Overlooked Challenges in Indonesian

Geothermal Development

PT Supreme EnergyJune 5, 2014

IIGCE 2014Jakarta Convention Center

The concessions are along the Great Sumatra Fault (GSF)

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PT Supreme Energy Muara LabohPPA signing March 2, 2012

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PPA for Muara Laboh and Rajabasa were signed on March 2, 2012 with electricity tariff of :- Muara Laboh : US$ 0.094 per kWh- Rajabasa : US$ 0.095 per kWh

Muara Laboh Project

Construction of 14 km access road

Muara Laboh Project

Preparation of drilling camp, Explosive bunker and Pipe casing storage

Muara Laboh Project

Construction of Access road to the first Well Pad

Muara Laboh Project

Drilling starts on September 2012

Geothermal system was found in Muara Laboh, West Sumatra

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6(six) wells exploration program completed with resource found around 60 to 95 MW

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The concessions are along the Great Sumatra Fault (GSF)

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PT Supreme Energy Rantau DedapPPA signing November 12, 2012

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PPA for Rantau Dedap was signed on November 12, 2012 with electricity tarif of US$ 0.0886 per kWh

Construction of about 34 km of access roads

13Endikat River Ford

A road bridge has to be built across major river

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Stone bridge is built across major ravine -Mechanically stabilized earth (MSE) Wall

Extensive earth work were performed to build an MSE Wall

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`river

Before After

~23m

2(two) Stone bridges across ravines were built to reach the first well pad

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Spud date for first well drilling commenced on February 3, 2014

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Drilling of 2(two) wells have been completed with 5(five) to 7(seven) wells exploration program

The concessions are along the Great Sumatra Fault (GSF)

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Forestry permit issued on April 2014 in conjunction with forest for community program

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Overlooked challenges in developing Geothermal Power plants in Indonesia

Standard challenges1. Electricity tariff – New tariff2. Government guarantee (BVGL) – MOF Template developed3. Forestry permit – New Geothermal Law4. Land Acquisition - 5. Community issues -

Overlooked challenges6. Project Management capability for infrastructure

development7. Other Permits and Licenses8. Subsurface engineering capabilities 9. Sufficient capital for exploration (Equity)

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Develop harmonious relation with all local stakeholders (formal & informal leaders, Directly Affected Villagers) and work closely with security

apparatus to utilize “soft power”

Finding hot temperature system is related to well pad location

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+ + + + + + + + + + + + + + + + + + + + + + + + + + + + ++ + + + + + +

FumarolesH2O,CO2,H2S

Acid – SO4, Pools

Steaming Ground Na–HCO3– SO4,Springs

NaCl Springs

Magma Source H2O,CO2,SO2, HCl

dilution

Lateral outflow of NaCl brine

-4

-3

-2

-1

SL

+1

+2

km

200 oC250 oC

300 oC

Cap Rockvapor zone

upflow

Typical High Grade

Typical Marginal

Volcanic Arc Geothermal System

In many cases, higher elevation has better chance compared to low elevation

Making access roads to reach high elevation pads is a civil engineering challenge

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Crossing ravines and valleys in remote jungles needs special engineering and construction feat

24Typical Mechanically Stabilized Earth (MSE) wall to cross deep ravines

Near Geothermal system, there are possibilities of soft soil condition (Geothermally altered clay)

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Various technology to improve soil condition needs to be implemented such as the use of Geogrid, Geotextile, Lime stabilizer, Clean set cements

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Building infrastructure for exploration program needs experienced project management capabilities

Overlooked challenges in developing Geothermal Power plants in Indonesia

Standard challenges1. Electricity tariff – New tariff2. Government guarantee (BVGL) – MOF Template developed3. Forestry permit – New Geothermal Law4. Land Acquisition - 5. Community issues -

Overlooked challenges6. Project Management capability for infrastructure

development7. Other Permits and Licenses8. Subsurface engineering capabilities 9. Sufficient capital for exploration (Equity)

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Develop harmonious relation with all local stakeholders (formal & informal leaders, Directly Affected Villagers) and work closely with security

apparatus to utilize “soft power”

Number of Permits and Licenses for a Geothermal investment

• General corporate : 14 • Operational : 15• Land related : 3• Environmental related : 6• Manpower related : 6• Safety related : 12 Total : 56

Current environmental regulation implements similar treatment as Oil & Gas drilling cuttings

Need coordination help between between Ministry of Energy and Mineral resources (Director General of EBTKE) with Ministry of Environment to

differentiate between Oil & Gas drilling cuttings and Geothermal drilling cuttings

Burn

The needs of EBTKE certification for ALL earth moving equipment

To develop exploration drilling infrastructure needs about 50 to 70 Earth moving equipment. Each equipment currently has to be certified by Director General of EBTKE. Crane, Drilling rig and equipment certification are accepted but earth

moving equipment needs reconsideration on the necessity of certification

Develop harmonious relation with all local stakeholders (formal & informal leaders, Directly Affected Villagers) and work closely with security

apparatus to utilize “soft power”

Overlooked challenges in developing Geothermal Power plants in Indonesia

Standard challenges1. Electricity tariff – New tariff2. Government guarantee (BVGL) – MOF Template developed3. Forestry permit – New Geothermal Law4. Land Acquisition - 5. Community issues -

Overlooked challenges6. Project Management capability for infrastructure

development7. Other Permits and Licenses8. Subsurface engineering capabilities 9. Sufficient capital for exploration (Equity)

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Requirement for Subsurface and drilling engineers in a Geothermal development

Requirement for 1(one) exploration area for 24-hour continous drilling campaign :• Geologist, Geochemist, Geophysicist – 3 to 5 engineers• Numerical Modeler – 1 to 2 modeler• Well testing engineers – 2 to 3 engineers• Drilling managers & engineers – 3 to 5 engineers

Experienced engineers salary :• Subsurface engineers – US $ 5.000 to US $ 15.000 per

month with transfer fee amounting to US $ 100.000• Drilling engineers – US $ 20.000 to US $ 25.000 per month

Limited engineers resulting in hijacking of employees

Cooperation between Government, Industry, and University

• Develop of a geothermal education capacity expansion roadmap

• Provide grants for Masters and PhD Students• Conduct field trips• Offer “Distance Learning Courses”• Conduct monthly seminars on Geothermal energy • Develop short courses and workshops• Establish a technical program exchange 

Proposed future cooperation program

1. Generic engineers accelerated program (max 1 year) - for 1 to 5 years experienced engineers - Geologist, Numerical modeler, Well testing engineers, Drilling engineers2. Specialist engineers accelerated program (max 2 years) - for 5 to 10 years experienced engineers - Geophysicist, Geologist, Geochemist, Numerical modeler

Overlooked challenges in developing Geothermal Power plants in Indonesia

Standard challenges1. Electricity tariff – New tariff2. Government guarantee (BVGL) – MOF Template developed3. Forestry permit – New Geothermal Law4. Land Acquisition - 5. Community issues -

Overlooked challenges6. Project Management capability for infrastructure

development7. Other Permits and Licenses8. Subsurface engineering capabilities 9. Sufficient capital for exploration (Equity)

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Develop harmonious relation with all local stakeholders (formal & informal leaders, Directly Affected Villagers) and work closely with security

apparatus to utilize “soft power”

Histogram of capacities of worldwide productive wells from 869 wells – GeothermEx data

Better economics

0 10 20 30 40 50 60 70 80 900.0

50.0

100.0

150.0

200.0

250.0

300.0

350.0

400.0

Number of Wells Drilled

Cum

ulati

ve W

ell C

apac

ity (M

W)

Average 4.9 MW per well

Kamojang Field, West Java, Indonesia (after Sanyal and Morrow, 2011)

Required equity for Geothermal explorationis about US $ 1 million per MW target

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For 60 MW Power plant Project financing :• Lender would need at least 50 % steam at well head• 30 MW steam means about 6(six) wells each at 5 MW• Exploration drilling for 6 wells x US $ 7 million $ 42 million• Civil infrastructure cost $ 20 million• Drilling casings, Master valves, Pump and Pipings $ 5 million• Required equity at least US $ 70 million

Clean Technology Fund Solutionto be implemented for Rantau Dedap

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US $ 50 million

Summary of challengesRecent solutions and also Proposed solutions

Standard challenges1. Electricity tariff – New tariff2. Government guarantee (BVGL) – MOF Template developed3. Forestry permit – New Geothermal Law4. Land Acquisition - 5. Community issues -

Overlooked challenges6. Project Management capability for infrastructure development

– Prepare and recruit experienced Project management team7. Other Permits and Licenses – Simplify un-necessary permits8. Subsurface engineering capabilities – Accelerated education9. Sufficient capital for exploration (Equity) – CTF fund

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Develop harmonious relation with all local stakeholders (formal & informal leaders, Directly Affected Villagers) and work closely with security

apparatus to utilize “soft power”

Thank you for your attention