Japan-Indonesia energy deals

Indonesia and Japan sign energy deals - 21-08-07. To coincide with the signing of the economic partnership agreement (EPA) between Indonesia and Japan, firms from both countries have signed off on energy deals worth a total of $ 6.13 bn in value. Over half the agreements were made in a signing witnessed by President Susilo Bambang Yudhoyono and visiting Japanese Prime Minister Shinzo Abe, which saw a number of Indonesian and Japanese companies sign agreements on four energy projects worth $ 3.97 bn in total investment. One such project will see Japan's Mitsubishi carry out engineering, procurement and construction (EPC) of a 500 MW combined cycle power plant in Cilegon, West Java, to be built by state-run electricity company PLN. The project will cost around $ 345 mm.

Japanese firms Mitsui and Marubeni will also handle EPC for a 200 MW coal power plant to be built by PLN in Tarahan, Lampung, worth $ 268 mm. Aside from the electricity sector, Mitsubishi also signed an agreement with state-owned oil and gas company Pertamina and Indonesia's largest publicly traded oil company Medco for the joint development of the Senoro gas block in Central Sulawesi.
Under the agreement, the three companies will also jointly develop a liquefied natural gas plant to process gas from the Senoro block. The plant is expected to produce about 2 mm tons of gas a year for export to Japan. The investment needed for the development of the Senoro gas block and the construction of the LNG plant has been estimated at $ 840 mm and $ 1.16 bn respectively.

The fourth deal was signed by state gas distributor PGN and the Japan Bank for International Cooperation (JBIC), under which the Japanese bank would provide $ 440 mm in loans for PGN's 1.3-bn South Sumatra and West Java gas pipeline project. Construction of the pipeline is already underway.

In addition to the four projects, Japanese and Indonesian companies also signed five agreements worth $ 2.16 bn at an Indonesia and Japan business forum later in the day, Energy and Mineral Resources Minister Purnomo Yusgiantoro said. The agreements include a Power Purchase Agreement between Marubeni, the operator of a 600 MW coal fired plant in Cirebon, West Java, and PLN. Also signed was a memorandum between PLN and Paiton Energy Company on the upgrade of an 800 MW Paiton coal power plant in East Java.

Other deals covered the joint development of a 300 MW geothermal power plant in Sarula, North Sumatra, between Pertamina, Medco and Itochu; and the signing of a letter of intent between Pertamina and Itochu for the $ 300 mm construction of a liquefied petroleum gas storage site in Indramayu, West Java, with the capacity to hold 1 mm tpy.

The Indonesian government has agreed to conduct a feasibility study on the development of a brown coal liquefaction plant in Satui, South Kalimantan, with JBIC, Kobe Steel and Bumi Resources. Energy-hungry Japan has recently been stepping up its efforts to secure energy deals with resource-rich Indonesia.

Indonesia is Japan's second largest source of coal, exporting around 32 mmtons to the country in 2006, figures from the Indonesian Investment Coordinating Board show. Indonesia is also the number-one exporter of liquefied natural gas to Japan, providing 22 % of Japan's total demand of 63.31 mm tons last year.

The EPA agreement signed by the two countries' leaders guarantees a steady supply of Indonesian gas to Japan.

Source: The Jakarta Post