The week in review: Summits, pledges and reality

Vincent Lingga |The Jakarta Post | Editorial | Sun, 06/24/2012 7:18 AM 

Leaders of the G20 have pledged to take action to boost weakening world economic growth and support moves by eurozone countries to move toward a banking union to restore stability to the financial system, but they offered little new concrete aid.


The communiqué issued earlier this week after two days of talks in the Mexican resort of Los Cabos appeared to herald a shift in favor of the need to stimulate growth and will now put the focus on the summit of EU leaders later next week.

The G20 leaders appeared to recognize the risk that eurozone fears could spark turmoil across financial markets in the coming months, pledging to inject an extra US$456 billion into the International Monetary Fund to act as a firewall against further financial contagion.

They voiced support for the eurozone to take steps toward greater financial integration of the 17-member single-currency bloc, such as banking supervision, bank resolution and recapitalization, and deposit insurance.

The leaders vowed not to erect new trade barriers until 2014 to foster global growth.

However, the International Chamber of Commerce (ICC) strongly criticized the G20 leaders, pointing out that while the world economy was experiencing the worst crisis of the last 60 years, multilateral talks had stalled and protectionist measures had proliferated.

ICC Secretary General Jean-Guy Carrier quoted a research report of the Global Trade Alert during the G20 Business Summit in Los Cabos on Monday showing that the world’s richest developed and emerging economies had added about 225 protectionist measures over the past two years alone.

The rise in protectionist measures was also amply documented in recent detailed reports, prepared jointly by the World Trade Organization (WTO), the Organization for Economic Cooperation and Development (OECD) and the United Nations Conference on Trade and Development (UNCTAD) at the request of the G20.

Anyway, most analysts have from the outset not put too much importance on the G20. After its widely recognized success as a fire fighter at the time of the financial crisis about three years ago, many observers have criticized the G20 forum mostly as a talking shop to let policymakers understand what their counterparts elsewhere are up to and why.

But then while there is a gap in global economic governance at leadership level, the G20 is still seen as best-placed to fill that space, one structure that people look to for guidance.

No wonder, many did not expect much from the gathering this week of global leaders, development experts, bankers, academics and activists in Rio de Janeiro held immediately after the G20 summit to celebrate the anniversary of the landmark Earth Summit of 1992.

The conference tried to address the linked problems of poverty, hunger, energy shortages and environmental degradation but the big gathering seemed to be overshadowed by economic and political crises around the world.

There are few expectations for concrete action or pledges of new aid to developing countries. The absence of key leaders from developed countries dashed the hopes for more concrete results.

Delegates said the constraints of the still-faltering global economy had dampened hopes and refueled the conflict between industrialized and developing countries that had hobbled international development and environment talks for years.

But Indonesia’s President Susilo Bambang Yudhoyono, one of the leaders attending the meeting, seemed not to be discouraged by the skeptics. He was instead still optimistic that the Rio summit would come out with a lot of firm action programs.

Yudhoyono briefed delegates from more than 190 countries on Indonesia’s programs to stop deforestation through a two-year moratorium on new permits for logging and exploitation of peat land in cooperation with the Norwegian government that pledged $1 billion in funding.

“We also launched a nationwide campaign to plant trees, which in the last two years have resulted in 3.2 billion trees being planted. We did this out of our own volition, but we also expect the world to support our efforts beyond rhetoric and finger pointing,” he said.

However, most environmental NGOs in Indonesia criticized Indonesia’s poor progress in reforming its forestry sector as deforestation has continued, thereby jeopardizing its campaign to reduce carbon emissions by 26 percent by 2020.

Even Norway’s Environment Minister Bard Vegar Solhjell was quoted by Reuters as observing that the moratorium itself would not be sufficient to achieve Indonesia’s climate change mitigation.

The $1 billion Norway has promised under the deal is contingent on policy change and proven emissions reductions from the forestry sector.

The conference, formally titled the Conference on Sustainable Development, but more popularly known as Rio+20, tried tackling big questions such as protecting the world’s forests and fisheries, weaning the world off fossil fuels and encouraging farming and economic growth that does not destroy the natural environment.

As Indonesia participated in the two important summits abroad, the nation witnessed an Indonesian Air Force Fokker F-27 aircraft crashing into the ground at the Rajawali military housing complex, near the Halim Perdanakusuma Airbase in East Jakarta on Thursday afternoon. All seven crew members and three civilians on the ground died.

Also on Thursday, the West Jakarta District Court handed down a 20-year prison sentence to Umar Patek for illegal possession of firearms and explosive devices and chemicals, premeditated murder in the 2002 Bali bombing and the 2000 Christmas Eve church bombings in Jakarta.

Read full post »

Floating regasification unit improves LNG supply, value chain

Vincent Lingga, Oslo | Fri, 06/15/2012 9:19 AM

Indonesia has been one of the world’s largest exporters of liquefied natural gas (LNG) since the mid-1970s, but the role of the clean-burning primary energy in the country’s electricity generation is still almost negligible.

The problem is that most of the big power generation stations are located in Java while most gas is produced on the outer islands, and Java does not have an onshore LNG receiving terminal, which costs hundreds of millions of dollars to build.

No wonder the two LNG plants at Arun in the northernmost province of Sumatra and in Bontang, East Kalimantan, have been tied to long-term (more than 25 years) contracts because the building of the loading and receiving terminals to handle LNG carriers require billions of dollars of investment.

But the launching last month of Indonesia’s first floating storage and regasification unit (FSRU) in Java bay will drastically change the supply and value chain of natural gas.

 The power generation station at Muara Karang, north of Jakarta, has begun taking in natural gas from as far as the Bontang plant because the short distance between the FSRU mooring in the Jakarta bay and the power stations can be covered by a submarine pipeline.

The FSRU takes deliveries of LNG from tankers and turns it back into gas (regasification) before pumping it to the power plant through the sub-sea pipeline.

The FSRU, named Nusantara Regas Satu, was built at the Sembawang yard in Singapore by converting an old LNG vessel owned by Golar LNG into floating regasification vessel-based LNG receiving unit.

The facility, which is also Asia’s first FSRU, is chartered by PT Nusantara Regas, a joint venture of two state companies — Pertamina oil and gas company and Perusahaan Gas Negara (PGN).

The FSRU with a storage capacity of 125,000 cubic meters enables the quick realization of gas purchases and obviates the need for shore-based LNG storage tanks and regasification facilities.

Later in 2013 or early 2014, the Nusantara Regas Satu will be joined by an even larger FSRU, with a storage capacity of 170,000 cubic meters, currently under construction at the South Korean Hyundai shipyard.

Earlier this year, PGN and Norway’s Hoegh LNG signed a 20-year contract, extendable by 10 years, under which the Norwegian fully-integrated LNG service company will provide PGN with an FSRU and mooring system offshore of Lampung, in southern Sumatra.

Different from the first FSRU in Java bay, which was converted from an old LNG tanker, the second facility will employ the first of Hoegh LNG’s new building regasification vessels.

“We have three FSRUs currently under construction at Hyundai and one of them will be moored offshore Lampung,” Hoegh LNG’s vice president Geimund Aasbo told The Jakarta Post in Oslo last week.

The project, scheduled to come on stream in early 2014, includes construction, lease and operation of an FSRU with an associated mooring system, a contract for pipeline and necessary infrastructure and a tie-in with an existing grid connected to the power station onshore.

“With more than 40 years of experience in LNG transportation services, Hoegh has been operating two FSRUs and five LNG vessels, all under long contracts, to energy companies in the global LNG value chain,” Aasbo added.

There are now 14 FSRUs operating worldwide with seven others, including the one destined for Indonesia, still under construction in South Korea.

The FSRU facility will greatly improve Indonesia’s energy security, especially because most of the hydrocarbon discoveries in recent years are gas, such as the Senoro and Matindok fields in Central Sulawesi with combined proven reserves of 2.4 trillion cubic feet, and the Masela block in the Arafura Sea, south of Papua, with reserves of 6.5 trillion cubic feet and the huge BP gas field at Tangguh in Papua.

 “I expect hydrocarbon discoveries in the eastern part of Indonesia will consist mostly of natural gas,” said Statoil Indonesia CEO Tor Fjaeran.

Though a newcomer in Indonesia’s petroleum industry, the Norwegian state oil company Statoil has been operating a deep-water Karama production sharing contract offshore West Sulawesi and has farmed into nine other concessions, all of which are offshore in the eastern region.

Natural gas is cleaner than other fossil fuels, and gas-fired power plants are relatively cheap to build, fueling a stronger demand for gas.

As LNG transportation has now been made much easier with the FSRU, it also allows LNG spot markets to expand.

The International Energy Agency (IEA), a watchdog for the developed countries, has estimated LNG trade to increase to more than 395 billion cubic meters in 2015.

Most LNG is still sold under long-term contracts that underpin the billions of dollars of investments required for liquefaction plants. But the massive expansion of regasification capacities has created bigger opportunities along the global LNG value chain.

We can imagine in the coming years a fleet of small tankers on regular runs across the country carrying LNG from Bontang, BP Tangguh plant in Papua, Shell’s Masela plant in the Arafura sea or Pertamina-Medco Senoro-Matindok’s plant in Central Sulawesi and supplying the gas to electricity plants, which are currently run on expensive diesel or fuel oil.

The FRSU infrastructure will make all that possible.

The author is a staff writer at The Jakarta Post.

Read full post »

Norway geared up for ‘big bang’-style trade and investment in Indonesia

Vincent Lingga, The Jakarta Post, Oslo | Wed, 06/13/2012 11:27 AM

Gunn Ovesen (left) and Trond Giske: (Courtesy of Innovation Norway)

Oil and gas-rich Norway is gearing up to enter Indonesia’s economy in a “big bang kind of way” through investment and trade, focusing on the hydrocarbon industry, marine and maritime services, hydropower, health care and the environment.

While both countries are still negotiating a comprehensive, strategic economic partnership agreement, an increasing number of Norwegian companies, with the full support of their government, are preparing to enter Indonesia’s economy in a major way.

“Indonesia needs deep-water technology in oil mining and, being a vast archipelagic country, it also needs to develop its marine and maritime industry. My country has a very strong competitive edge in both industries,” said Norwegian Trade Minister Trond Giske.

But, why now?

Norway’s Deputy Trade and Industry Minister Jof Jeanette Moen pointed out that over the past few years Indonesia had been the third-fastest growing economy after China and India within the prestigious Group of 20 major economies (G20).

“I think the future of the world will also be shaped by what happens to Indonesia and we want to play a part in that development”, Moen added.

Both the trade and industry minister and his deputy were among the main keynote speakers at a seminar in Oslo last Thursday on business opportunities in Indonesia

The meeting also presented Suryo Sulisto, chairman of the Indonesian Chamber of Commerce and Industry (Kadin), Indonesian Ambassador to Norway Esti Andayani and Ananda Idris, a consultant well experienced in dealing with Norwegian businesses.

The seminar, which was attended by about 50 businessmen from across Norway, some of whom already possess good experience of doing business in Indonesia, was part of a series of preparations for the vigorous campaign to enter Indonesia’s economy.

The next big step will be the opening of an Innovation Norway office in Jakarta in August, which will serve as the “man on the spot” in Indonesia to help Norwegian companies on how to market products and how to invest in Indonesia.

Innovation Norway, a state institution with offices in more than 30 countries, plays a unique role in promoting trade, investment, technology innovation and even tourism, serving as the spearhead to help Norwegian businesses market their products or set up investment ventures overseas.

As a state company funded by the central government and county administrations, Innovation Norway is able to hire highly competent professionals to produce market intelligence studies and provide advisory services and technical assistance.

“We can even provide financing services [both loans and equity capital] to businesses with highly promising prospects. Once we enter a company, we serve as the catalyst to attract other commercial banks into joining the financing” said Innovation Norway’s CEO, Gunn Ovesen.

Norway has always pursued a prudent economic vision. Even though it is one of the world’s largest producers of oil, producing more than 2.2 million barrels a day and more than 110 billion cubic meters of natural gas a year, the country generates more than 90 percent of its electricity from hydropower.

The government has been pouring a good portion of its oil and gas export earnings into what Norway’s Finance Ministry claims to be one of the largest sovereign-wealth funds in the world, with more than US$550 billion in reserves for investment both within the country and overseas.

“Norway is the world’s sixth-largest producer of hydropower in the world, supplying more than 95 percent of our domestic electricity consumption of over 250 terrawatt hours [TWh] last year,” said Geir Elsebutangen, managing director of INTPOW, a government research and development agency focusing on renewable energy.

Elsebutangen added that Norwegian companies had also developed advanced technology in tunneling work for hydropower generation stations and other basic infrastructure.

“For a few months every year, most of our rivers are frozen, yet our tunneling technology can guarantee a constant supply of water to our hydropower stations,” he sad.

Elsebutangen, who gained years of experience working with the ABB construction company in Indonesia and other Asian countries, sees many potential sites for hydropower plants in Indonesia, especially those of small capacity.

“Tinfos AS has completed a mini hydropower plant near Makassar, South Sulawesi, with a capacity of 10 megawatts [MW]. This plant can be a model for other areas to generate renewable energy, while serving as a showcase for the public to realize how vitally important it is to protect forests,” he added.

The “big bang” declaration of Norway’s entry into the Indonesian economy will be capped with a visit by a business delegation in late November during which Norwegian companies will show their competitive edge in hydrocarbon, marine and maritime services and hydropower, as they seek joint-venture partners.

Norway has a population of only around five million people, barely half the population of Jakarta, but with gross domestic product (GDP) of over $420 billion and per capita income of more than $55,000,
Norwegian consumers have strong purchasing power..

Unfortunately, however, Indonesia-Norway trade has not grown well and has so far failed to achieve its full potential. According to official data at the Trade and Industry Ministry in Oslo, bilateral trade totaled only about $260 million last year, down from $295 million in 2010, albeit up significantly from $195 million in 2009, mostly in Indonesia’s favor.

Indonesian exports to Norway have consisted mostly of garments and accessories, consumer electronic goods and wooden products, while imports have consisted primarily of machinery and fish.

But bilateral trade will increase substantially in the coming years as more Norwegian companies sell technology, marine and maritime services and equipment.

Last January, Norway’s Hoegh LNG, one of the world’s largest fully integrated floating liquefied natural gas companies, signed an agreement worth more than $250 million with state-owned PT Perusahaan Gas Negara (PGN) to provide PGN with a floating storage and regasification unit (FSRU) and mooring system in Lampung under a 20-year charter, which is due to begin operations in early 2014.

Read full post »