Indonesia forestry laws curbing geothermal-industry

By Muklis Ali

JAKARTA, Nov 16 (Reuters) - Indonesia needs to relax its laws to make it easier to explore for geothermal energy in protected forests if it is going to meet a target of lifting electricity demand from renewables, an industry official said on Monday.

Indonesia has established two crash programmes to increase power generation by 10,000 megawatts in a bid to resolve chronic power shortages in Southeast Asia's biggest economy.

The first programme, which is due to be 40 percent complete by the middle of next year, relies on coal-fired power stations.

Preparations on the second programme are due to start next year with nearly half, or 4,733 MW, due to come from geothermal.

But the president director of Pertamina Geothermal Energy, a unit of the country's state oil and gas firm Pertamina, said a 1999 forestry law targeting open-pit mining in conservation forests would slow progreess.

"Exploration activities in conservation forests are considered to violate forestry laws. This will hamper geothermal projects in the conservation areas," Abadi Poernomo told Reuters, noting that many geothermal sites in Indonesia were located in conservation forests.

Pertamina already operates geothermal projects in West Java and North Sulawesi.

"It will be difficult building a 4,700 MW geothermal power plant in the second phase of the government's electricity plan because of this forestry law," Poernomo said.

"The government needs to amend the forestry law to help develop geothermal projects," he added.

Overlapping regulations on the environment and mining frequently complicate plans to develop projects in Indonesia, although green groups also complain that firms are sometimes wrongly given permission to exploit dwindling forests.

Some geothermal projects have also been stalled by protests from environmentalists and activists over alleged damage to protected forest areas in a country with one of the fastest rates of deforestation in the world.

Indonesia is hoping to tap alternative sources of energy to meet rising power demand and cut consumption of expensive crude oil as its own reserves dwindle.

The vast archipelago, with hundreds of active and extinct volcanoes, has the potential to produce an estimated 27,000 MW of electricity from geothermal sources.

However, most of the potential remains largely untapped because the high cost of geothermal energy makes the price of electricity generated this way expensive.

"The cost of geothermal exploration drilling and high steel prices have caused the price of geothermal projects to become very expensive," said an official at the energy ministry, who declined to be quoted by name.

Indonesian energy firms Medco Energi Internasional (MEDC.JK) and Star Energy, are looking at making new investments, while Chevron (CVX.N), the world's largest private producer of geothermal energy, has previously said it plans to double its geothermal business in Indonesia and the Philippines by 2020.

Indonesia's state electricity firm PT Perusahaan Listrik Negara (PLN) has 25,000 MW of generating capacity but daily output is far less because most of its plants are old and inefficient.

(Editing by Ed Davies)