Geothermal energy upbeat it can help rupiah

7 September 2018

Geothermal long-term investment business Less affected by fluctuation of rupiah Has high local content in drilling

The energy sector is seen as one of the major drivers of the rupiah depreciation against the US dollar mainly due to its high reliance on imported material such as oil.

Yet the geothermal sector is upbeat its position is the opposite.

Energy and Mineral Resources Minister Ignasius Jonan called on investors to stay optimistic in the geothermal sector amid the current economic situation as he believes the geothermal business is a long-term investment that is less impacted by day-to-day economic changes.

“We should utilize the sector [geothermal] as much as we can, because this is a long-term investment. Therefore, I hope all stakeholders in the sector are undeterred [by the current situation],” he said in his opening speech at the 2018 International Geothermal Convention & Exhibition in Jakarta on Thursday.

His statement was confirmed by business players in the industry.

Indonesian Geothermal Association (API) chairman Prijandaru Effendi said the sector was less impacted due to its high level of local components in the upstream sector.

“Our drilling has reached 90 percent of the TKDN [local content requirement], while the rest is only for the pipes. However, we acknowledge that in terms of downstream sectors, such as turbines, the TKDN has only reached 30 to 35 percent,” he said on Thursday.

Prijandaru, the vice president of relations, safety, health and information with energy firm PT Supreme Energy, added that the geothermal sector might also help in terms of increasing the volume of the dollar in the country.

“For example, my company got financing from foreign countries, so basically investment of geothermal is increasing dollar volume,” he said.

The TKDN in the energy sector is one of the recent measures that the government has said would help reduce imports, which subsequently will affect the rupiah, which hovered around Rp 14,900 per US dollar on Thursday.

The regulation to improve the use of local content was just issued in the form of Energy and Mineral Resources Ministerial Decree No. 1953/2018, which stipulates that all energy firms are obliged to utilize local products that have a quality similar to the imported ones.

If the equipment for operational purposes, such as capital goods, equipment, raw materials and other supporting materials, can be fulfilled with locally made products, the business entities that intend to import the goods would not be provided with import facilities, it says.

As one of the country’s spearheads in the renewable energy sector, geothermal power is upbeat to close the year with US$1.2 billion of investments, which as of July has reached 52.96 percent, or equivalent to $643 million, according to a ministry official.

Energy and Mineral Resources Ministry geothermal director Ida Nuryatin said the sector’s optimism on investment was proven with eight new permits for the initial survey procedure and exploration (PSPE), which was just issued on Thursday.

“Besides that, we have a government drilling policy [giving preliminary data on resources] and also three new geothermal working areas [WKP]. Hopefully the policies will boost our investment in geothermal,” she said.

The new eight PSPEs, with a total investment of $146 million, were operated by six energy firms. There are two firms that are set to explore two areas: local energy firm PT Star Energy at Mount Hamiding, North Maluku, and South Suoh Sekincau, Lampung, and Turkey-based firm PT Hitay Energy in Tanjungsakti, Sumatra, and Geureudong, Aceh.

Source: Jakarta Post – 7 September 2018