Big info dump on current events of Geothermal Energy in Indonesia:
SSEK Indonesian Legal Consultants: Omnibus law impact on Geothermal Energy
(2 December 2020) The Indonesian Government enacted Law No. 11 of 2020 regarding Jobs Creation (the “
Omnibus Law”) on November 2, 2020. The stated aim of the Omnibus Law is to bolster investment and create jobs by streamlining regulations and simplifying the licensing process to improve the ease of doing business in Indonesia.
The Omnibus Law amends various provisions in laws across numerous sectors, including amending 29 provisions and removing six provisions in Law No. 21 of 2014 regarding Geothermal (the “
Geothermal Law”).
Many of the changes to the Geothermal Law concern the direct use of geothermal resources. We look at some of the key changes.
Centralizing the Direct Use of Geothermal Resources
The authorities of the central government and local governments (provincial, regency and municipal) to oversee and regulate business activities related to the direct use of geothermal resources remain the same as under the Geothermal Law.
However, the Omnibus Law now gives the central government the authority to stipulate norms, standards, procedures and criteria for the direct use geothermal resources. Local governments must then follow these norms, standards, procedures and criteria when exercising their authorities, including when issuing a Business License for the Direct Utilization of geothermal resources, known as a
Perizinan Berusaha Terkait Pemanfaatan Langsung or “
PBPL”. This direct use license was known as an
Izin Pemanfaatan Langsung under the Geothermal Law.
Details regarding the norms, standards, procedures and criteria shall be further regulated under a government regulation, but it is hoped that they will simplify licensing matters, particularly the licensing authority given to local governments.
Determining the Price for Direct Use of Geothermal Energy
The Omnibus Law removes the provision in the Geothermal Law on the authority of the central government to determine the price of geothermal energy from direct use business activities. Instead, the Omnibus Law stipulates that the price of direct use geothermal energy will be stipulated in a government regulation that is to be issued.
We assume that the central government will still have the authority to determine the price of direct use geothermal energy price, but we will have to wait for the implementing government to be certain.
Removing the Production Fee for the Direct Use of Geothermal Resources
The Omnibus Law removes the requirement for holders of a PBPL to pay production fees (
iuran produksi) for direct use geothermal energy. Now PBPL holders are only required to pay local taxes and retributions/levies.
It is hoped that removing the production fee will encourage greater investment in Indonesia’s geothermal sector, particularly in business activities related to the direct use of geothermal resources.
No Separate License for Indirect Geothermal Use in Water Conservation Areas
In keeping with its stated aim of easing the process of doing business in Indonesia, the Omnibus Law removes the provision of the Geothermal Law requiring a separate license from the Minister of Maritime Affairs and Fisheries for business activities related to the indirect utilization of geothermal resources in water conservation areas. It is hoped that removing this additional licensing requirement under the Geothermal Law will spur investment in the sector.
Criminal Provisions Under the Omnibus Law
The Omnibus Law has added qualifications for certain criminal offenses under the Geothermal Law, meaning that criminal sanctions for these offenses will be imposed only if the offenses have resulted in casualties or have damaged health, safety and/or environment. The affected offenses are as follows:
- conducting direct geothermal activities (i) without a PBPL, (ii) not in the location stipulated in the Business License, and (iii) not in accordance with its purposes;
- conducting indirect geothermal activities without a Business License for Indirect Utilization (Perizinan Berusaha untuk Pemanfaatan Tidak Langsung or “PBPTL”).
The Omnibus Law also removes the threat of imprisonment as contained in provisions in the Geothermal Law for the following violations:
- intentionally conducting exploration, exploitation and/or utilization activities not in the designated work area;
- carrying out indirect geothermal utilization business activity without a PBPTL; and
- intentionally using a PBPTL not in accordance with its purposes.
Conclusion
The Omnibus Law focuses on business activities related to the direct use of geothermal resources. It gives the central government the power to control the authorities given to local governments. The Omnibus Law also seeks to encourage investment in the direct use geothermal sector by scrapping the production fee for the direct use of geothermal resources. For indirect geothermal activities, the Omnibus Law eliminates the dual licensing regime in water conservation areas. But it will be important to closely monitor further implementing regulations to be issued for Omnibus Law.
So, less fees to improve margins, no extra license for water conservation area (don't even know why we need it, Geothermal is not polluting), and less stringent criminal laws.
Most importantly, centralization of licensing. Government regulation on pricing still pending.
PT Medco Power planning additional geothermal projects as part of renewables push
As part of wider renewable energy development plants, PT Medco Power in Indonesia, is planning to continue its push on geothermal development with expansion at Sarulla, the further development of Ijen and the third project of Bonjol.
Icelandic and Indonesian firms sign cooperation on small-scale geothermal development
NewQuest Geotechnology & North Tech Drilling have signed a strategic partnership for small-scale geothermal development in Indonesia, as well as energy storage and CO2 capture.
Exploration being prepared for Bituang geothermal working area, North Sulawesi
The Indonesian government is now preparing exploration work for the geothermal working area of Bituang, Cisolok Cisukarame, and Nage. Drilling is expected to start in 2021.
Indonesian drilling contractor PT Apexindo to seek for geothermal drilling contracts in 2021 beyond its oil and gas activities.
Indonesian drilling PT Apexindo Pratama Duta Tbk is putting a strong emphasis on projects in Indonesia, with plans for upstream oil and gas and geothermal services to be executed in 2021.
So to summarize:
- Omnibus Law has attempted to make Geothermal investment more attractive by reducing tariffs, licensing requirements, as well as centralization of power back to the central gov
- Medco Energy is keep to expand into Geothermal
- Premier domestic driller company PT Apexindo sees new drilling opportunities in 2021, including in geothermal
- Cooperation with Iceland bodes well for Geothermal micro-generators. Would improve isolated grid capacity hopefully.
