POLITICS
Police Capture Terrorist Leadership
Police said they had detained the head of the Jemaah Islamiyah terror network, just two days after announcing the capture of Abu Dujana, the country's most wanted militant.

Brig. Gen. Suryadarma Nasution, commander of the Detachment 88 anti-terrorist unit, told a news conference on Friday (15/6/07) that Zarkarsih, also known as Mbah, was caught in Yogyakarta last Saturday.
“He is the emergency head of JI,” he said. “He is above Abu Dujana and was captured on the same day.”

Zarkarsih is believed to have replaced Abu Bakar Ba'asyir and then Abu Rusdan as Amir or leader of the increasingly fragmented network.

Police are still searching for fugitive Noordin Mohammad Top, the Malaysian national considered a key figure behind a series of bomb attacks, including the 2005 blasts in Bali that killed more
than 20 people.

Indonesia Rejects UNSC Vote
Indonesia rejects a draft statement in the UN Security Council (UNSC) condemning Iranian President Mahmoud Ahmadinejad’s call for the destruction of Israel.
As a result, the Security Council failed in a June 8 vote to adopt the French-drafted statement, which required consensus by all 15 council members to be adopted.

Indonesia said the council’s decision to target Ahmadinejad's remarks was not fair because it had been silent on many occasions and on many issues that directly threatened international peace and security.

It pointed to Israeli's recent abduction and detention of Palestinian cabinet and parliament members and the Jewish state's recent threat to assassinate Hamas leader Khalid Mishal as examples.

It also pointed out that the council had done nothing to condemn Israel's almost daily attacks on unarmed Palestinians.

"The security council never reacts at all on issues that we believe have clearly threatened international peace and security, although we have asked many times," Foreign Ministry director for international security and disarmament Desra Percaya complained.

He noted that when the Israeli newspaper Haaretz called for Ahmadinejad's assassination last year to create a more stable region it was greeted with silence from council members.

Percaya described Ahmadinejad's June 3 statement calling for Israel's destruction as simply "rhetoric” that could not be taken seriously.

The Associated Press reported that delegates from Qatar, the only Arab nation on the Security Council, had no instructions from their government on how to treat the draft statement.

REGIONS
US Congress Briefed Over Papua Progress
In an informal meeting between the visiting PDI-P delegation led by secretary general Pramono Anung and congressmen from the US Democratic Party, the Indonesian parliamentarians outlined progress achieved in Papua and West Papua provinces to their US counterparts, The Jakarta Post reported on Monday (11/6/07).
Congressman Eni Faleomavaega, who has sought international support for self-determination for Papua, told the PDI-P delegation Indonesia's sovereignty over the provinces depended not so much on international recognition but on how the Indonesian government treated the territory, improved the capacity of local governments and empowered Papuan people.
"Jakarta must uphold justice and speed up development programs in all sectors to improve the social welfare of Papuan people," delegation member Hasto Kristiyanto quoted Faleomavaega as saying during the meeting.
Pramono said his delegation explained to the Congress members about the granting of special autonomy, with increasing annual autonomy funds distributed by the central government to the provinces to enable them to deal with their own domestic affairs.

Police Arrest Alleged Human Trafficker
Police have arrested the alleged leader of a people smuggling operation that tried to send 83 illegal Sri Lankan migrants to Australia, Australian Foreign Minister Alexander Downer said Thursday (14/6/07).
Downer said a joint operation between Indonesian and Australian police resulted in the arrest on June 10 of Abraham Lauhenapessy, also known as "Captain Bram". "He's somebody who has been of interest to us for quite some years and we believe may have been involved in quite a number of people smuggling ventures," Downer told the ABC.
"So this is a very good example of the strong cooperation we have with the Indonesians and we congratulate the Indonesians on the good work they've done."
Downer said Lauhenapessy was believed to have organized a boatload of 83 Sri Lankan men who were intercepted by the Australian navy on February 21 and taken to a detention center on Christmas Island.

Chinese Arrested For Killing Turtles
Nearly two dozen Chinese fishermen will go on trial for allegedly killing hundreds of endangered turtles, Antara reported Thursday (14/6/07).
Indonesian customs officials picked up 23 Chinese men in waters north off East Kalimantan province on May 8, the news agency reported. They face up to five years in prison and a fine of Rp100 million.
The fishermen caught and killed 387 rare turtles and planned to smuggle them abroad, the report said.
 

BUSINESS BRIEFS
MACROECONOMY
Govt. Eyes New System to Prevent Crisis
As part of a newly launched package of economic policies, the government will set up a macro early warning system to prevent a recurrence of the 1998 economic crisis, The Jakarta Post reported.
"The government and Bank Indonesia will establish a work unit to monitor various economic indicators, based on which it will be able to detect the real condition in the economy," Coordinating Minister for the Economy Boediono said at the launch of a new economic policy package Tuesday (12/6/07).
The planned establishment of the early warning system is part of 44 programs to be instituted by the government in the financial sector as part of its new economic policy package.
Other important measures to be taken include the establishment of the Financial Sector Stability Forum.  "The existence of this forum will be quite important as it will provide a mechanism for discussing how the government and the central bank should do their jobs in dealing with a crisis," he said.
Finance Minister Sri Mulyani Indrawati said that she and the central bank governor would soon sign a joint decree on a number of important aspects related to the establishment of the forum.
"The joint decree will outline various issues concerning the forum's work mechanisms and resources," she said, adding that besides the establishment of the early warning system and the forum, the new package of economic policies for the financial sector would also include the drafting of a bill on a safety-net program for the financial sector and a blueprint for the development of the financial system, to be known as the Indonesian Financial System Architecture.
Boediono said the latest financial sector reforms included in the economic policy package are a follow-up to the financial reform policies issued in mid-2006.
He said that a number of programs instituted as part of the previous financial sector reform policy package had been successfully implemented, including those related to the settlement of non-performing loans at state banks, and the treatment of ailing insurance companies.
The previous financial sector reform policy package also included policies that were aimed at supporting diversification of financing for business expansion.
Toward this end, the government had issued regulations to support the operation of a bond repo market, the development of a shariah-based capital market, the issuance of government retail bonds, and the drafting of a regulation on sukuk, or shariah-based financial instruments.
Boediono said that these programs formed part of the 55 programs carried out from July 2006 up to the end of the first quarter of this year.  "The actions which are scheduled to be implemented after this quarter, and those which have not yet been completed, are included in the newly issued policy package," he said.

BI: Inflation Looks ‘Manageable’
Inflation will likely remain "manageable" in coming months, and the country will probably achieve its target of maintaining a 5.0%-7.0% inflation rate until the end of this year, Bank Indonesia Deputy Governor Aslim Tadjuddin said Friday (15/6/07), Dow Jones Newswires reported.

Tadjuddin said that given this level of inflation, "looking forward, (Bank Indonesia) sees that room remains to cut interest rates."

He didn't specify when or by how much the central bank might cut its policy rate, but said the central bank sees real interest rates of 1.5%-2.0% as desirable.
The consumer price index fell for a second consecutive month in May to 6.01% on year, compared with 6.29% in April.

Govt. Swaps Debt amid Weak Market Sentiment
The government swapped a sharply lower amount of rupiah bonds in an auction on Tuesday (12/6/07), amid weak market sentiment following worries over higher interest rates in global markets, the Finance Department said.
Investors swapped Rp105 billion ($11.70 million) in bonds due 2010 with 15-year debt FR0043 compared to Rp1.45 trillion swapped in a previous debt swap in May when the government exchanged papers with similar maturities.
The government, however, was able to price the 15-year bonds to yield lower at 9.61% compared to 10.17% in May due partly to excess funds in domestic markets, the department’s director of debt management, Bhimantara Widyajala, said.
"The markets are still nervous, with weak sentiment after some countries increased interest rates," Treasury Director General Rahmat Waluyanto was quoted as saying by Reuters.
Waluyanto said the government planned an indicative target of Rp3 trillion for its next monthly bond auction on June 19 at which it hopes to sell two series of bonds, coded FR0043 and FR0045, maturing in 2022 and 2032, respectively.
The department also said it aims to raise Rp2 trillion from sales of treasury bills on June 26.

INVESTMENT
Incentives for Investment Unveiled
The government aims to boost investment in the country by slashing the approval time for new investments, offering tax incentives, and creating other measures to smooth the path for entrepreneurs, Coordinating Minister for the Economy Boediono said Tuesday (12/6/07).
"These policies are aimed at accelerating the development of the real sector and empowering micro, small and medium enterprises so as to increase the growth of the national economy," Boediono was quoted as saying by Dow Jones Newswires.
The moves follow a new law passed earlier this year to boost investment in Indonesia. The government sees greater investment as vital to achieving its economic growth targets.
Among other measures designed to spur greater investment, the new investment law mandates exemptions or reductions of income tax, import duties and value-added taxes; accelerated accounting of asset amortization and depreciation; and exemptions or reductions of land and building taxes.
The office said in a statement that the government will begin offering income tax incentives to listed companies by August and to other investors by December.
Actual foreign direct investment in the country rose 15% on year to $2.99 billion in the first quarter of 2007, while FDI approvals for the same period increased nearly sixfold to $14.13 billion from $2.36 billion a year before.
The government is also conducting a countrywide assessment of investment regulations, which will be completed this month.
Boediono said the assessment has already found that some policies passed by provincial and regional authorities are hindering investment in certain areas of the country.  Once the assessment is complete, the government will ask provincial authorities to review policies it deems non-conducive to investment, he said.
The government will also issue guidelines to better safeguard the rights of taxpayers from violations by taxation officials.  Businesses have complained that tax officials are able to detain or prosecute companies or businesspeople without adequate proof that they have violated tax laws.

Jakarta, Surabaya Bourses to Merge in October
The Jakarta Stock Exchange (JSX) and the Surabaya Stock Exchange (SSX) will be merged no later than October, Antara reported.
The merger is one of the targets of the financial reform measure announced by the government on Tuesday (12/6/07) as part of the policy package aimed at accelerating the revival of the real sector.
The planned merger of JSX and SSX will improve efficiency and liquidity of share trading to make the country’s share market more competitive, observers said.
The government plans to increase the use of information technology in the bourse by setting up e-reporting, e-registration and e-monitoring systems, expected to be completed by December.
SSX director Guntur Pasaribu said the merger is expected to create an international class capital market in Indonesia.

Neptune to Invest $322.5m in Shrimp Farmer
The Neptune consortium, the new owner of PT Dipasena, said it will invest Rp2.9 trillion ($322.5 million) in the next five years to revitalize the company’s shrimp ponds in Lampung.
The consortium, led by PT Central Proteinaprima (CP Prima), said it is optimistic Dipasena’s shrimp sales will soar to Rp2.2 trillion next year, or seven times its estimated sales this year, and to Rp4.1 trillion in 2009, Antara reported on Wednesday (13/6/07).
Dipasena's shrimp production is forecast to rise 562% from an estimated 6,394 tons this year to 42,371 tons in 2008.  The shrimp will be exported to Japan, the US and Europe.
CP Prima director Mahar Sembiring said the consortium has already secured Rp880 billion in working capital and investment credits from Bank Panin.
 

Royal Doulton to Invest $25m

Royal Doulton, with an existing investment of $75 million in the country’s ceramic industry, plans to invest a further $25 million, Antara reported.

Anthony O`Reilly, the British company’s chairman, said June 9 that with the additional investment, the company would raise its ceramic wares production capacity in Indonesia from 6 million to 12 million pieces per year.

He said his company had decided to make the additional investment as it believed the Indonesian economy would undergo continuous development in the next five to 10 years and because the country had certain comparative advantages over other countries.

The investment will boost the workforce from 1,350 at present to about 2,000.

Achmad Widjaya, chairman of the Indonesian Ceramic Industries Association, said Indonesia is now the world’s fifth biggest ceramic ware producer. 

In another development in the industry, PT Arwana Citramulia said it would invest a further Rp160 billion to increase production of its ceramic tiles by 5 million sq m per year to 27.4 sq m a year, Kompas reported.

Yamaha to Up Motorcycle Output Capacity
Japan's Yamaha Motor Co said Wednesday (13/6/07) it will boost the production capacity of its motorcycle factory in Indonesia by more than 20% by 2008 to meet strong demands.
The Japanese motorcycle maker will build an additional line at its existing No 2 plant on the outskirts of Jakarta, a Yamaha spokesman was quoted as saying by Dow Jones Newswires.
The new line is designed to manufacture engines and assemble motorcycles.
Yamaha's production capacity in Indonesia will increase to 2.2 million units annually, compared to the current 1.8 million.

STATE CONCERNS
Govt. Raises CPO Export Tax
Indonesia has raised the export tax for crude palm oil and its products from Friday (15/6/07) in a bid to stabilize domestic cooking oil prices, chief economics minister Boediono said, according to Reuters.

Cooking oil prices have jumped by nearly 30% since early this year on surging global crude palm oil prices. Cooking oil is a staple and rising prices would increase inflationary pressure, analysts say.

The government has raised the export tax on crude palm oil to 6.5% from 1.5% while the tax on crude olein is up to 6.5% from 0.3%.

"The government has decided to raise the export tax effective today for palm oil and its by-products to secure domestic supply of cooking oil at reasonable prices," Boediono said.

The government in the past had raised or lowered the palm oil export tax to ensure crude palm oil supply to local refiners and to stabilize local cooking oil prices.

2007 Rubber Output Seen Up 5%
The country’s natural rubber output is expected to grow nearly 5% this year to 2.765 million tons and the country is likely to take over Thailand as the world's top producer in less than a decade, industry officials said on Wednesday (13/6/07). Indonesia produced 2.637 million tons in 2006.
"Rubber prices are good, so growers are tapping more frequently.  Also, the rubber trees we planted a few years ago have started producing," Mukti Sardjono, director of perennial crops, told a rubber conference.
Indonesia is aiming for output growth of 4.12% per year to help boost rubber output to 3.072 million tons in 2010, Sardjono said, according to Reuters.
To achieve the target, the government plans to replant 250,000 hectares of old smallholders' rubber plantations and plant 50,000 hectares of new smallholder rubber plantations until 2010.  Under the program, smallholders can get loans from banks at an interest rate of 10% during the development period of seven years.
The replanting and new expansion for smallholder rubber plantations will take place in the rubber-growing areas of Sumatra and Kalimantan.
Indonesia is expected to take over from Thailand as the world's top rubber producer in 2020 given extensive room for expansion, said the International Rubber Study Group.
In 2020, the country’s natural rubber output is forecast to hit 4.12 million tons, exceeding Thailand's rubber output, which is expected to reach 3.68 million tons.
"It may be earlier than that because expansion in rubber areas and replanting will help boost production and allow Indonesia to grow," said Hidde Smit, the group's secretary general.

Italy in Debt Swap
Italy has agreed to cancel the equivalent of $9.32 million worth of debt that Indonesia owes it
on condition that Jakarta spends the same amount on six humanitarian projects in Aceh, an official said, according to XFN-ASIA.

Mahendra Siregar, a deputy at the office of the Coordinating Ministry for Economic Affairs, said among the six projects approved by Italy is the building of a bridge and hospital and the reconstruction of a fishing harbor.

Last year, Italy has approved the cancellation of 4.98 million euro in debt after Indonesia pledged it would spend the same amount on four projects in Aceh. These projects have been completed, so that the debt cancellation would take effect immediately after some administrative steps conducted by the Italian Government.

SOEs
Garuda Mulls Reopening Offshore Routes
National flag carrier PT Garuda Indonesia is considering reopening routes to Amsterdam and Nagoya, and starting a new service to India next year to increase revenue from international flights, which contributed 45% of its income last year.
Garuda spokesman Pujobroto said the carrier is studying what needs to be done to improve its services, including the use of newer aircraft and expanding promotion to business passengers.
Besides reopening old routes and establishing new ones, Garuda will also increase the frequency of its flights to a number of existing destinations.
Agus Priyanto, Garuda executive vice president for sales and marketing, said the new and reopened routes would push the contribution of international services to Garuda's earnings to 50% in 2008.
Garuda currently serves 27 domestic and 24 international routes.  According to Pujobroto, routes to the Middle East, Japan and Australia are the most profitable of all of the airline's international routes.
He said Garuda is targeting a profit of Rp45 billion ($5 million) in 2007 after suffering losses for the past three years -- Rp800 billion in 2004, Rp688 billion in 2005 and Rp197 billion in 2006.
During the first four months of the year alone, the flag carrier had made Rp121 billion profit, compared to a loss of Rp279 billion in the same period last year.
The improved performance, according to Pujobroto, is due to various programs instituted by Garuda, including strengthening its subsidiaries, and improved productivity and efficiency.

Jasa Marga Sets Coupon Rate for Bonds
Toll road operator PT Jasa Marga has set a 10.25% coupon rate for its 10-year bonds worth Rp1.5 trillion ($165.2 million) to be issued this month, the state-owned firm said on Thursday (14/6/07), according to Reuters.
Returns on the bonds, which will be offered at a nominal value, compared to 10-year government bond yields currently at about 9%.  The bonds will be offered in the middle of June.
Bahana Securities is the lead underwriter for the bond issuance.
Jasa Marga, a frequent bond issuer, last issued bonds in July last year, raising Rp1 trillion.  The firm is also planning to list a maximum of 30% of its shares to raise Rp2.5 trillion by the end of July.
Jasa Marga, which controls about 75% of the country's toll roads, plans to build three new toll road projects in Java for a total cost of Rp9 trillion in the coming years.

Telkom to Sell Shares in 2 Units - CEO
PT Telkom said Wednesday (13/6/07) it plans to sell stakes in two wholly owned units to the public.
“We expect to sell stakes in PT Telkom Vision and PT Yellow Pages Indonesia soon", Telkom chief executive Rinaldi Firmansyah told Dow Jones Newswires.  He said the proceeds would be used to develop the two companies' businesses.
Telkom Vision provides television cable services, while Yellow Pages offers telecommunication and information services.  He declined to specify the size of the stake sales.
Meanwhile, PT Telkomsel plans to enter the fixed wireless access market in a bid to tap the lower end of the market, the company's chief said on Wednesday, according to Reuters.
"We are committed to provide a service to lower-end groups by way of fixed line access. As soon as we get approval from shareholders we will apply to the government for a license," Kiskenda Suriahardja said.  "We wish to be able get to all customers from the low-end groups as well as provide them more affordable prices."
Analysts say many customers would be prepared to give up the convenience of nationwide mobility for the cheaper tariffs of fixed-wireless service.

Govt. to Revitalize Strategic Industries
The government will soon revitalize state firms engaged in strategic industries, including aircraft maker PT Dirgantara Indonesia (DI).
"I think the country is now able to revitalize state firms engaged in strategic industries," State Minister for State Enterprises Sofyan Djalil said Tuesday (12/6/07), according to Antara.
If managed well, the strategic industries could brighten the prospects of the national economy and increase state revenues, he said.
Djalil said he had discussed the planned revitalization of strategic industries with President Susilo Bambang Yudhoyono and former president BJ Habibie.  "I met the president and Pak Habibie yesterday.  We will look into the possibility of revitalizing PT DI, (shipbuilder) PT Pal, and (arms industry) PT Pindad," he said.
Early this week, the president met with Habibie to discuss the planned revitalization of strategic industries. 

Seven SOEs Establish Trade Forum
Seven state enterprises on Tuesday (12/6/07) established the Indonesian Trade Forum (ITF) to strengthen their cooperation, Antara reported.
State Minister for State Enterprises Sofyan Djalil said the forum was set up by Bank Mandiri, Bank Rakyat Indonesia (BRI), Bank Negara Indonesia (BNI), Bank Ekspor Indonesia, PT Kliring Berjangka Indonesia, PT Bhanda Ghara Reksa, and PT Sucofindo to follow up the enforcement of Law No 9/2006 on warehouse receipts.
Warehouse receipts is a process guaranteeing the existence and availability of a given quantity and quality of a commodity in storage for safekeeping, often used in cash and futures transactions instead of having to deliver the physical goods or commodities.

PRIVATE SECTOR
Cement Demand Up 8%
Demand for cement grew 8% in the first five months of the year and is likely to grow by a similar amount next year as the sector gradually recovers from last year's slowdown, an Industry Department official said on Wednesday.
"In the first five months of 2007, consumption grew by 8%," Secretary General Agus Tjahjana said, according to Reuters.  "For 2008, we're looking at 8% demand growth."
The country’s largest cement maker, PT Semen Gresik, estimates domestic cement consumption will rise by 6% to 7% in 2008.
Indonesia's cement industry was hit last year by high interest rates, which put a brake on the construction sector.
Semen Gresik has a 45% market share and sold 14.34 million tons last year out of total industry sales of 32.1 million tons.

Adam Air to Fly to Hong Kong, China This Year
Low-cost carrier Adam Air said it plans to expand its international flight service by flying to Hong Kong and China this year, Antara reported on Wednesday (13/6/07).
Adam Air, which is shedding its budget image to become a full-service airline, already serves regional flights to Singapore and Penang from Jakarta.
Head of corporate communications Danke Dradjat said the airline is set to continue to expand its operations regionally and globally.
Investment holding company PT Bhakti Investama acquired 50% of PT Adam Skyconnection Airline, the operator of Adam Air, earlier this year. 
Adam Air operates 22 aircraft, primarily old Boeing planes.  It plans to phase out the old aircraft and buy 60 new ones in the next five years, including six Airbus A320 aircraft, which will arrive early next year.

BANKS
Temasek May Sell BII Stake: Report
Temasek Holdings, Singapore's state-owned investment company, may be intending to sell its stake in mid-sized lender PT Bank Internasional Indonesia (BNII.JK) to South Korea's Kookmin Bank, Investor Daily reported.

The daily quoted a senior executive of Kookmin Bank as saying that the Korean bank would be keen to buy the stake if BII wanted to sell and that meetings have been held to discuss the possibility. In March the bank denied reports that it was in talks to buy the Temasek stake.
Temasek, Kookmin Bank, Barclays Bank and Malaysia's Financial Holding group control a consortium called Sorak Financial Holdings Ltd. which owns 56.26% of BII. Temasek and Kookmin each have a 25% stake in Sorak Financial.
Temasek Holdings is also a partner with Deutsche Bank in the Asia Finance Consortium, which owns 69.9% of Bank Danamon.
Under a new ruling introduced last year, a single investor may not own shares in two banks. Those already having more than one bank under their control are either to reduce their stake or have their banks merged into one.
 
The Investor Daily report said Temasek was disappointed with the performance of BII after the Sinar Mas group, one of its largest clients, bought Bank Shinta and renamed it Bank Sinar Mas, transferring their business from BII.

S. Korean Bank Aims for Bank Bintang
South Korea's third largest bank, Hana Bank, is conducting due diligence on Bank Bintang Manunggal and hopes to complete its acquisition by September, Bank Bintang official Siti Rohan told the Investor Daily on Monday (11/6/07).
Earlier, Bank Bintang vice president Singgih Mintarno said the bank’s shareholders are ready to increase its capital to Rp80 billion ($9 million) before the end of the year, in line with central bank regulations.  
Chief spokesman of the central bank Budi Mulya said the process is underway and is expected to be concluded before the end of the year.  
Bank Bintang reported only Rp34.32 billion in paid-up capital at the end of March.

POWER
PLN to Get Tangguh LNG
State-owned electricity company PLN has finally secured a Liquefied Natural Gas (LNG) supply from the LNG plant at Tangguh, Papua, after the government agreed to reallocate part of the supply already earmarked for the Sempra Energy to the electricity utility, The Jakarta Post reported on Friday (15/6/07).
PLN power generation director Ali Herman Ibrahim said Thursday that the decision had been made during his meeting with the Upstream Oil and Gas Executive Agency (BP Migas) on Wednesday.
Herman told Detik.com that BP Migas had confirmed that PLN would receive a portion of the LNG supply previously allocated to the US West Coast-based energy firm, Sempra Energy Corp.
It had been reported earlier that the government planned to divert the gas supply for Sempra to other energy firms in Asia, such as Tokyo Gas in Japan, Kogas, Posco and K-Power in South Korea, and the Taiwan-based Chinese Petroleum Corporation as these companies were likely to offer higher prices than that offered by Sempra.
US contractor Sempra Energy's LNG purchase agreement with the BP-operated Tangguh project in Papua will allow for up to half of the scheme's committed volumes to be diverted, Upstream reported on Friday (15/6/07).

Sempra has a 20-year contract to buy 3.7 million tons per annum of LNG from the Tangguh plant.

"Up to 50% of our volumes can be diverted, most likely to customers in North Asia and Japan, subject to certain conditions and on proper notice (from BP)," Sempra LNG vice commercial & development president Octavio Simoes told Upstream on the sidelines of the Asia Oil & Gas Conference.

Sempra plans to import the Tangguh LNG to its Energia Costa Azul terminal in Baja California, Mexico, which is set to come into operation in the first quarter of 2008.
The Tangguh LNG plant, located in a Papua gas field with proven reserves of more than 14 trillion cubic feet, is in the final phase of constructing the first two trains and is expected to commence initial production by the last quarter of 2008.
Meanwhile PLN said that it has sold Rp3 trillion ($332 million) of bonds and Islamic debt this week to finance its major network expansion projects.
The company sold Rp.5 trillion of 10-year bonds yielding 10.4%, and Rp 1.2 trillion of 15-year bonds yielding 10.9%, said Orias Petrus Moedak, managing director of PT Danareksa Sekuritas, which helped organize the sale.
The Jakarta-based utility also sold Rp300 billion of 10-year Islamic bonds.

Tender For 5 Geothermal Projects
The government will invite bids in August for five geothermal projects as part of the effort to boost electricity supply in less-developed regions, an official told The Jakarta Post.
The projects will have an estimated combined capacity of 455 MW, comprising 160 MW in Seulawah, Nanggroe Aceh Darussalam, 75 MW in Maluku, 120 MW in Telaga Ngebel, East Java, 50 MW in Ungaran, Central Java, and 50 MW in Tampomas, West Java.
The Energy and Mineral Resources Ministry's Director General of Geology and Mineral Resources, Simon Sembiring, said Tuesday (12/6/07) that  the ministry was awaiting a ministerial decree that would set out general provisions and tendering procedures for the geothermal business as a whole.
The decree was likely to be issued next month, he said, and after that the Finance Ministry was expected to complete its discussions on how much geothermal energy promoters would have to pay in royalties.
The government has also formed a team tasked with coming up with a formula to determine an economically feasible ceiling price for both investors and the sole power purchaser -- state-owned electricity firm PT PLN.

Mideast Consortium to Build $600M Power Plant
A Middle East consortium, Mine Power Holdings BSC, will build a coal-fired power plant
with an investment of $600 million in Indonesia, Antara reported on Friday (15/6/07).

Mine Power will build the 600-MW plant at a coal mine in Riau, said Alwi Shihab, presidential special envoy for the Middle East.

Shihab said the consortium, which will cooperate with a local partner PT Ridlatama, also wants to build a hydroelectric plant with a capacity of 300 MW.

He said the government and state-owned electricity company PLN have expressed support for the projects.

J-Power Mulls Pumped-Storage Power Plant
Japan’s Electric Power Development Co Ltd, or J-Power, will begin a feasibility study this year on building a seawater pumped-storage power station in Indonesia, Nikkei reported on Friday (15/6/07), without citing sources.

J-Power and state-run power utility PT PLN have signed a technological assistance agreement, and the Japanese firm will study the feasibility of commercial operations in the Indian Ocean off the eastern coast of Java, the financial daily said.

J-Power is considering building a facility capable of putting out 700,000 to 800,000 kilowatts. Construction cost is estimated at around $700 per kilowatt and the study and construction are likely to take some 10 years, the Nikkei said.

OIL & GAS
Pertamina Aims to Go Public by 2009
State-owned oil and gas company Pertamina is working on a strategic restructuring plan which would enable the company to go public by 2009, Platts Commodity News reported on Friday (15/6/07)
"We have finished the first phase of our restructuring and have built a strong fundamental by changing our culture and the mindset of our people," company president Ari Soemarno told Platts in an interview on the sidelines of the 12th Asia Oil and Gas Conference in Kuala Lumpur.

"Now we are in the midst of putting together our strategic plan for the next five years. We are working on a road map for the privatization of our assets and restructuring our business
activities. Our target is that by 2009 we will have the company at a stage where it is ready to go public," he added.

Pertamina is currently in the process of upgrading its refineries and is also working with regional oil and gas companies to acquire overseas upstream assets.

The company has also completed a study of an expansion of the secondary processing capabilities of its 340,000 b/d Cilacap refinery. "We will make an investment decision on the project this year, start engineering work early next year and hope to have the units operational around 2011-2012," Soemarno said. "Building a new refinery is very costly. Our priority is to work on the existing refineries," he added.

Pertamina is also looking at upgrading its 260,000 b/d Balikpapan refinery to enable the plant to process sour crudes, Soemarno said.

All of Pertamina's seven refineries, which have total capacity of 1.05 million b/d, are now able to meet the new 3,500 ppm (0.35%) sulfur standard for gasoil that was introduced in Indonesia in March this year, he said.

Green Light for Kalimantan-Java Gas Pipeline
PT Bakrie & Brothers has received the green light from the government to continue work on its $1.26 billion gas pipeline linking East Kalimantan and Central Java, The Jakarta Post reported on Tuesday (12/6/07).
Downstream Oil and Gas Regulatory Agency (BPH Migas) chairman Tubagus Haryono told the Post that the project would go ahead in line with the original schedule as there were no longer doubts over the gas supply for the country's longest pipeline project.
He said Bakrie would have sufficient supplies from the gas-rich region as most of the current Liquefied Natural Gas (LNG) export contracts from the province would have been terminated by the time the project comes onstream in 2011.
According to the government's gas balance figures, the East Kalimantan region will have a gas surplus of 1,629 million cubic feet per day by 2011 as demand is expected to drop to 1,413 million cubic feet per day while the supply will stand at 3,042 million cubic feet per day.
Up until 2009, most of the gas produced in the province will be used to supply LNG exports to Japan and South Korea.
Tubagus denied the project was in danger, saying, "The project is still going ahead and there are no plans to terminate the contract,"
A number of international institutions, including Mitsui, Mizuho, both of Japan and Deutsche Bank have committed to providing loans worth about $1.26 billion to finance the project. Bakrie alone will provide about $400 million to finance pipe procurement and construction works.
 

Pertamina Agrees to Extend LNG Supply to Japan
PT Pertamina has signed an in-principle agreement with its Japanese liquefied natural gas buyers on extending long-term contracts, which are set to expire in 2010-2011, president Ari Soemarno told Dow Jones Newswires Monday (11/6/07).
The exact volumes and prices are being negotiated, but Pertamina will likely supply a minimum 3.0 million tons a year of LNG in total, he said on the sidelines of the 12th Asian Oil & Gas Conference. "We have not mentioned the quantity and the price. But...we can sell 3 million tons," Soemarno said, declining to say what the maximum volume might be.
Six Japanese companies - Kansai Electric Power Co., Osaka Gas Co., Chubu Electric Power Co., Kyushu Electric Power Co., Toho Gas Co. and Nippon Steel Corp. - have long-term LNG supply contracts with Pertamina which will expire in 2010 and 2011.
These contracts total 12 million metric tons a year of LNG.

Chevron to Launch Minas Oil Recovery Project
Chevron Corp. will launch an enhanced oil recovery project in the Minas field in a bid to boost production, an official at upstream regulator BP Migas told Reuters on Thursday (14/6/07).
The plan over the next decade is of particular interest to the market given the status of Minas crude as a regional benchmark, along with its potential to boost flagging oil output.
"BP Migas has approved the Minas oil recovery trial project. We hope this project will produce good results to boost Indonesia's oil production," said Achmad Luthfi, the deputy chief of the agency, adding that the Minas field, the largest in Indonesia, still had big reserves.
Nicole Hodgson, Chevron Asia's media adviser, said BP Migas and the company had studied a variety of technologies and had agreed in principle to conduct limited scale field trials to test the performance of surfactant/polymer, the chemical being eyed for the enhanced oil recovery project.
"We hope to start chemical injection by early 2011. We expect results to be obtained by 2012," Hodgson told Reuters via email. "By 2013 a decision is likely to be made on whether or not to expand the use of this technology. It is too early to make estimates on recovery or production rates.”
A second BP Migas official, who declined to be identified, said oil reserves in the Minas field were estimated at 4 billion barrels and as much as 10% might be recoverable.

Team to Sanction Firms over Oil Spills
A new national team has been established to deal with oil spills and related disasters, the government announced Wednesday (13/5/07).
The team will be authorized to set penalties for ship owners found guilty of damaging the ocean and coastal areas. "The newly established National Oil Spill Contingency Planning Team could punish a ship's captain, ship owner, the shipping company and the involved oil and gas companies," The Jakarta Post quoted Transportation Minister Jusman Syafii Djamal, who is chairing the team, as saying.
He said the team had been created in response to several past oil spills in Indonesia. The team has no limit on its working term and also functions as an advocacy body for victims.
Luluk Sumiarso, Director General of Oil and Gas at the Energy and Mineral Resources Ministry, said that holding oil and gas companies responsible for oil spills was based on the 2001 oil and gas law. "Prevention is our idea. According to a survey, many oil spills occur when (the oil) is being transported, rather than on oil rigs," he said, adding that causes of spills were various, ranging from tanker collisions to crew negligence.
The 2006 presidential regulation derives from a 1985 law ratifying the United Nations Convention on the Law of the Sea. It required the Indonesian government to develop a policy to allow oil spills to be tackled quickly and environmental damage to be minimized.

Pertamina Signs Tanker Deal with Chinese Firm
State oil firm Pertamina has signed contract with China's Jiangsu Eastern Shipyard to build two tankers worth $61.4 million, a company official told Reuters on Thursday (14/5/07).

Pertamina spokesman Toharso said the tankers, of 85,000 deadweight tons each, were expected to be delivered in 2010. "Pertamina will use these tankers to transport crude oil to its
refineries," he said.
He said Pertamina operates around 150 tankers, mostly hired from other companies.

Indonesia has nine oil refineries that are scattered in the archipelago with a total combined capacity of 1 million bpd. Despite Indonesia's status as the Asia-Pacific's only OPEC member, about 30% of the country's oil products for consumption are still imported.
 

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