FRAME WORK OF REGULATION ON GEOTHERMAL BUSINESS ACTIVITIES

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1 REPUBLIC OF INDONESIA DEPARTMENT OF ENERGY AND MINERAL RESOURCES DIRECTORATE GENERAL OF COAL, MINERAL AND GEOTHERMAL FRAME WORK OF REGULATION ON GEOTHERMAL BUSINESS ACTIVITIES DENPASAR, FEBRUARY 2007

2 1. Background 2. Geothermal Rules and Regulations TOPICS 3. Draft of Government Regulations on Geothermal Business Activities Contents Part I Part II Part III Part IV Part V Part VI Part VII Part VIII Part IX Part X : INTERPRETATION : GEOTHERMAL ACTIVITIES STAGES : BIDDING ON DESIGNATED WORKING AREA (WKP) : MINING PERMIT (IUP) : RIGHTS AND DUTIES FOR MINING PERMIT HOLDERS : GEOTHERMAL DATA : GUIDANCE AND SUPERVISION : ADMINISTRATIVE SANCTIONS : TRANSFER STIPULATIONS : CLOSING STIPULATIONS

3 GEOTHERMAL ADVANTAGES 1. Geothermal as a renewable source of energy, environment friendly and can be utilized for based load, peak load and forever load. 2. Geothermal energy in Indonesia has the potentials to generate up to Mega Watt (equivalent to 11 billion barrels of oil), unfortunately the utilization for this source of energy is only 3% (852 MW) from its immense potentials. 3. Since geothermal energy cannot be exported, it is mainly utilized as an on site source of energy. 4. By releasing less carbon emission than conventional industrial plants, geothermal energy endorses The Clean Development Mechanism.

4 WORLDWIDE POTENTIALS GEOTHERMAL ENERGY World Potential (~60,000 MW), Installed Capacity (~8,500 MW) COUNTRY POTENTIALS (MW) INSTALLED CAPACITY (MW) Indonesia 27, USA 12,000 2,300 P.R. China 6, Africa, including Kenya 6, The Philippines 6,000 1,900 South & Central America 3,500 1,220 Japan 2, Europe, including Iceland and Azores Islands 2,000 1,050 Russia 1, New Zealand 1, Source: DOE, GRC, IGA

5 GEOTHERMAL POTENTIALS IN INDONESIA The 253 locations of potential geothermal energy in Indonesia

6 ROADMAP ON THE DEVELOPMENT FOR GEOTHERMAL ENERGY MW 2000 MW 3442 MW 4600 MW 6000 MW 1148 MW existing WKP 1442 MW existing WKP 1158 MW Existing WKP + new WKP 1400 MW New WKP 3500 MW New WKP 9500 MW (target)

7 GEOTHERMAL POTENTIALS AS A SOURCE OF ENERGY FOR POWERPLANTS 100% 2% 2% 6% 15% 8% 8% 90% 8% 24% 6% 7% 6% 80% 9% 14% 12% 6% 70% 9% 20% 60% 5% 24% 50% 19% 40% 30% 20% 42% 47% 60% 70% 71% 10% 0% Coal Gas Geothermal Hydro Oil

8 HANDYCAPS IN THE DEVELOPMENT OF GEOTHERMAL ENERGY 1. Construction on a Geothermal Power Plant requires an a large amount of capital for initial investment (from 1,3 to 2,2 million USD per MW). 2. Most locations in Indonesia which are Geothermal Energy potentially developed, are situated in Protected Forest and National Parks. 3. Contracts that are already exist, have no certainty in concerns with Regional Government towards the distribution of the 34% nation s income. 4. Geothermal companies are tenuous towards changing in Government Regulations. 5. Geothermal Power plants are hard to compete against other power plants, aside from Oil fired power plants. 6. Lack of national s capacity to develop geothermal power plant.

9 1. Geothermal Law No.27/2003 GEOTHERMAL REGULATIONS a. The Purpose for Geothermal Mining : i. To control the utilization of the geothermal energy for supporting a sustainable development and the additional value of the energy. ii. To increase state revenue and to push the country s economic development in order to achieve wealth and prosperity. b. The utilization for geothermal mining will be controlled by local/ regional government and the central government. c. The distribution of authority for local/ regional government, provincial government in utilizing geothermal energy. 2. Implementing Government regulation required: a. Government Regulation on Geothermal business activity (indirect utilization)- has been addressed to the President. b. Government regulation on direct use in the process c. Government regulation on Non-Taxed State Revenue ( Royalty, dead rent and bonus) in the process

10 PART I INTERPRETATION 1. Stages on Geothermal business activity includes: General Survey, Exploration, Feasibility Study, Exploitation and Utilization 2. Direct Use : Business activity on non generating electricity either for public usage or for the company its self. 3. Indirect use : Business activity on generating electricity either for public usage or for the company its self. 4. Designated Mining Area (WKP): Area which designated in the mining permit. 5. Bidding on designated mining are: Proposition of mining area to companies is a part of process of obtaining mining permit (IUP).

11 PART II STAGES OF GEOTHERMAL BUSINESS ACTIVITY LOCAL.GOVT. CENTRAL.GOVT. COMPANY UU 15/1985 PP 10/1989 jis PP 3/2005 dan PP 26/2006 RESOURCES GENERAL SURVEY EXPLORATION FEASIBILITY STUDY EXPLOITATION ELECTRICAL POWER GENERATION 3 YEARS 2 YEARS 30 YEARS AUTHORISATION GEOTHERMAL MINING PERMIT (IUP) Designation of mining area Bidding

12 PART III BIDDING ON DESIGNATED WORKING AREA (WKP) 1. In the process of mining area bidding, the minister can decide the price steam or electricity 2. Minister, Governor, Bupati/Walikota carry out bidding depend on their authority 3. Requirements and the process of bidding

13 PART IV MINING PERMIT (IUP) 1. Minister, Governor, atau Bupati/Walikota issue IUP to the winner of the bidding. 2. One company can be granted only one designated mining area (WKP) 3. IUP is given for 35 years long, namely : a. Exploration : 3 years, can be extended 2 times for 1 yr b. Feasibility study : 2 years c. Exploitation : 30 yrs can be extended each for 20 yrs 4. WKP wide: a. Exploration < Ha b. Exploitation < Ha

14 CHAPTER V RIGHTS AND DUTIES FOR MINING PERMIT HOLDERS 1. Mining Permit Holder s Rights: a. Tax Incentives b. Extension of Mining Permit 2. Duties as a Mining Permit Holder: a. Pay taxed and non-taxed state revenue b. Endorse the usage of Domestic Products, Services, Science and Technology, and Construction Designs c. Carry out Community Development Program for the local. d. Fulfilling Safety Regulations, Health Regulations, Environment Conservation Program and Technical Regulations on Geothermal Mining

15 CHAPTER VI GEOTHERMAL DATA 1. All data and information belongs to the Indonesian Government 2. The Utilizing Data for the purpose of : a. Determining Work Areas and classifying them according to their Potentials b. To put together General Plans in accordance to the State s usage for Electrical Energy and Electrical Supplies. c. To determine the State s geothermal potential resources and reserves. d. For the purpose of Science and Technology development 3. Data Confidentiality : a. Basic/ primary data (obtained from General Survey) : 4 Years b. Analyzed Data (obtained from evaluating Basic Data) : 6 Years c. Interpreted Data (obtained from Basic Data and Analyzed Data) : 8 Years

16 CHAPTER VII GUIDANCE AND SUPERVISION 1. Guidance and Supervision of which includes amending Utilization Policies, Guidelines, Counseling, Facilitating, Advising, Supervising, Monitoring and Training towards Governors, Bupati/Walikota will be conducted by The Minister of Energy and Mineral Resources. 2. Guidance and Supervising on geothermal business activities are carried out by The Minister of Energy and Mineral Resources, Governors, Bupati/Walikota in accordance to their authority. 3. Governors, Bupati/Walikota are subjected to report to The Minister of Energy and Mineral Resources every 6 months concerning Mining activities in their respective regions.

17 CHAPTER VIII ADMINSTRATIVE SANCTIONS 1. Ministers, Governors, Bupati/Walikota are authorized to give administrative sanctions to Mining Permit Holders that has violated certain regulations. 2. Forms of Administrative Sanctions : a. An official warning notice b. Stopping all mining activities c. Revoking Mining Permit

18 CHAPTER IX TRANSFER STIPULATION 1. Mining Authorizations, Mining Permits and Working Contracts which are issued before the legalization of the new purposed regulation, are to be considered valid until they expire. 2. For Working Areas that has not been exploited until 21 st October 2010, should be return to the Government. 3. The Minister of Energy and Mineral Resources carry out supervision on existing mining authorization, mining permit and contract of work.

19 CHAPTER X CLOSING STIPULATION This Regulation is legally binding since the date it is amended.

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21 (MWh) FUTURE PLANS AND REALIZATION ON ELECTRICITY PRODUCTION Realization on Electricity Production from Geothermal Future Plans on Electricity Production from Geothermal

22 LIST OF INSTALLED GEOTHERMAL PLANT CAPACITY No. Production Area Location 1 Kamojang Jabar Turbine capacity Owner 1 x 30 MW PLN 2 x 55 MW PLN 1 x 60 MW PLN Total Capacity (MW) Lahendong Sulut 1 X 20 MW PLN 20 1 x 20 MW PLN x 20 MW PLN 3 Sibayak Sumut 4 G. Salak Jabar 1 x 2 MW Pertamina 2 2 X 5 MW Pertamina x 60 MW PLN 3 x 65 MW CGS x 55 MW PLN Darajat Jabar 1 x 90 MW CGI X 110 MW CGI 6 Wayang Windu Jabar 1 x 110 MW SE Dieng Jateng 1 x 60 MW GDE Bedugul Bali 1 x 10 MW Pertamina Jumlah

23 KEMUDAHAN DAN KENDALA TERKAIT DENGAN PERATURAN PERUNDANG-UNDANGAN A. SEBELUM UU No. 27 / 2003 Jenis Peraturan Kemudahan Kendala UU No. 41/1999 tentang Kehutanan, jo. UU No 19/2004 tentang Penetapan Peraturan Pemerintah Pengganti UU No 1/2004 tentang perubahan atas UU 41/1999 tentang Kehutanan menjadi UU UU No. 22/1999 tentang Pemerintahan Daerah - Mayoritas keberadaan lapangan panas bumi di Indonesia dalam kawasan hutan lindung dan beberapa di taman nasional, - Meningkatnya tuntutan daerah atas bagi hasil bagian pemerintah. Keputusan PresidenNo. 49/2001 Pasal 4 PPh, PBB, PPn, PDRI, Bea masuk dan pungutan lainnya termasuk dalam 34% dari NOI sebagai bagian Pemerintah - Keputusan Menteri Keuangan - No. 26/PMK.010/ No. 78/PMK.010/2005 Keputusan Menteri Kehutanan No. 55/1994 Keputusan Menteri LH 175/Kpts II/2003 Pembebasan bea masuk - - Perubahan kompensasi lahan pengganti pinjam pakai penggunaan kawasan hutan lindung dari 1:1 menjadi 2:1 - Perubahan peruntukan lahan dari hutan lindung menjadi taman nasional dan cagar alam Surat dari Dirjen Bea Cukai Vooruistslag/ Penundaan Pajak Dalam Rangka Impor (PDRI) -

24 B. SESUDAH UU No. 27 / 2003 KEMUDAHAN DAN KENDALA TERKAIT DENGAN PERATURAN PERUNDANG-UNDANGAN (Lanjutan) Jenis Peraturan Kemudahan Kendala UU No. 27/2003 tentang Panas Bumi - Memberikan kesempatan yang sama kepada pelaku bisnis untuk pengembangan usaha Panas Bumi melalui lelang terbuka - Pemerintah dapat melakukan survey pendahuluan dan eksplorasi untuk mengurangi resiko pengembang panas bumi - Memperoleh fasilitas perpajakan sesuai dengan Peraturan Perudang-undangan perpajakan yang berlaku - Hak mendapatkan perpanjangan jangka waktu IUP. -Belum ada Peraturan Perundang-undangan untuk mendapatkan insentif pajak dan bea masuk UU No. 41/1999 tentang Kehutanan, jo. UU No 19/2004 tentang Penetapan Peraturan Pemerintah Pengganti UU No 1/2004 tentang perubahan atas UU 41/1999 tentang Kehutanan menjadi UU - Mayoritas lokasi prospek panas bumi di Indonesia berada di kawasan hutan lindung Peraturan Menteri Kehutanan - No. P.12/Menhut-II/ No. P.14/Menhut-II/ Kompensasi lahan penggunaan kawasan hutan lindung untuk kegiatan pertambangan panas bumi: - Untuk provinsi yang luas hutannya <30%, areal kompensasinya 1:2 - Untuk provinsi yang luas hutannya >30%, areal kompensasinya 1:1 Kompensasi berupa dana yang dijadikan PNBP Departemen Kehutanan yang besarnya 1% dari nilai harga per satuan produksi dari seluruh produksi Peraturan Daerah - Pengusahaan panas bumi rentan terhadap perubahan peraturan daerah tentang pajak dan retribusi

25 INDONESIA S GEOTHERMAL POTENTIALS LOCATION RESOURCES ( MW ) SPEKULATIF HIPOTHESIS ESTIMATIO N RESERVES (MW) PROBABILITY PROVEN INSTALLED CAPACITY SUMATERA 5,705 2,433 5, JAWA - BALI 2,300 1,611 3, , NUSA TENGGARA SULAWESI 1, MALUKU / IRIAN KALIMANTAN Total 253 locations 9,530 4,724 9, ,305 Total 14,254 12, MW Total : 27,199