POLITICS
Indonesia to Boost UN Force
Indonesia is seeking to engage at least 2,000 Indonesian military and police personnel in United Nations peacekeeping missions in 2008, Commodore I Putu Adnyana, military adviser to the country’s UN permanent representative, told the Antara news agency last week.

He said the increase would allow Indonesia to take a command position, assume a more strategic role and help improve the Indonesian military’s image in the international community.

Indonesia currently has 1,072 servicemen from the Indonesian Armed Forces (TNI), but none from its National Police force, stationed in the Lebanon, Congo and Nepal.

In 2008, Indonesia is expected to add 175 personnel from the Army Engineering Corps, 120 medical staff, a helicopter and 140 policemen to UN missions.

Countries which contribute the most servicemen to UN operations include Pakistan (10,173), Bangladesh (9,690), India (9,387), Nepal (3,628), Jordan (3,571), Ghana (2,905), Uruguay (2,582), Italy (2,554), Nigeria (2,470) and France (1,980).

The plan to increase the number of the Indonesian troops is mandated in the 1945 Constitution, which obliges the country to become an independent and active in seeking to solve international problems.

"So we should not only be active in the political, economic and social forums, but also in military affairs (peacekeeping missions)," Adnyana said.

Indonesia Captures Aide of Top Terrorist
Indonesian police have captured a suspected aide of wanted militant Abu Dujana, who is thought to head a splinter group of Southeast Asian militant group Jemaah Islamiah (JI), a police spokesman said on Sunday (11/6/07) reported by Reuters.
Dujana has replaced Noordin M Top, a Malaysian national considered a mastermind behind a series of bomb attacks, as Indonesia's most wanted fugitive, deputy police chief Makbul Padmanegara told reporters last week.
The captured man, named Mahfud but also known as Yusron, was caught by Detachment 88, Indonesia's secretive anti-terror unit, in the town of Banyumas in Central Java, National Police spokesman Sisno Adiwinoto said by telephone.
"We have captured Mahfud alias Yusron. He is suspected of being a member of Abu Dujana's staff," Adiwinoto said.
The spokesman said that from information provided by Mahfud they were looking for Dujana and other militants.
After a series of raids earlier this year, police revealed that Dujana had emerged as the head of a military wing of JI after the death in 2005 of master bomb-maker Azahari Husin.
Police previously said Dujana had direct control of the group's ammunition and explosives, including distribution and storage.
In the March raids, police said they had also found a huge cache of weapons, explosives and chemicals that could be used to make a bomb bigger than the main device used in Bali.
Dujana is wanted in connection with several deadly bombings including the 2004 Australian embassy blast in Jakarta and a car bombing at the JW Marriot hotel in the capital a year earlier.

REGIONS
Papua Governor Starts 2,600-Village Tour
Papua Governor Barnabas Suebu was in Bosnik kampong (village) in Biak Numfor regency on Monday as part of a planned tour of 2,600 kampongs (small communities)in Papua to discuss a new grassroots financing plan, The Jakarta Post reported on Tuesday (5/6/07).
A similar tour is being undertaken by West Papua Governor Abraham O. Atururi, who will visit 1,700 kampongs in the new province.
Suebu will be unable to visit every kampong in Papua, but the governor says he will attempt to organize meetings with representatives of those kampongs not on his itinerary.
The governor has arranged the tour to discuss his administration's plan to disburse Rp100 million (approximately US$11,000) to each kampong.
At each stop Suebu will be accompanied by local regents and officials of government agencies, who will offer information on the money and how kampongs are expected to manage the funds.
Governor Suebu is scheduled to make his last visit July 15 at Skouw kampong, near the border with Papua New Guinea, not far from the Papua provincial capital of Jayapura.
Deputy Governor Alex Hesegem will then take over, visiting kampongs through until the end of August.
Suebu began realigning the provincial budget earlier this year, allocating a large portion of the budget for grassroots empowerment programs. Only a small portion of the budget has been earmarked to fund the operation of government offices.

Aceh Governor Bans Logging
Aceh Governor Irwandi Yusuf declared a moratorium on logging Wednesday (6/6/07) as part of efforts to develop a new long-term forest management strategy, the Associated Press reported.
Yusuf said all logging would be banned indefinitely. "This is part of our long-term plan to come up with a durable and fair forestry management plan," said Yusuf, adding he hoped the move would minimize natural disasters.
It was not immediately clear what penalties violators face.  

W. Sumatra Council Passes Disaster Mitigation Bylaw
The West Sumatra legislative council became the first in the country to pass a law on disaster mitigation on Wednesday (6/6/07).

The draft of the ordinance had been in deliberation since March last year, and had to be revised to adjust it to the 2007 Disaster Mitigation Law approved by the House of Representatives
last March.

A spokesman for the United Development Party, Guspardi Gaus, said the ordinance was required in West Sumatra because the province was prone to natural disasters, particularly
earthquakes and tsunamis. 
"With the inclusion of the provincial decree, the administration will be able to work more seriously due to the clear description of the duties of each of the authorities dealing with the pre-disaster, disaster and post-disaster periods, which in the event of the disaster, could all work at once," he told The Jakarta Post.

ECONOMY
Rates Can Fall Further: BI
After cutting its benchmark interest rate to 8.50%, Bank Indonesia (BI) says more rate cuts are feasible as inflation continues to fall.
BI spokesman Budi Mulya said after the quarter-point cut on Thursday (7/6/07) that more reductions were possible as inflation came within the full-year target of 6% to 7%, Dow Jones Newswires reported.
The rate reduction followed the announcement by the Central Bureau of Statistics (BPS) that inflation had fallen for the second consecutive month for a year-on-year figure of 6.01%, down from 6.29% in April.
Dow Jones commented that BI has now achieved a target it previously set to cut the rate to 8.50% by the end of 2007. “With inflation still in check, it now seems to be looking to cut rates further,” the agency said.

Fauzi Ichsan, economist with Standard Chartered, said the inflation outlook is good. “We expect inflation to be at 6.2% by the end of the year, our (foreign exchange) reserves are more than $50 billion, which is BI's target for the end of the year.”

Mulya noted, however, that monetary policies need to be accompanied by concrete measures to boost activity in the real sector.
"Measures are needed to deal with non-financing problems related to infrastructure projects so that banks can boost their intermediary roles and thus stimulate economic growth," Mulya was quoted as saying by Reuters.
Non-oil and -gas exports in April were valued at $7.35 billion which put the growth rate of January-April this year compared with the same period last year at 22.7%, BPS reported. 
Non-oil/gas imports rose 2.37% in April compared with the previous month, reaching $4.02 billion. The trade surplus stood at $3.21 billion in April, a decline from $3.80 billion a month earlier.
A fall on Wall Street saw regional markets erode, with the Jakarta Stock Exchange composite index closing down 1.88% on Friday to 2,054.450. The weaker rupiah, which was trading at the close on Friday at 9,080/9,090 to the dollar, was also seen weighing on sentiment.
Deputy BI Governor Aslim Tadjuddin said Friday that the bank expects the dollar to fall back below Rp9,000,

Tadjuddin told Dow Jones Newswires that he isn't overly worried about the rupiah's slide as Indonesia's sound macroeconomic fundamentals will continue to underpin the rupiah's strength.

"This is only temporary due to the slumps in the global stock market," he said. "Other regional currencies such as the peso and Malaysian ringgit are also affected."
State-owned enterprises minister Sofyan Djalil said he was moving to put 20 state-owned companies on the market next year after an early sale of shares in three companies this year. Bank Negara Indonesia could hold a secondary offering as early as August and raises up to $1 billion, he told foreign correspondents.

Next year, he said, "we will go to parliament and ask for their approval to list shares of at least 20 state-owned companies," he said. He did not name the companies.

This year, the government would also sell a 30% stake in toll road operator and builder PT Jasa Marga and shares in mid-sized property concern PT Wijaya Karya.

London-based research firm Oxford Business Group (OBG) said in a review of the economy 10 years after the economic crisis that Indonesia had a bright future as long as certain key requirements are met.

The report says Indonesia's economy has done remarkably well, with GDP growth picking up steadily, making the country one of the main investment destinations in the region, The Jakarta Post reported.

The report says that the country still has to address a number of outstanding issues that could hamper future growth. The newly introduced Investment Law was not enough on its own and needed to be accompanies by key reforms in the bureaucracy and labor regulations.

Head of the Investment Coordinating Board Muhammad Lutfi told a ceremony to launch the report that investment was on the rise again after a 31.7% decrease in foreign investment last year.

"In the first quarter of this year, domestic investment approvals rose by almost 500% from Rp16 trillion in the same period last year to Rp77.5 trillion. Meanwhile, foreign investment approvals surged by almost 600% from $2.36 billion to $14 billion," he said.
There was investment interest in the pulp and paper sector, with seven domestic and foreign companies planning to build new pulp and paper factories with a total investment of Rp69.37 trillion ($7.78 billion).
The investments were prompted by the closure of a number of factories in North America and Scandinavia, which have dominated the global pulp and paper market, the Association of Pulp and Paper Companies (APKI) said.
Media company PT Media Nusantara Citra (MNC) raised about $419 million in the country's largest initial public offering since 2003.

The IPO by MNC, controlled by conglomerate PT Bimantara Citra, is Indonesia's fifth-largest and the biggest since No.4 lender PT Bank Rakyat Indonesia raised $484 million in October 2003, according to Dealogic data.

MNC operates television stations in Indonesia, including the country's first private TV station, Rajawali Citra Televisi Indonesia (RCTI), Global TV and Televisi Pendidikan Indonesia, and will make its trading debut on June 22.
Toyota Motor Corp's vehicle sales rose 45% in May to 13,188 units from a year ago, thanks to lower interest rates.
Jodjana Jody, head of sales at PT Toyota Astra Motor, also estimated total domestic vehicle sales from all makers is expected to have reached around 38,000 units in May.
"I think overall industry sales last month could be 38,000 units ... it seems consumers have started buying cars again, especially as the interest rates have come down substantially," he told Reuters.

Indicators:
 

BUSINESS BRIEFS
MACROECONOMY
BI Rate Cut to 8.5%, Hoped to Boost Loans, Growth
The central bank cut its key interest rate by 25 basis points to 8.5% on Thursday (7/6/07), the 12th since May last year, to help boost bank lending and spur economic growth.

Easing inflation, which slowed to 6% on-year in May from 6.3% a month earlier due to a decline in food prices, was the main reason behind the rate cut, Bank Indonesia (BI) Governor Burhanuddin Abdullah said in a statement following a BI board of governors meeting.
The May price figures marked a six-month low, and leave inflation after the first six months of the year at 1.84%, meaning that Indonesia has a "good chance of hitting the full-year inflation target of 5%-7% this year, and 4%-6% next year," Abdullah was quoted as saying by The Jakarta Post.

The central bank hopes that Thursday's rate cut would spur more growth and help improve the country's business climate, and at the same time maintain stability in the financial markets.

It definitely bodes well for the economy to achieve this year's government growth target of 6.3%, a statement added.

"In general, economic expansion continued into the first quarter.  Economic growth in the first quarter stood at 5.97%, which is higher than BI's initial projection."

Since May last year, the central bank has progressively reduced its rate by a total of 4.25% to try to help revive the economy, which was badly hit by double-digit inflation and interest rates in the aftermath of 2005's double round of domestic fuel price hikes.

As a result, the economy grew last year by a less-than-expected 5.5%, even lower than the 2005 growth rate of 5.6%.

BI expects the decline in interest rates to allow the banking sector to play a greater role in reinvigorating the country's real sector.

By the end of April, BI figures show, bank lending had grown by 16.5% from a year earlier, with the loan-to-deposit ratio (LDR) hitting 65.8% -- the highest level for the last six years.

Last year, bank lending expanded by a modest 14%.

BI's rate policy has been facilitated by the appreciating rupiah and sound foreign exchange reserves.

Indonesia's forex reserves stood at $50.1 billion last month, while the rupiah appreciated in May to an average of 8,838 against the dollar from 9,093 in April.

While the economic prospects look good, BI said it would like to see better coordination with the government as part of the effort to improve the investment climate, especially in dealing with the non-financing obstacles hampering the progress of infrastructure projects.

BI said that regulations are also needed that would ensure the effective utilization of funds by local governments so as to revive the real sector in their respective regions.

6.6%-6.9% GDP Growth Projected in 2008
The government and the House of Representatives’ budget committee have agreed on an estimate of GDP growth for next year of 6.6%-6.9%, compared to the estimate of 6.6%-7% initially suggested by the government, Bisnis Indonesia reported.
The newspaper quoted lawmaker Harry Azhar Aziez as saying the government and the committee had agreed on estimates for next year of consumer inflation of 5.5%-6.5%, instead of the rate of 6%-6.5% initially suggested by the government; of the interest rate on three-month Bank Indonesia Certificates (SBI) of 7%-8%, against the 7.5%-8% initially suggested; of an average exchange rate of Rp9,100-Rp9,400 to the US dollar, just as initially suggested; of an average crude oil price of $57-$60 a barrel; and of output of oil of 1.034 million barrels per day.
The government will use these forecasts in drafting its budget for next year.

 

INVESTMENT
Austrian Firms May Set Up Biodiesel Businesses
At least three Austrian companies are looking into the possibility of becoming involved in the "green energy" business in Indonesia to help boost the development of biodiesel.
"Energea, BioDiesel International and the Christof Group are discussing the biodiesel business with a number of leading Indonesian agribusiness companies," Austrian commercial counsellor Raymund Gradt told The Jakarta Post on Monday (4/6/07).
"The three Austrian companies could provide the technology to build biodiesel refineries jointly with local firms," he said.
He however declined to name their Indonesian counterparts as the two sides have been in discussions for more than a year, but have yet to finalize a deal.
The three Austrian companies are leading technology solution providers for biodiesel production and currently produce a total of 440,000 tons of biodiesel per annum, more than half of their country's annual demand of about 700,000 tons to 800,000 tons.
They are on a mission to leverage biodiesel production in connection with the European Union's program of increasing the contribution of green energy -- biodiesel and biofuel – from 3.4% this year to 20% in 2020.
Austria, whose green-energy share already stands at 21%, wants to double this to 40% by then.
"Certain Austrian companies are also interested in acquiring biodiesel from Indonesia and are looking into the possibility of using jatropha as a raw material.  This is because it's cheaper than palm oil, and can be used both in winter and summer," Gradt said.
A number of foreign companies have already committed to establishing bioenergy businesses in Indonesia.

No Plan to Raise Tax on Stock Deals
The government has no plan to raise the tax on stock transactions, Finance Minister Sri Mulyani Indrawati said on Thursday (7/6/07), remarks that analysts said should quell worries in the bullish Jakarta stock market.
"There has been no such announcement. We don't have any such plans. Up until now, the government has no plan to change the tax on stock transactions," the minister was quoted as saying by Reuters.  "If the government wants to change its policies, it will be done after a thorough and careful study."
Analysts said the remarks were likely to help boost sentiment on the stock market, which has had hit record highs this year.
"This should quell fears among investors in the equity market, though some may be cautious in accordance with the adage about no smoke without fire," financial analysis firm Forecast Pte said in a commentary.

STATE CONCERNS
No Oil Palm in Primary Forests: Minister
Indonesia won't allow oil palm growers to cut primary forests for establishing plantations, State Minister for Environment Rachmat Witoelar said.
Indonesia is trying to reduce emissions of greenhouse gases, 75% of which result from deforestation.  The country is set to overtake Malaysia this year as the world's largest palm oil supplier and plans to add 1.5 million hectares of the crop over the next three years, the government said.
“Expansion of palm oil plantations will not be allowed to sacrifice natural forests,” Witoelar said in an interview with Bloomberg News.  “They will be planted in lots that are already empty.  There are plenty of these, 18 million hectares of them.”

SOEs
Garuda on Track to Post Profit in 2007
After booking a Rp121 billion ($14 million) profit in the first four months of the year, national flag carrier PT Garuda Indonesia is on course to post a profit this year, ending three years of losses, The Jakarta Post reported on Monday (4/6/07).
"This is a good start to the year," Garuda spokesman Pujobroto said in a media statement.
With the January-April period considered as "low season", the carrier expects an even better performance for the rest of the year, he said.
Last year, Garuda's losses stood at Rp298.3 billion, narrowing the Rp688.5 billion booked in 2005.
Pujobroto attributed the profit mostly to an increase in its load factor and number of passengers from the same period last year.  Garuda's load factor rose 7% from 69%, while the number of passengers rose by 5% from 2.684 million in the January-April period last year.
Of the 28 domestic routes the carrier served during the period, only four experienced losses, the statement said.
Garuda has 49 aircraft, including a Boeing 737-400 that arrived only this month.  Its long-term development plan includes an ordered 25 Boeing 737NGs and 10 Boeing 787 Dreamliners which are expected to join the carrier in 2009, the statement said.

7m New Users for Telkomsel
Mobile phone operator PT Telkomsel added 7 million new users in the first five months of the year, close to its full-year target, the company's chief said on Wednesday (6/6/07).
"Telkomsel's subscribers have reached 42 million until today," Kiskenda Suriahardja was quoted as saying by Reuters.  "We haven't revised our target because we want to focus more on quality of services."
Telkomsel, which controlled more than half of the country’s 65 million mobile phone users in 2006, is aiming to add 9.5 million new users this year.
Suriahardja said the company will spend $1.5 billion this year on infrastructure and new business, including broadband, wireless access and 3G.  "We will use internal funds, bonds and loans from banks for this year's capital expenditure," he said.
Telkomsel is 65% owned by state telecommunications company, PT Telkom and 35% owned by Singapore Telecommunications Ltd.

PRIVATE SECTOR
MNC Raises $419m in IPO
Media company PT Media Nusantara Citra (MNC) raised about $419 million in the country's largest initial public offering since 2003 after pricing its share sale at the upper end of its indicative range, Reuters reported on Thursday (7/6/07).
The IPO by MNC, controlled by conglomerate PT Bimantara Citra, is Indonesia's fifth largest and the biggest since No.4 lender Bank Rakyat Indonesia (BRI) raised $484 million in October 2003, according to Dealogic data.

It surpasses the roughly $280 million raised in all 12 IPOs last year on the Jakarta bourse.

The exchange has said it aims to double new listings this year, a target that received a boost the previous week when plantation firm PT Sampoerna Agra raised about $122 million by pricing its offering near the top of an indicated range.

Other sizeable listing candidates include state-owned toll road operator PT Jasa Marga, which hopes to raise roughly $300 million later this year, and coal miner PT Indo Tambangraya Megah, a unit of Thailand's Banpu Plc, which is looking to raise about $100 million in an IPO.

MNC operates television stations in Indonesia, including the country's first private TV station, Rajawali Citra Televisi Indonesia (RCTI), Global TV and Televisi Pendidikan Indonesia, and will make its trading debut on June 22.

The company sold 4.125 billion shares, or 30% of its enlarged share capital, at Rp900 per share, MNC investor relations official David Audi confirmed, compared with its indicative range of Rp730-Rp950.

Deutsche Bank, Lehman Brothers, UBS and local houses Bhakti Securities and Danareksa Sekuritas handled the deal.

Bimantara used to be controlled by the family of former president Suharto before the Asian financial crisis in the late 1990s.  The family now holds a minority stake in the firm, bankers have said.

Investment company Bhakti Investama holds a nearly 21% stake in Bimantara, according to Reuters data.

In the past few months, Bimantara has been in the news for various acquisitions and the expansion of its business units such as mobile phone operator PT Mobile-8 Telecom.

Toyota Sales Up 45% in May
Toyota Motor Corp's vehicle sales rose 45% in May to 13,188 units from a year ago, due to lower central bank rates, which have helped boost consumer spending, an executive at its local distributor said on Tuesday (5/6/07).
Head of sales at PT Toyota Astra Motor, Jodjana Jody, also estimated total domestic vehicle sales from all makers in the country to have reached about 38,000 units in May.
"I think overall industry sales last month could be 38,000 units... it seems consumers have started buying cars again, especially as the interest rates have come down substantially," Jody told Reuters on Wednesday (6/6/07).  "We sold 13,188 units last month helped by our (flagship) model Kijang Innova, because of the promotion on the model."
Toyota's sales in the first quarter dropped by 11.6%, partly due to floods that hit Jakarta and some other areas disrupting sales, while overall industry sales in the first three months rose 6.42% from a year ago.

Association Builds First Sugar Factory
The association of sugar and wheat flour companies Apegti has begun constructing the first of its nine sugar factory projects, Antara reported on Thursday (7/6/07).

The first factory is being built in West Sumatra by association member PT Semesta Berdaya.  Costing about Rp300 billion ($33.5 million), it will be completed in 20 months.

Apegti chairman Natsir Mansyur said the association will soon buy machines for sugar factories valued at Rp1.62 trillion.  The spending on machines will be part of Rp2.7 trillion Apegti plans to invest to build nine new sugar factories in the country.

Some 60% of the machines will be imported from China and the rest will be bought from local producers.
 

BANKS
Banks Show Promising Growth - Fitch
Fitch Ratings said it expects the financial performance of the country’s banks to improve this year, against a backdrop of benign interest rate conditions and stronger GDP growth.
The ratings agency said this supports its positive outlook for the international ratings of the 10 largest banks it covers, all of which have "BB-" ratings, XFN-Asia reported on Tuesday (5/6/07).
Fitch said the underlying profitability of the banks last year had remained quite good, despite the more difficult operating climate in the first half of the year.  The banks registered an average return on assets of 1.7% and an average net interest margin of 6% last year -- figures that are among the highest in Asia.
But asset quality issues remain because non-performing loans made up 7.5% of total loans at the end of last year, Fitch said.  The bulk of the problems lay with the legacy loans at state-run Bank Mandiri and Bank Negara Indonesia (BNI), which accounted for close to 30% of banking system assets.
Nevertheless, these problem loans are gradually being tackled, with the sharp decline in domestic interest rates since the second half of last year expected to aid in overall debt servicing ability, the agency said.
While state-owned banks still have a lot of catching up to do, the challenge for the other private banks is to maintain the discipline needed to continuously enhance risk controls and processes to cope with a growing base of loan assets, including the generally still unseasoned portfolio of retail loans, Fitch said.

BI Requires Risk Certification
All bankers will be required by 2010 to prove their ability to handle lending risks through a qualification program offered by the Risk Management Certification Agency (BSMR), The Jakarta Post reported on Monday (4/6/07).
This includes foreign bankers working in Indonesia, who will also have to pass a series of local aptitude tests on risk management, BSMR certification board head Gayatri Rawit Anggraeni said.
There will be no distinction between local and foreign bankers in the certification program, which will be a national standard in testing the competence of financial managers to adhere to the country’s banking standards.
"Indonesia's banking sector may be different from other countries, so foreign bankers should also understand local banking regulations, apart from international best practices," Anggraeni said on June 2, during one of the agency's aptitude tests.
"Foreign bankers can notify us if they have already obtained similar international certifications, but they will still be required to take the local certification tests, focusing on local matters and issues."
BSMR is an independent agency endorsed by local bank and risk professional associations, as well as Bank Indonesia (BI), to carry out the certification program.  It also has links with the New York-based Global Association of Risk Professionals (GARP).
Anggraeni said the agency's cooperation with GARP would benefit local bankers by enabling them to upgrade their local certifications when pursuing banking careers abroad.
BSMR general manager Gandung T. Sulistyo said the tests were held in line with BI's regulation stipulating all bankers must obtain adequate risk management certification by 2010.
Bankers unable to meet the required qualification according to their position will be subject to sanctions of between Rp1 million and Rp100 million in fines per day.
The central bank will also downgrade a bank's risk management assessment if it does not suspend any of its bankers failing to meet the aptitude requirements.
BI is striving to improve prudent lending in the banking sector, to avoid a repeat of the 1997-1998 financial crisis.
 

BCA’s Credit Card Business Up 30% in Q1
Bank Central Asia (BCA) said its credit card business is set to continue its strong performance, with up to 30% growth expected.

BCA director Suwignyo Budiman said Wednesday (6/6/07) that at the end of the first quarter, the number of credit cards issued by the bank had increased by about 30% from the same period in 2006, and he predicted similar growth for the entire year, reported The Jakarta Post.

BCA has almost 1.5 million cardholders, with outstanding credit amounting to Rp2 trillion ($227 million).

"We've been experiencing an average of 30% to 35% growth in cardholder numbers and outstanding credit from year to year," Budiman said.

Budiman said with the expected sharp increase in the number of the bank's cardholders, its credit card business would make a significant contribution to BCA's total revenues this year.
BCA last year earned a net profit of Rp4.24 trillion, up 18% from Rp3.59 trillion in 2005.

BCA controls about 10% of the domestic credit card market, which has about 8.1 million cards in circulation from 20 different issuers.
 

POWER
Labuhan Angin Plant to Open in 2008: PLN
PT PLN’s 300-MW Labuhan Angin coal-fired steam power plant in North Sumatra will start operating in September next year, company president Eddie Widiono told XFN-Asia on Friday (8/6/07).

Widiono added that PLN is also planning to build four more coal-fired plants (PLTU) by 2009 in North Sumatra, as part of the government's "crash program" to build a total of 10,000 MW of additional power capacity across the country by 2010.

The plants include PLTU Sumut in Pangkalan Susu with capacity of 400 MW; PLTU Meulaboh with capacity of 200 MW; PLTU Sibolga with capacity of 200 MW; and PLTU Kuala Tanjung with capacity of 200 MW.

OIL & GAS
Cepu First Oil in Sight
ExxonMobil is set to achieve first oil by early 2009 from its Cepu block onshore Java, after sealing an agreement for an early production scheme (EPS) with the authorities, Upstream reported on Friday (8/6/07).

Output of 10,000 barrels per day of crude is now being targeted by the end of next year, according to upstream watchdog BP Migas' deputy chairman Abdul Muin.

Cepu co-venturers ExxonMobil and Pertamina had been discussing an EPS of up to 20,000 bpd with BP Migas but it now seems the sides have agreed to settle for lower initial volumes to help Indonesia arrest its domestic oil production decline.

Detailed development plans for this project will now be formulated. The main hurdle to be overcome for the EPS is land acquisition to build oil pipelines, said BP Migas.

Peak production of 160,000 bpd of oil is expected to be achieved within a year of the Banyu Urip oilfield coming fully on stream.

The field, and four other smaller discoveries on Cepu, have combined recoverable reserves put at 600 million barrels of oil and 1.7 trillion cubic feet of gas.

Partners in the Cepu block are ExxonMobil and Pertamina, both with 45% equity, while the remaining 10% is held by companies designated by the relevant local administrations.

Pertamina Aims to Raise Oil Output
Pertamina aims to lift crude oil output by about a fifth next year, as Indonesia focuses exploration efforts on its existing fields, the state firm's chief executive told Reuters on Monday (4/6/07).
Ari Soemarno said the company sought to lift crude output to 180,000-190,000 barrels per day (bpd) next year, from an estimated 155,000 bpd in 2007. Pertamina expected to produce between 255,000 bpd and 300,000 bpd by 2010, he added.
"We are concentrating basically now in upstream to increase our production," said Soemarno, adding the firm was focusing on raising output in existing fields, including those located in Java, South Sumatra and Sulawesi.
Pertamina produced 140,000 bpd last year. The data includes the company's own production and partners. Soemarno said Pertamina would allocate about $1 billion on upstream activities this year, including for exploration.
"We are planning to drill production wells in excess of about 170 wells this year. We are a bit behind of that but we are working hard," he said.
 
"We are working with reputable oil companies to work in the existing fields. We are also acquiring new fields in Indonesia."
In March, the Indonesian government awarded a joint venture between Pertamina and Norway's Statoil ASA the Karama block, offshore Sulawesi.
Soemarno said crude oil price in excess of $60 a barrel was sufficient to maintain exploration plans in Indonesia, despite being squeezed by higher rig and equipment costs.
Pertamina also aims to boost production of gas to meet rising demand for the cleaner fuel. Soemarno said natural gas output was expected to rise by 30% in the next three to four years from the current 1.2 billion cubic feet per day.
On the disputed Natuna D-Alpha gas block controlled by Exxon Mobil Corp., he said Pertamina was awaiting a government decision over who would operate the block. "Natuna development is very much viable at this stage, even though it will require a huge amount of cost," he said.
Pertamina has a 24% stake in the huge gas block that has around 222 trillion cubic feet (tcf) of gas, of which 46 tcf is thought to be commercially recoverable. Exxon holds the remaining 76%.
On plans for a regional gas pipeline network, Soemarno said the project was feasible in Java, Sumatra, peninsular Malaysia, Singapore and perhaps up to Thailand. But it may be better to focus on liquefied natural gas (LNG) shipments for the more remote eastern areas, he said.

Half of Tangguh LNG Offered to Japan, S. Korea
The government will offer half of the liquefied natural gas (LNG) production from the Tangguh project in Papua, to Japan and South Korea with a higher price than offered to US West Coast buyers, Antara reported on Wednesday (6/6/07).
The Tangguh LNG plant, now being built by BP Plc as the operator, is expected to start production next year.
Energy and Mineral Resources Minister Purnomo Yusgiantoro said Japan and South Korea are expected to agree to a higher price with the soaring oil prices.
Based on contracts already signed by the government, the price of LNG is $5.6 per million British thermal unit (MBTU) for the US West Coast buyers and $3.35 per MBTU for Fujian (China) and $3.5 per MBTU for South Korean buyers.
Present contracts with Japanese buyers will expire in 2010, 2013 and 2015 for LNG exports from Bontang in East Kalimantan and Arun in Aceh.
Separately, Pertamina president director Ari Soemarno told Reuters that Pertamina had reached an agreement with Japanese buyers on extending LNG contracts two weeks ago, although the quantity was still to be unveiled.
"Indications are we are looking at around 3 to 4 million tons per year," he said, pointing to a smaller volume than in current contracts.

Pertamina, Medco , Mitsubishi in LNG Project
State-owned oil and gas company PT Pertamina, PT Medco Energi Internasional and Mitsubishi Corporation will sign an agreement on a joint venture company to build a liquefied natural gas project in Southeast Sulawesi, Antara reported.

Pertamina will own 20%, Medco 20% and Mitsubishi 60% of the joint venture company that will handle the development of the $1 billion project in Senoro, Pertamina upstream deputy director Tri Siwindono said Thursday (7/6/07).

The LNG plant will have an annual production capacity of two million tons with gas to be supplied from nearby gas fields owned by Pertamina and Medco.

The three partners have already agreed on the prices of gas from the Senoro and Matindok gas fields.
Currently Pertamina and Medco plan to invest $2.4 billion to develop the Senoro gas field, which is expected to start producing before the LNG plant comes on stream expected in 2009.

MINING
Bukit Asam in Talks to Acquire Coal Firms
State coal miner PT Tambang Batubara Bukit Asam has been holding talks over acquiring other coal miners, director for operations and production Milawarma told XFN-Asia on Thursday (7/6/07).

"We have a number of potential target firms and we're currently conducting due diligence on some of them," Milawarma said. "Acquiring other coal mining firms is part of our long-term
growth strategy.”

He declined to disclose the names of target firms or the timeframe Bukit Asam is looking at to acquire them.

Milawarma also said the company plans to start construction of its own railway track to transport coal from its mining site in Tanjung Enim, South Sumatra to nearby ports, with work expected to be completed in 2010.

The new track will help boost the company's coal sales volume to 20 million tons per annum from around 10 million in recent years, he said.

Bangka Tin Smelters Restart, Stocks Shipped
Four small Indonesian tin smelters have started up on the producing island of Bangka and shipped out more than 3,000 tons of refined tin produced before last year's crackdown, an industry official told Reuters on Thursday (7/6/07).

The October crackdown on illegal mining and smelting on the island led to the closure of dozens of small smelters, sparked supply concerns and sent tin prices on the London Metal Exchange to contract highs around $15,000 a ton.

The four smelters have shipped out as much as 3,200 tons of tin recently, but they have yet to churn out new metal despite the start-up, said Apik Chakib Rasjidi, head of the Indonesian Tin Industry Association, which groups small smelters.

"They are not running in full capacity yet. There are still issues to settle. It also depends on supply," Rasjidi told Reuters.

The four smelters are CV DS Jaya Abadi, CV Donna Kembara Jaya, PT Bangka Putra Karya and PT Bukit Timah, said Rasjidi, adding that the shipments to Singapore from Bangka were carried out from early May to early June.

Expectations of improving supplies from Indonesia, the world's second largest tin producer after China, have helped pull down tin prices on the LME from a contract high of $15,100 a ton on April 18. Tin fell $100 a ton to $13,800 on Thursday.

Rasjidi declined to say when the smelters would run at full capacity but said the current price remained attractive to produce refined tin.

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