and more focused at those who need it, such as the lower and middle-income group, and giving a choice to the rich on what petrol they want to fill in their tanks,” he said.

“The system is a shift in how we price petrol, but it is necessary if we are to lessen the burden on the lower and middle-income groups,” the paper quoted him as saying.

Malaysia imposed its highest-ever fuel price rises in February 2006, citing the spiralling cost of crude oil. The move was condemned by political and civil groups, arguing it was unnecessary as the country is a net exporter of oil.

The central bank recently said that rising prices of fuel, commodities and food will see headline inflation for the year rise to 2.5-3.0 per cent from 2.0 per cent in 2007.

During the just concluded Asean Finance Ministers Meeting in Vietnam, Malaysian Second Finance Minister Tan Sri Nor Mohamed Yakcop said many of his Asean counterparts share the view that economic growth is the top priority over the tightening of monetary policies in the face of a global economic slowdown.

Due to that, he said, the tightening of monetary policy to curb inflation is unlikely to take place in many of the Asean economies. “Generally, in the present circumstances, many of our member countries believe that inflation is cost push and not demand push (driven by costs rather than demand). So tightening monetary policies may not be the right solution,” he said.

Source: Bangkok Post, 07 Apr 2008

Speculative liquidations up to midweek put concrete pressure on the crude oil market last week by more than $5 a barrel, encouraged by the restart of an Iraqi oil terminal. In addition, the US dollar strengthened against the euro as the sub-prime contagion spread into Europe with the colossal write-off of $23 billion from UBS and Deutsche Bank. Meanwhile, US Federal Reserve chairman, Ben Bernanke hinted at a slowdown in interest-rate cuts as the US recession might be milder than anticipated.

Nevertheless, investors seemed comfortable with triple-digit crude oil price,s providing strong buying support for the market when it slipped. A steep downward trend in US gasoline inventories during the refinery maintenance season in early Q2 might eventually raise product supply concerns and drive the entire energy market. It is believed the market will remain highly volatile and bullish with fund movements until the US dollar starts to show a steady positive trend.

Gasoline prices in Singapore eased last week to around $111 a barrel on lower crude prices and expectations of higher Indian inflows. India, a typical gasoline exporter to the Middle East, plans to divert cargoes into Asia to serve strong demand, particularly in China, Indonesia, and Vietnam in April, while supply tightness in the Middle East has been relieved on an influx of supply from Europe and the Mediterranean.

In addition, a refinery in South Korea has restarted its secondary units last Tuesday after a week-long unplanned shutdown, but it had yet to lift the force majeure on April loading of gasoline and diesel. Consequently, the current supply situation in Asia remains tight during spring maintenance season for refineries. For the coming week, gasoline prices are expected to remain steady on strong regional demand, though the anticipation of a supply increase would limit the upside.

Weighed down by falling crude prices and a weakening heating oil market in Europe, diesel prices in Asia fell by $2 a barrel last week. However, the fundamentals remained strong as global demand continued to be bullish and supply stayed tight, reflected by relatively low stock levels in several regions.

Due to strong economic growth and domestic price controls in developing countries, demand from countries such as China, India, and Indonesia has not been affected by high oil prices. April’s import requirements from such countries will stay robust with lower regional supply amid planned and unplanned refinery maintenance since February.

In addition, South Africa and Chile have increased diesel imports to help ease power shortages in their countries. Asian diesel prices are thus likely to remain firm on sustained demand and limited supply this month.

Source: The Jakarta Post, 07 Apr 2008

Vice President Jusuf Kalla renewed calls Friday for state-owned power company PT Perusahaan Listrik Negara (PLN) to speed up construction of coal-fired power plants in a bid to swiftly resolve a power crisis plaguing Java.

Kalla made the statement during his visit to the Suralaya coal-fired power plant in Cilegon, West Java.

“If there are no longer any problems, please speed up the construction. We will reward the management if the project can be finished before schedule,” he said.

The 652 Megawatts Suralaya project is scheduled for completion in 2010.

However, since Java has frequently suffered power blackouts due to a lack of power capacity, the government has requested PLN wrap up several key power projects on the island before next year’s general election.

President Susilo Bambang Yudhoyono has recently issued a government regulation ordering PLN to complete the construction of 35 planned 10,000 MW plants, 10 of which are to be built on Java, by 2010 at the latest.

Aside from the Suralaya plant, the pipeline projects also include a 600 MW Pacitan plant in East Java, a 900 MW Naga plant in Banten, a 900 MW Pelabuhan Ratu plant in West Java and a 200 MW Lampung plant in Lampung.

“We have just promised the Vice President the Suralaya plant can be completed by March 2009,” PLN’s Suralaya general manager Chairudin Matondang said.

The Suralaya plant, valued at US$334 million, is being built under a cooperation with China Technical Import & Export Corporation (CNTIC), China National Machinery Import and Export Corporation, Zhejiang Electric Power Design Institute, and local firm PT Rekayasa Industri.

Chairuddin said the construction was disturbed in March by bad weather that hampered incoming materials from China.

There are already seven coal-fired 3,400 MW power plants operating near the Suralaya plant.

PLN has predicted a continuation of the electrical crisis into next year if no extra power is made available.

The Java-Bali power grid has a capacity of 15,000 MW, less than the area’s 16,251 MW peak power consumption, forcing PLN to regularly cut off electricity supply in the region.

Source: Bangkok Post, 2 Apr 2008

PETROLEUM: PTT Exploration and Production Plc said yesterday that it expected to sign a deal with CNOOC Ltd of China later this month to swap stakes of gas fields in Burma.

“We should sign a contract with CNOOC within this month,” said CEO Anon Sirisaengtaksin.

PTTEP said in February that it would swap its 20%stake in Burma’s offshore Block M3 and M4 for the A4 and C1 blocks held by CNOOC. PTTEP also owns 100% of the offshore Block M9, which is still under exploration in the Gulf of Martaban.

The company said in August last year that it planned to spend $1 billion on Block M9 and was looking for financial and technical partners to help share the costs of developing it.

PTTEP shares closed yesterday at 153 baht, up two baht, in trade worth 430.08 million baht.

Source: Bangkok Post, 2 Apr 2008

Thailand expects to start negotiations with Cambodia on April 21 in Bangkok on offshore petroleum fields in the disputed waters in the Gulf of Thailand, according to Songpop Polachan, deputy director-general of the Department of Mineral Fuels.

The Ministry of Foreign Affairs would host the first official negotiations between the two countries in the hope of reaching a conclusion over the controversial area, which covers 26,000 square kilometres.

Mr Songpop said that the Thai government was prepared to propose to Cambodia a model based on the successful Malaysia Thailand Joint Development Area and the Timor Gap Australia-Indonesia Co-operation pact.

Exploration began 30 years ago in the disputed Thai-Cambodian waters, also called the Khmer Basin. Despite the lack of concrete reports on reserves, both countries have sought to tap the overlapping area for potential undersea oil and natural gas potential.

At a time of skyrocketing global oil prices, an area potentially rich with resources proves even more valuable to both countries, which are eager to overcome the dispute and move ahead with their plans.

The two countries have not engaged in any serious talks about the offshore area for the past decade.

Cambodian officials said recently that their unofficial talks in 2006 on the issue had failed to result in a formal round because Thailand needed a larger share over the area than the 50-50 proposed by Cambodia.Thailand is currently focusing on seeking to secure as many energy sources from its neighbours as possible in order to meet its projected growth demand in the near future.

Thailand’s combined crude and condensate production in local petroleum fields hit a record high in excess of 200,000 barrels per day last week, Mr Songpop added.

The additional output mainly came from the onshore Na Sanoon field in Phetchabun, operated by Pan Orient Resources Ltd, which helped boost the production to 10,000 barrels a day from 1,500 barrels. The total production was expected to double this year to catch up with the demand growth.

The department also expects PTT Exploration and Production (PTTEP)’s Nang Nual offshore field to be ready to resume crude production this year after being suspended in mid-2006 due to technical errors.

The Nang Nual block was producing 18,000 barrels of crude per day before the suspension.

During the term of the former military-backed government, the Energy Ministry had made all-out efforts to seek crude and natural gas reserves locally to lessen the country’s dependence on imported oil.

Last year, Thailand imported crude supplies equivalent to about 808,000 barrels, worth 703 billion baht.

Source: The Jakarta Post, 01 Apr 2008

State oil and gas company PT Pertamina is targeting the production of 65.72 million barrels of crude oil in 2008 despite its failure to achieve its 2007 output target.

President director Ari H. Soemarno said Monday this year’s target would be 25.73 percent higher than last year’s output of 52.27 million barrels, which was 8 percent short of the 56.57 million barrels targeted that year.

“Still, Pertamina’s oil production last year was 9.53 percent higher than the 47.72 million barrel output in 2006,” he told the House of Representatives’ Commission XI overseeing financial affairs in a hearing.

Ari said Pertamina also failed to achieve its 2007 gas production target of 519.68 billion standard cubic feet (scf).

“In 2007, Pertamina’s gas production was 405.71 billion scf, around 22 percent below the targeted 519.68 billion scf,” he said, adding that the output was, however, 8.6 percent higher than 2006’s 373.57 billion scf.

For 2008, Pertamina has set a gas production target of 438.05 billion scf, almost 16 percent lower than 2007’s target.

In spite of the failure to reach its oil and gas production targets last year, Ari said, Pertamina booked a 28.4 percent rise in net profit to Rp 24.4 trillion (US$2.68 billion) in 2007 from Rp 19 trillion in 2006 due to increases in oil prices on the world market.

He said according to Pertamina’s unaudited financial reports, the company had a total revenue of Rp 393.6 trillion in 2007 against Rp 369.2 trillion in total expenditure.

“In 2007, Pertamina contributed Rp 38.5 trillion to the state budget in the form of various taxes and Rp 10.8 trillion as state revenue other than taxes such as dividends,” Ari said.

Bloomberg also reported Monday that Pertamina planned to shut its Balongan refinery in West Java for scheduled maintenance.

Pertamina processing director Rukmi Hadihartini was quoted as saying the plant, which had a refining capacity of 125,000 barrels a day, would be completely closed in August.

The planned closure may prompt Indonesia, Southeast Asia’s biggest importer of refined oil such as gasoline and diesel, to increase imports.

Indonesia imports about a third of its oil products because its daily refining capacity of 1.06 million barrels falls short of domestic demand.