Medco Signs MoU with Libya over Area 47 Block

Oil and gas company PT Medco Energi Internasional Tbk, found by businessman Arifin Panigoro, said its wholly owned unit Medco International Ventures (MIV) has signed a memorandum of understanding with Libya Investment Authority (LIA) over the development of lucrative onshore Area 47 oil and gas block in Libya.

LIA, a sovereign wealth funds of Libya, is a new partner of Medco in developing the Area 47 block. On December 21, 2009, LIA has finalized the acquisition of 100% shares in Verenex Energy Inc. (verenex), a listed oil and gas and company in Canada, which holds 100% shares in Verenex Energy Area 47 Ltd (VEAL). VEAL is the partner of Medco International, which holds 50% interest in the Area 47 and also the operator of the block.

Under the MoU, both parties agreed that the operator of the Area 47 block will still be in the hands of VEAL, which is now a subsidiary of LIA, while Medco International Ventures will be responsible to provide services and support on technical and operational aspects to Verenex Energy.

MIV is fully owned by Medco Energi Global Pte Ltd, a sub-holding which is also a wholly owned subsidiary of Medco Energi. MIV holds 50% interest in the oil and gas exploration block, in area 47, located in Ghadames Basin, Libya.

Medco Energi said that both LIA and MIV will cooperate to secure approval on Working Program and Budget for 2010 from the Lybian government as well as securing extension of exploration extension and the re-implementing drilling program in the Area 47.

Medco Energi and Verenex won the rights to develop the block for 30 years in 2005. Under the deal with the Libyan government, Medco and the Libyan sovereign wealth fund will receive 13.7 percent of revenue and the Libyan government 86.3 percent. The block, which is believed to contain about 2.15 billion barrels of oil equivalent, is expected to begin production in 2013-2014. (Roffie Kurniawan)

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CBM Asia closes LoI to acquire Sekayu PSC

CBM Asia Development Corp. has closed its letter of intent with, inter alia, Batavia Energy Inc. to acquire, indirectly, 24% of South Sumatra Energy Inc. ("SSE"), a private company jointly owned by PT Ephindo and Batavia, which together with Jakarta-based operator PT Medco Energi Internasional Tbk, holds the production sharing contract (the "Sekayu PSC") for coalbed methane on the 58,349 hectare "Sekayu" block located in the South Sumatra Basin, Indonesia.

Under the terms of the LOI, CBM Asia has paid an upfront cash payment of US$730,000 and is required to fund US$3,243,500 in exploration expenditures on the Sekayu block over the next three years to earn an estimated 12% working interest in the Sekayu PSC. 

A second cash payment of US$350,000 (the "Second Installment") is payable on or before March 1, 2011 provided that the Company has the right, in its discretion, to prepay such payment on or before March 1, 2010 for a reduced amount of US$270,000. 

If the Company fails to make the Second Installment, its estimated working interest in the Sekayu PSC will be reduced from 12% to 11%. Under the terms of the LOI, the Company also has the sole and exclusive right to provide financing for up to an additional 24% interest in SSE representing the remaining estimated 12% working interest in the Sekayu PSC. 

Alan T. Charuk, the President and Chief Executive Officer of CBM, has been nominated for appointment as a director of SSE, which appointment should be effective within 30 days.

CBM Asia President and CEO Alan Charuk commented on the closing of the Sekayu interests, "This transaction demonstrates our commitment and ability to identify and acquire valuable coalbed methane assets in Asia," Charuk said in a statement to TSX Ventures yesterday.

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CBM Asia acquires 48% South Sumatra Energy

CBM Asia Development Corp. announces that it has signed a Letter of Intent with Batavia Energy Inc. to acquire 48 percent of South Sumatra Energy Inc. which, together with PT Medco CBM Sekayu, holds a Production Sharing Contract for coalbed methane on a 58,349 hectare block located in the South Sumatra Basin, Indonesia.

Awarded May 27, 2008, the Sekayu Block PSC marked the first time the Government of Indonesia awarded a PSC for the exploration and development of coalbed methane in Indonesia. PT Medco Energi Internasional Tbk ("Medco"), Indonesia's leading independent oil and gas company, and operator of the Sekayu Block PSC, has forecast that the first commercial coalbed methane production will begin in 2011 and peak in six years. 

Indonesia's estimated coalbed methane resource of 453 trillion cubic feet ("TCF") of gas in place is among the largest in the world after the United States and China. The South Sumatra Basin, the largest coalbed methane basin in Indonesia, is estimated to contain in-place resources of approximately 183 TCF (Society of Petroleum Engineers, 2004).

Under the LOI, the Company will earn a participation interest in Batavia's 31.5 percent working interest in the Sekayu Block PSC, and has committed to exploration and appraisal expenditures over the next three years to determine the commercial feasibility of coalbed methane production.

"We are happy to secure this rare capital acquisition opportunity in Indonesia's rapidly emerging coalbed methane industry. As Indonesia moves to develop its large prospective coalbed methane resources for delivery to domestic and global markets, we look forward to working with our new partners in the Sekayu Block PSC where initial exploration drilling is scheduled to commence by early September 2009. This acquisition will diversify our interests in the coalbed methane sector in Indonesia and complement our already outstanding prospects in the Kutai Basin," said Mr. Alan Charuk, the Company's President and Chief Executive Officer. Successful completion of the Sekayu Block PSC test well will mark the first government approved commercial coalbed methane well drilled in Indonesia.

Closing of the LOI is subject to, among other things, completion of the Company's due diligence review, execution of definitive agreements and applicable third party consents and approvals.

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Medco profit drops 84%

Oil and gas producer PT Medco Energi Internasional Tbk reported net profit of US$9.58 million in the first half 2009, dropped 84% from the same period last year on substantial decline of sales revenue.

Medco posted net sales revenue of US$311 million, slashed 59% from US$762 million in H1 2008, mainly due to the fall of net oil and gas sales to US$227 million and free fall of net sales of chemicals and other petroleum products to US$15 million (against US$125 million).

Medco's cost of goods sold dropped 55%, while operating expenses also declined 24%. As a result, Medco booked operating profit of US$31.3 million against US$195 million in H1 29008.

Medco has total asset of US$2.07 billion as of June 30th, 2009, while its market cap as of today is US$1.1 billion. With annualized EPS of Rp62, Medco is currently traded with PE multiple 54. Expensive! 

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Areva-Medco Euro120 million PLN contract

The consortium formed by Areva's Transmission and Distribution division and PT Multifabrindo Gemilang, a subsidiary of Medco Group, has been awarded 120 million Euro contract by PT Perusahaan Listrik Negara (PLN), the state-owned power utility company.

Through this contract, Areva-Medco will modernize the Indonesian network in line with the 10,000 MW program launched in 2006. This turnkey contract includes delivery of several high voltage substations as well as underground electrical cables, in order to distribute power to the main Java cities (Jakarta, Bandung and Surabaya).

Multifabrindo is Medco's subsidiary in construction and fabrication. Established in 1983, the company operates production facility over 3 hectares of land in Krakatau Industrial Estate, Cilegon, Banten province.

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Corporate actions update

PT Pakuwon Jati Tbk will inject USD80 million into PT Artisan Wahyu using proceeds of USD110 million issued by Pakuwon Jati Finance BV to finance Superblok Gandaria project.

Pakuwon raised USD110 million from international bond issued in November 2006 with maturity in 2011 and yield 12%/year. Gandaria project is consisted of shopping center (232,484 m2), office space (99,642 m2), four-star hotel (39,154 m2), and two condo towers with 72,765 m2. Construction to start this year and completion by fourth quarter 2009. No worries about oversupply?
Meanwhile, PT Medco Energi Internasional Tbk through its wholly owned subsidiary, Medco Far East Limited/PT Medco E&P Malaka, and its partners, Premier Oil Sumatra (North) BV, have signed a Share Sale and Purchase Agreement with ConocoPhillips to acquire Conoco's 50% working interests (through CPAL, 100% owned by Conoco) in Block A Production Sharing Contract located in Aceh province for USD72 million. Medco & Premier will equally own 50% of CPAL.
In April 2006, Medco and its partners, Premier, and Japex Block A Ltd, a subsidiary of Japan Pertroleum Exploration Co Ltd, have acquired 100% shares of Mobil Block A Limited from ExxonMobil Block A Investment Limited, which was also the holder of 50% working interest of Block A PSC. Such acquisition provided Medco, Premier, and Japex working interests of Block A PSC to the amount of 16.67%, 16.66%, and 16.67%, respectively.
Acquisition of CPAL raised Medco's ownership in Block A to 41.67%, similar to Premier's.
Meanwhile, PT Budi Acid Jaya Tbk will build a 5.7 MW biogas power plant with USD7 million investment in Lampung, Sumatra.
PT Bank Negara Indonesia (BNI) Tbk estimated 35% growth in profit after tax to Rp1.9 trillion for the year 2006 on 6% loan growth.

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John Karamoy, commissioner for Petrosea

PT Petrosea Tbk has appointed John Sarad Karamoy as its new independent commissioner. Mr Karamoy, 70, was president commissioner of PT Medco Energy International Tbk in the period of 2001-2006.

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Bumi Resources insider trading investigation

Jakarta Stock Exchange (JSX) has launched an insider trading investigation on PT Bumi Resources Tbk, but no such initiatives taken for Medco and Energi Mega Persada shares trading. Investigation is focused on shares trading prior to the cancellation of mega deal USD3.2 billion between Bumi Resources and Renaissance Capital in August.

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Sampoerna is in talks to enter Medco

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Panigoro, Encore, & Medco

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Lapindo to Freehold, hold on!

I bet the following information would add more confusions. Today PT Energi Mega Persada (EMP) Tbk disclosed the selling price of Lapindo Brantas Inc to Freehold Group is US$1 million. Compare that with USD2 when it plans to sell to Bakrie Oil. No explanation why now USD1 million. But the following might answer that.

Under the sales & purchase agreement with Freehold (BVI), EMP has no right over-riding-royalty interest, no exclusive right to buyback the shares of KEL and PAN which control Lapindo Brantas Inc, no option to buyback KEL & PAN, and no obligation to provide technical assistance to buyer.
The SPA with Freehold, controlled by Singapore-registered Alsace Pte Ltd, set EMP free from any claim or charges, including those related to Banjarpanji mudflow in Sidoarjo, East Java. Nice!
When asked by JSX what is the relationship between Minarak Labuan Co (L) Ltd, a vehicle company owned by Bakrie, and the divestment of KEL & PAN to Freehold, EMP didn't clearly answer that. JSX asked that because Minarak stated last week that it had committed to provide funds needed by Lapindo Brantas to serve its obligation under Presidential Decree No. 13/2006.
If we should believe in EMP's statements that no relationship between Freehold and Bakrie, we must say that Minarak Labuan is a generous company. It's strange as well to understand why would someone want to invest USD1 million only to take other people's responsibility which could cost hundreds of million USD?
Asked about who will take the responsibility over the mudflow, EMP said it should be shared by three companies (Lapindo, Medco, and Santos) based on operating agreement signed in 1992. Lapindo owns 50% working interest in the Brantas PSC, with Medco and Santos hold 32% and 18% respectively. Medco declined to take the responsibility and filed Lapindo to International Arbitration Body in New York instead.

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Cost recovery claims & US$2.5bn state loss

The Supreme Audit Agency (BPK) found potential loss to the state of US$2.5 billion of cost recovery claimed by five oil and gas contractors, Tempointeraktif.com reported.

BPK has just audited five of the contractors. They are Chevron Pacific Indonesia, ConocoPhilips Grissik, PetroChina Jabung, Medco Rimau and Pertamina-BSP. BPK blamed on Upstream Oil and Gas Regulatory Body (BPMigas) for the potential losses as the agency is seen non decisive enough. BPK also asked government to review the production sharing contracts (PSCs) to have them clearly state what costs could be recovered.

Details are as follows:
Charges on interest recovery:
- Chevron: USD4.95 million
- Conoco: USD170.4 million
- PetroChina: USD23.98 million
Third party contracts:
- GSEA contract between Conoco & Chevron: USD5.46 million
- Electricity supply contract between BOB Pertamina & Chevron: USD20.04 million
- Electricity supply contract between Chevron & MCTN: USD210 million & USD1.23 billion
- Duri oil-gas exchange between Chevron & Conoco: USD4.2 million

OTHERS:
- Collection station modification at Chevron: USD33.979 million
- Investment credit charges for gas operation at Conoco: USD379.5 million (no legal grounds)
- First Tranche Petroleum at Conoco: USD442.19 million during 1997-99 & 2000-2004 (no legal grounds)

Unfortunately none of the companies audited clarified the findings so far. Considering the amount that big, if they're true, so much at stake for these oil giants, especially Chevron & Conoco, both listed in the world's stock exchanges. The scope of audit, I think, has been limited to certain operation of these giants and that would potentially lead to another major findings. It's interesting to see what will be their responds.
BPMigas, as reported by Tempointeraktif.com, simply said it would follow-up the findings and cross-check them with the contracts.
To my surprise, even BPMigas admitted, donations from these oil/gas contractors made to tsunami victims could be charged as cost recovery item as long as it's stated in the contract. Such donation could be considered the company's corporate responsibility & community development program and it's reimbursed.
To me, it isn't fair at all. These companies got so much publication when they gave the donation, perceived as good citizens, and have led people to think how generous they are while actually it's the state/people who pay for it through cost recovery scheme.

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Chevron in Indonesia: A Wakeup Call (2)

I'm so glad to read an article written by Orin Basuki, reporter of Kompas, the largest newspaper in Indonesia, under the title...chasing the truth to San Ramon. The article is basically based on an audit report completed by Supreme Audit Agency (BPK) on PT Chevron Pacific Indonesia, a subsidiary of Chevron Corp, USA.

The article is centered on cost recovery, a term in oil and gas business in which contractors such as Chevron claim the costs to government/state.
BPK found the following irregularities at Chevron:
1) Caltex polytechnic Riau: Cost recovery claimed US$6.56 million. (So the education & training facility is not a donation of Chevron, it's a state-funded institution)
2) School cost: Cost recovery claimed US$6.29 million for 2004 & 2005. (Again, this is no corporate social responsibility/CSR, it's a state-sponsored)
3) Donation to international school: Cost recovery claimed US$5.94 million. (This isn't a CSR for God sake)
4) Community development & community relationship: Cost recovery claimed US$1.5 million and US$1.47 million respectively. (Not CSR, state-funded activity)
5) Interest recovery: US$4.97 million (this should not be charged as cost recovery item)
6) Modification of collecting stations US$33.98 million: No benefits for the operation.
7) Materials worth US$18.92 million, no gain, charged as cost recovery.
8) Electricity and steam supplied by PT Mandau Cipta Tenaga Nusantara have been doubted the fairness and would cost the government US$210 million and loss to the state at US$1.23 billion.
BPK auditors admit there should be a long list of items that deserved cost recovery, but government's position in most contracts is so weak that contractors tend to mark up cost recovery and charge everything in the mechanism. "Even they charged the cost to pay foreign teachers for expatriate's children or scholarship for children of local staffs. In the end, cost recovery is about the same with all the company's operational costs," Arief Handoko, BPK auditor told Kompas.
Worse, as explained by J Widodo Mumpuni, chief auditor on Chevron, government's position in the contracts is so weak that it coudn't blame contractors for the markups even though they put the country at huge financial losses.
This is what I mentioned in my previous article Chevron in Indonesia: A Wakeup Call.
I hope Kompas would continue the publication of other audit results over oil contractors such as ExxonMobil, ConocoPhillips, Petrochina, CNOOC, Medco Energi, Energi Mega Persada, Pacific Oil & Gas, Santos, Star Energy, Pertamina, Petronas, etc.
Not just that we're aware of how these contractors made lots of money from the country's resources, but we know how careless our government officers (including BP Migas) in performing their role as regulator and supervisor. With that, we know what we should fix right now.

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Energi spin-off Lapindo to Bakrie Group

As reported earlier, PT Energi Mega Persada Tbk confirmed the plan to spin-off Lapindo Brantas Inc which is currently at the center of an unstoppable hot mudflow in Porong, East Java, to Bakrie Group.

Finance director of Energi Yuli Soedargo stated in a press release to Detik.com that the divestment "would hopefully help Energi maintain its healthy operation and financial performance."
Energi share price had dropped almost 24% since the first eruption of mud at Lapindo's Banjar Panji-1 drilling well in May 29 and no sign of immediate end to the disaster that forced thousands of people left their homes vacant (covered by mud), thousands lost their jobs, and cost the company millions of US dollar. Several of the company's executives, contractors, and sub-contractors involved in the drilling activity have been named suspects by East Java police for environmental pollution case. Gov't had asked Bakrie family to take full responsibility in handling the disaster despite calls to have government share the burdens.
Under the spin-off plan, Energi would divest Kalila Energy Ltd and Pan Asia Enterprise (both registered in Hong Kong) which co-own 99% shares at Lapindo Brantas Inc. Lapindo Brantas is the operator of Brantas PSC (50% participating interest) with Medco Energi and Santos held 32% and 18% respectively.
No details available on how much Bakrie Group would pay the two companies. Neither available the impact on Energi's portfolio considering Brantas PSC's contribution in the past.
The spin-off plan, while criticized by many of washing-hands operation, would pave the way for Energi's plan to merge with PT Bumi Resources Tbk. Bumi itself is struggling to convince investors about its future after the collapse of US$3.2 billion divestment of coal mines assets (PT Kaltim Prima Coal, PT Arutmin Indonesia, and Indocoal). Bumi is scheduled to have analyst meeting on Wednesday to explain its financial performance in first half which some says below expectations. Earlier reports said Bumi's EBITDA for first half 2006 was only US$104 million. The company has been rumored of recorded net loss of US$1 million in the period. But others says Bumi would come up with more promising figures in the analyst meeting today.

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The Richest Indonesians & The Ironies

What a coincidence! Out there, Dow Jones quoted Forbes Asia's rich list, naming Sukanto Tanoto (owner of Raja Garuda Mas/RGM) as its Indonesia richest. At home, newspapers quoted SOE Minister Sugiharto pledge his support for state bank PT Bank Mandiri Tbk to take legal action toward recalcitrant debtors. Mandiri had named RGM as one of the debtors with no good faith.

While it's difficult to verify the exact figures, Sukanto's wealth according to Forbes reached US$2.8 billion, well above Putera Sampoerna (2.1), Eka Tjipta Widjaja (2), Rahman Halim (1.8) or R. Budi Hartono (1.4) and Aburizal Bakrie (1.2). In the previous list, Forbes named Halim as Indonesia's wealthiest while Sukanto was not even in the top five list. Wondering how the Forbes list has changed so significantly in the last few months.
Detik.com reported Sukanto is still in the police's fugitive list. But I'm not sure whether he is listed there still.
It's true that Sukanto once named a fugitive. His name also linked closely with Unibank which was closed down in 2001 but none held responsible for third party liabilities in the bank. The case isn't closed yet.
Sukanto's wealth mainly derived from palm oil business. He has pulp & paper empire, and recently oil and gas as well.
Surprisingly, no Sjamsul Nursalim in the top 10 list. Riady family, Tommy Winata, and Mum'in Ali Gunawan are out of top 10 as well. Riady family is partnering with Forbes for Indonesian edition, scheduled early next year.
Like it or not, agree or disagree, Forbes list could help Indonesia's tax officers chasing their tax payments or Bank Mandiri's bargaining position on bad loans. The list also useful for politicians, regent, governor candidates, or hopeful president candidates.
If you follow years of Forbes’ rich list, there is no significant change on the names of Indonesian richest. The difference is only on the amount of wealth & the rankings. The wealthy Indonesians could be categorized in several groups based on how they got their fortunes.
First, cigarette groups. We have Sampoerna family (even though they sold out the cigarette business to Phillip Morris), Wonowijoyo (Gudang Garam), Hartono (Djarum), and Peter Sondakh (Bentoel).
Second, forestry & plantation groups. We have Eka Tjipta Wijaya family (Sinar Mas Group), Sukanto Tanoto (Raja Garuda Mas), & Prajogo Pangestu (Barito).
Third, consumer goods. We have Salim and Wings Group.
Fourth, energy & engineering groups. We have Bakrie family, Panigoro (Medco), Kris Wiluan (Citra).
Fifth, property group. In this group we have Tan Kian (Dua Mutiara), Haliman Trihatma (Podomoro), Tommy Winata-Sugianto Kusuma (Artha Graha), Riady Family (Lippo).
Sixth, manufacturing. In this group we have Nursalim (Gajah Tunggal) for example.
So, mainly they got the fortunes from Indonesia’s rich & cheap resources (natural & human).
While most of these groups have expanded overseas (mainly China, India, or Brazil), Indonesian operations are still their main source of wealth. Most of these conglomerates were hurt by financial crisis, with the exception of cigarette groups.
But they have recovered in the last few years, thanks to the generosity of Indonesian people, the taxpayers. The state bailed out their bad debts. Some surrendered assets, but others managed to escape the financial responsibility easily.
Salim Group, for example, surrendered assets in 107 companies to pay around Rp56 trillion (US$6 billion) debt following the turmoil at Bank Central Asia (BCA). Government sold almost all the pledged assets with recovery rate of around 35%. Nursalim also did the same to pay his Rp28 trillion (US$3 billion) debt, with lower recovery rate.
Government also spent almost US$2 billion to bail out Bank International Indonesia (previously owned by Eka Tjipta’s Sinar Mas, currently controlled by Temasek).
That’s why there is almost no significant change in names listed in Forbes, the latest edition and in 1990s. The fact that Sukanto & Eka Tjipta are listed as number one and third in the ranking sparked criticism about how they created the wealth.
Both Sukanto & Eka Tjipta have strong pulp/paper & plantation (mainly crude palm oil) businesses through APRIL (RGM) Holdings & Asia Pulp & Paper (APP) respectively. Both groups have been the subject of continues allegation of environmental groups over massive deforestation in Sumatra Island.
WWF report few months ago said that APRIL and Asia Pulp & Paper (APP), the Indonesian paper producers, are accelerating the deforestation of Sumatra's jungles in spite of a bid to portray themselves as green.
According to the report, APP has been responsible for about 80,000 hectares of natural forest loss every year, equivalent to roughly one-half of the Indonesia province of Riau's annual forest loss since 2002. As of 2005, the company controlled nearly one-fifth, or 520,000 hectares, of the natural forests left on Riau's mainland. All these forests are under threat, as are any additional forests that APP acquires in its quest to fill its wood supply gap and expand pulp production.
WWF didn't publish the same press release on APRIL. But WWF Monitoring Brief June 2006 elaborated the organization's analysis on APRIL's activities.
Jikalahari (Riau NGO alliance) investigators have found evidence that APRIL's mills accepted wood from legally questionable third party source as late as May 2006. WWF admitted in the report that it calls APRIL to stop sourcing timber from this area until completion of the government legal verification process.
One NGO leader wrote cynically in Indonesian media recently that if you want to be rich, do the forestry business in Indonesia like Sukanto & Eka Tjipta. Other names listed in the Forbes report also have been regularly accused of various illegal practices such as fraud on reforestation funds or involvement in drugs & narcotics trading, gambling operation, or fishy deals with government and the military. But none of them convicted or worse various interest groups make huge chunk of money from the allegations on these richest men.

/Named a Suspect/
Apart of environmental concerns, the Forbes report has also been responded by Indonesia’s largest lender (by asset), Bank Mandiri, which happens to be the largest lender to Sukanto’s RGM. The bank has, several times, classified RGM as the debtor without good faith in settlement of almost US$500 million debts. Mandiri demands an increase in debt installment following the huge jump in pulp prices worldwide.
The day Forbes announced the rich-list, Indonesian minister for state-owned enterprises (Mandiri’s shareholder) pledged his support for Mandiri’s plan to take legal action against recalcitrant debtors, especially RGM. RGM denied all the charges arguing it follows the debt restructuring agreed upon few years ago.
A director at Mandiri was quoted by Indonesian newspapers saying, “You may rich, but pay your debts,” responding the list.
But it’s the police who surprised many when it announced the plan to reopen the investigation on Sukanto, not for the alleged environmental crime or his debts at Mandiri, but on a suspected banking crime that almost untouched in five years.
Just days after Forbes published the list, Indonesian police announced that it has resumed the investigation on Sukanto, named a suspect in a banking crime few years ago. Police declared that the case, involving Unibank---a bank initially owned/controlled by Sukanto and his wife Tinah Bingei, has been reopened after five years of almost no significant progress in investigation despite the fact that Sukanto had been named a suspect.
Unibank was closed down in 2001 leaving the state paying all third party liabilities (Rp3.9 trillion, almost US$400 million) with no shareholders held responsible. Sukanto was named a suspect on irregularities of export L/C worth US$230 million.
"Based on a meeting between Police Chief and Attorney General in August 2006, Sukanto's case has to be reopened and his status is still as suspect. The case is being handled by police team for corruption crime (Tipikor)," Paulus Purwoko, chief of public relations division at National Police Headquarter as reported by Indonesian media.
The sudden announcement failed to surprise the media at the time of eroding trust on the country’s campaign to fight corruption. Many raised the question, would the police be serious this time? Why the police reopen the case after so long? Could this be just part of ‘political’ game?
"Whatever the results might be, the reopening of the case has made Sukanto, well-known for his generosity overseas, shivering," a journalist from respected magazine commented the move. So far, police has not confirmed yet on when they would summon Sukanto for investigation.
The fellow journalist mentioned about Singapore-INSEAD's Tanoto Library or Carnegie Mellon's Tanoto Professorship. The owner of Raja Garuda Mas (RGM) also established Tanoto Foundation, which provide scholarships.
It’s not about his donations that make people doubt the investigation, but mainly the power politics in the country’s corrupt-legal system. Police might finalize the investigation, but state prosecutors may drop the case like what’s happened with the recent corruption allegation on Eddie Widiono (state-owned electricity company PLN).
Other intriguing issue is the unavailability of legal cooperation between Indonesia and Singapore. While Sukanto normally come to Indonesia, he stays in Singapore. “The problem, we have no bilateral agreement on this,” sighed the deputy attorney general Basrief Arief, who is also the Chief of Corruptors Hunting Team.
Besides, the five-year time lag since the Unibank’s closure in October 2001 is critical especially when it comes to witnesses. That’s why Attorney General’s Office said they would start the investigation all over again. This is clearly a big test for the country’s tattered image on corruption eradication campaign. Without serious efforts to end bad governance in Indonesian business, we can’t expect a cleaner sheet in the future rich lists.

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Lapindo disaster: Energi would runaway?

Bisnis Indonesia run a headline titled...Hot mudflow crisis cost the company, Energi spin-off Lapindo...which means PT Energi Mega Persada Tbk would runaway from all the responsibilities of the disaster from Lapindo Brantas Inc's operation. What?

Quoting an executive who claimed familiar with the plan, the newspaper reported the spin-off would be completed before the planned merger of Energi and PT Bumi Resources Tbk. Lapindo Brantas Inc is the wholly-owned subsidiary of Energi and has 50% shares in Brantas PSC with Medco Energi and Santos as partners.
The mud flow started out in May 29 at Brantas PSC's Banjar Panji-1 well where Lapindo is the operator. Lapindo claimed the disaster had cost the company some US$70 million. Some predicts the cost would goes up to US$380 million.
Energi's investor relation officer Herwin W. Hidayat declined to confirm the spin-off saying the company is reviewing some strategies to minimize the impact of Lapindo's disaster. "Our focus is to stop the mud flow," he said.
Why spin-off? To protect the shares price, Bisnis source said. So, it's like you're defending a father who simply give away his son in trouble even though the son had contributed a lot in the past. What a family!

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Matindok LNG project so far, so so!

State-owned oil and gas company PT Pertamina (Persero) announced another plan yesterday on its long-delayed liquefied natural gas (LNG) project in Central Sulawesi with Matindok block at the center of it. But the project has been downsized significantly.

As reported by Tempointeraktif.com, Pertamina has two potential partners in the Matindok LNG project, Mitsubishi and Australia Energy. This week, Pertamina would announce the LNG buyers to confirm the project's kickoff. Buyer would be the key financing source for the project (capable to produce 2.5 million tones/year of LNG). Total investment would be US$600 million, of which Pertamina will contribute up to 20%.
The discovery of Donggi field, Matindok and Senoro in Central Sulawesi was initially considered giant with estimated reserves of 22 trillion cubic feet (TCF), lot bigger than Arun in Aceh. In January 2003, Pertamina's then president Baihaki Hakim announced what he called the milestone for the company of a plan to build two LNG trains with US$1.7 billion investment plus petrochemical complex and gas to liquid (GTL) plant in the area.
Months later, Pertamina decided to delay the marketing of the gas on after test wells showed less gas than estimated. But in June 2003, Pertamina and Sri Gas notified Rentech (associate company of Sri Gas) that it has third-party interest to funding 16,000 bpd GTL plant in Matindok.
Pertamina sends stronger signal of less gas reserves in November 2005 when then deputy president of Pertamina Mustiko Saleh admitted that Pertamina would build the LNG plant in Senoro with PT Medco Energi International Tbk. One LNG train only, Mustiko said that time, with Senoro field (Pertamina 50% and Medco 50%) and Matindok (Pertamina 100%) as the source of natural gas for the LNG plant. Combined reserves estimated in the three fields (Senoro, Matindok & Donggi) was 9.6 TCF.
So, what about the petrochemical complex and GTL project? No news so far.

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Sumatra power cuts: The Big Irony

Sumatra Island is home to vast energy resources. Natural gas, crude oil, coal, geothermal, tidal energy, you name it. So it's a big irony that the island has been suffered regular power cuts in many years. What's wrong?

Let's start with Aceh in the northern tip of the island. It sits over depleting natural gas, after three decades of massive extraction at ExxonMobil's gas fields to produce liquefied natural gas (LNG) for power generating companies in North East Asia, mainly Japan. Two gas-fed ammonia and urea plants (AAF is being liquidated and one of PIM's plants) have been dormant for many years on unavailability of natural gas supply.
Down to North Sumatra, there are some hydropower plants, but decreasing water debit had cost lower generating capacity for almost a decade as the surrounding natural forests have been destroyed significantly to supply the pulp plants nearby.
The area's electricity demand is somewhere between 1,300-1,500 MW, with Belawan gas-fired as the largest supplier (1,036 MW) and some small hydropower plants. Asahan Hydropower has 600 MW capacity, but mainly absorbed by Inalum (aluminium smelter) and suffered significant drop of water level. Some projects, including Bukaka's Asahan hydropower and Medco's Sarulla will take few years to come to light.
In West Sumatra, almost all hydropower plants have been suffered major drop of water
level and underdeveloped geothermal resources.
At the heart of the island, pipelines have transported natural gas to Singapore. Two pipeline projects are underway to transport more natural gas to Java island. Riau in central Sumatra is home to the largest crude oil production site which contributes more than 40% of the national output. Yet, Pekanbaru, the capital city of Riau recorded power cuts many times a day.
Down to South Sumatra is the home of natural gas, oil and coal production centers. But Palembang and its neighbour city Bandar Lampung have experienced similar power cuts with Pekanbaru.
On top of these, Sumatra would be the future source of what we call green energy or biofuel as most of crude palm oil (CPO) plantations are located in the island. The problem, we give so little attention to boost power generating capacities in this island. Our focus is clearly too much on Java island, an area heavily rely on Sumatra for energy sources and at the same time we neglect the island's demand for energy. As a result, Sumatra recorded power cuts in 78 days last year. It's decreased from 349 days in 2002. But it's still too often, isn't it?
To add people's missery, there are 10 power plants are inactive, mainly gas-fired, and most hydropower plants only operates at 60% of their installed capacity.
This week, Medco starts to supply additional 55 MW gas-fired capacity in Batam Island, but that would not be enough. Efforts to build coal-fired plants in the island have been slow on poor government responds. Well, how could we promote redistribution of economic growth and wealth if we keep neglecting this island?

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H1 2006 performance of listed companies

Indonesian listed companies reported mix results in their first half 2006 performance with majority of companies reported lower net profit on poor margin.


Sampoerna, sales +29.4%, profit +20.8%
Gudang Garam, sales +2.8%, profit –49%
BAT Indonesia, sales –4%, loss Rp16bn against profit Rp22bn

Unilever, sales +13%, profit +8.9%
SMART, sales +13%, profit +2,550%
Cahaya Kalbar, sales +193%, loss –97%
PT Perkebunan Nusantara III, sales +16.7%, profit +8.3%

Tunas Baru Lampung, sales –19%, profit +1,172
Budi Acid Jaya, sales +8.4%, profit +73.9%
Suba Indah, sales –90%, loss –90%

Bimantara, sales +22%, profit +2,550%
RCTI, sales +4.9%, profit +4%

Adhi Karya, sales +40.5%, profit –87%
Tigaraksa Satria, sales +14.5%, profit +185%

Astra International, sales –13%, profit –38%
Astra Otoparts, sales –20.4%, profit –28.9%
Astra Graphia, sales +14%, profit +50%
Prima Alloy, sales +17.8%, profit –81%

Semen Gresik, sales +24.9%, profit +106%
Kalbe Farma, sales +3.1%, profit +27%
Enseval, sales +2.4%, profit –6%
Excelcomindo, sales +48.5%, profit Rp358bn (against loss of Rp52bn)
Samudera Indonesia, sales +4%, profit –80%

Medco Energi, sales +26.5%, profit +17%
Bukit Asam, sales +10%, profit –9%
United Tractors, sales +16%, profit –3.4%

Gajah Tunggal, sales +14%, profit -38%
Tri Polyta, sales +15%, profit Rp92bn (against loss of Rp367bn)
Berlian Laju Tanker, sales +22.5%, profit +49.4%
INCO, sales +1.4%, profit -16.9%
AQUA, sales +1.6%, profit +6%

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Conflicting statements over Lapindo disaster

The newly appointed director general for oil and gas at the ministry of energy Mr Luluk Sumiarso said yesterday that Lapindo Brantas Inc could claim the cost incurred from hot mudflow disaster in its Banjar Panji-1 drilling to government. His statement is completely the opposite of Upstream Oil and Gas Regulatory Body (BP Migas) chairman Kardaya Warnika who rejected such claim. So, who's right?

Both officers quoted the contract as the rationale behind their statements. I would say it's just way too premature to make such statements as it's not clear yet whether there were miss of conducts during the drilling that caused the disaster.
Luluk also defended Lapindo saying its partners (Medco and Santos) should be held responsible for the disaster as well while Medco rejected to take that arguing Lapindo is the operator. On this issue, would be better if Lapindo, Medco & Santos disclosed their agreements on operatorship.

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