By: Mahendra Siregar and Hari S. Noegroho

MACROECONOMY

Central bank revises up inflation forecast

The central bank revised up its inflation forecast for 2008 to 6.0-6.5% from around 5% previously, despite saying that a sharp increase in the consumer price index in January was a "one-time shock", Reuters reported Monday (4/2/08).
 
Annual inflation spiked to 7.36% last month, the highest since September 2006, when it stood at 14.6%.

"A recent sharp increase in commodities prices has pushed domestic inflation up ... We will step up our coordination in our policy, especially those related to inflation control," Bank Indonesia Governor Burhanuddin Abdullah said.

"Through those efforts, we predict inflation to be around 6.0-6.5% this year."

Central bank holds key rate at 8%
The central bank left its key interest rate unchanged at 8.0% on Wednesday, wary of mounting price pressures even as aggressive US rate cuts created some space for policy easing, Reuters reported Wednesday (6/2/08).

All 17 analysts in a Reuters survey this week forecast the central bank would keep its key interest rate, the BI rate BIPG, unchanged at 8.0% after January inflation came in well above expectations, forcing the central bank to raise its forecast for price growth in 2008.

BI plans to sell off shares in 2008
Bank Indonesia said Tuesday (5/2/08) it expected to sell off all its shares in a number of companies this year in compliance with existing central bank regulations, The Jakarta Post reported.

BI deputy governor Budi Mulya said BI would sell its shares in Netherlands-based Indover Bank, insurance firm PT Asuransi Kredit Indonesia (Askrindo) and financial firm PT Bahana Pembinaan Usaha Indonesia by the end of this year.

"We hope the divestment process can be completed this year. We requested the government to take over all of our shares," said Mulya.

The 2004 law on the central bank stipulates the obligation for BI to sell its shares in companies because they are not related to the main task of a central bank.

BI controls 55% of Askrindo and an estimated 82.2% of shares in Bahana, and entirely owns Indover.

Govt. aims to raise Rp3T from bond sales
The government aims to raise Rp3 trillion ($326.1 million) from the sale of rupiah-denominated government bonds this week, the finance ministry said on Tuesday (5/2/08), Reuters reported.

The issue follows another auction of mid-term bonds launched by the finance ministry at the end of January which raised a total of Rp3.7 trillion, above the target of Rp3 trillion.  

The two- and five-year zero coupon bonds were priced to yield 8.25% and 9.41% respectively.

Indonesian bonds have attracted strong interest from foreign and domestic investors because of the relatively high yields, particularly following the recent cut in US interest rates.


POWER
New benchmark price for geothermal power
The government has set the benchmark selling price for geothermal power generated by independent power producers at between 5.9 US cents to 10 cents per kilowatt hour (kwh), The Jakarta Post reported Wednesday (6/2/08).

Director General of Electricity and Energy Utilization Purwono said the calculation of the prices was based on the formula generally used by state power firm PT PLN.

"We have agreed the tariff is equal to 80% of the total costs PLN usually spends to produce power," Purwono said.

Based on the prices already set by the government, the power producers can only sell the electricity to PLN, as the sole power distributor for households and most businesses.

However, prices for the geothermal power vary between regions, with power plants located in remote areas getting higher prices due to higher production costs, Purwono said.


OIL & GAS
Cost recovery program to be revised
The Ministry of Energy and Mineral Resources is to tighten the cost recovery mechanism under which all operators in the oil and gas sector work after a major increase in claims, The Jakarta Post reported on Saturday (9/2/08).

The government intends to only provide refunds for exploration costs in producing fields, said the director of upstream operations at the ministry, Priyono.

Under the system, the government recovers the money that oil and gas operators spend on exploration work after the blocks start producing.

The cost recovery fund is based on the exploration cost in an entire block, even when some of the oil and gas fields within the block fail to produce, leaving the government with a huge bill.

Priyono said a new regulation, to be ready next week, would base the calculations of the cost recovery funds on the exploration money spent only on fields that produce oil or gas.

It will be used in contracts on 26 new blocks the government plans to offer investors in May.

Data from the ministry shows the government paid Rp7.3 trillion ($784 million) in cost recovery in 2005, Rp7.8 trillion in 2006 and Rp8.3 trillion in the first nine months in 2007.

BP Migas financial operation division head Sujaryono says the cost per barrel of oil has risen from $11.50 in 2005 to $14 last year.

Government ends talks with Exxon on Natuna
The government has ceased negotiations with ExxonMobil Corp on the latter's contract to manage the Natuna D-Alpha gas field, Thomson Financial reported Monday (4/2/08).

Kardaya Warnika, the head of the negotiating team and chairman of upstream oil and gas regulator BP Migas, said that Exxon and BP Migas did not reach any agreement.

The government had earlier terminated Exxon's contract after the latter failed to start any development on the block after having held the contract for 20 years.

Exxon had initially argued that the basic agreement allowed two contract extensions, each for a period of two years, so that when the contract expired in 2005, it still had two extensions available.

The government, however, has said that the contract could not be extended anymore because Exxon failed to submit its plans to develop the block and commercialize the gas resources.

The contract was entered into in 1985. ExxonMobil held 76% of Natuna D-Alpha, with the remaining interest held by state-owned PT Pertamina.

The government will grant state oil and gas firm PT Pertamina the right to take over the development of the gas-rich Natuna block from US energy giant ExxonMobil Corp, The Jakarta Post reported Friday (8/2/08).

The decision was made following a deadlock in negotiations between the government and ExxonMobil.

Vice President Jusuf Kalla said the decision was in line with existing regulations which gave Pertamina priority to take over any block should the contract with private developers be terminated.

"Because there has been no (positive) result in the negotiations with ExxonMobil, Pertamina has been given priority to take over the development of the block. The decision is in accordance with Indonesian law," said Kalla.

He said Pertamina was permitted to seek partners in developing the gas block, which is estimated to hold 46 trillion cubic feet of gas.

Elnusa lists shares, plans expansion
PT Elnusa, a subsidiary of state oil company PT Pertamina, officially listed its shares on the Indonesia Stock Exchange on Wednesday, having completed an initial public offering (IPO) for 20% of its current equity, The Jakarta Post reported Friday (8/2/08).

The oil and gas exploration and drilling company raised Rp584 billion (some $62 million), president director Eteng A. Salam said.

"This year, we expect to increase our net profit by up to 90%, from Rp110 billion last year to over Rp200 billion.

"We are targeting revenues of Rp2.2 trillion," said Salam. PT Elnusa recorded Rp2 trillion in revenue in 2007.

Hendri Suardi, PT Elnusa's finance and administration director, said the company was also considering the possibility of debt financing for further expansion. The additional finances, approximately $100 million, would be raised either through a bond issue or loan.

PT Elnusa has already initiated talks with Bank Central Asia (BCA), Bank International Indonesia (BII) and Bukopin, said Hendri, adding a consortium of the above may provide a loan to the company.

Salamander Energy buys 25% stake in Bengara 1
Salamander Energy announced on Monday (4/2/08) it has agreed to acquire a 25% interest in the Bengara 1 PSC from PT Medco E&P Bengara (Medco), Dow Jones reported.

The acquisition of this interest is subject to the approval of the government as required in the Bengara 1 PSC.

The Bengara 1 PSC is located in the Tarakan Basin, East Kalimantan, immediately north-west of the Simenggaris JOB-PSC in which Salamander has a 21% interest.

"I am delighted that we have expanded our presence in East Kalimantan through the acquisition of a 25% interest in the Bengara 1 PSC,” said James Menzies, chief executive of Salamander Energy. "We look forward to adding the Sebuku well to this year's active drilling program."  

Salamander Energy is an independent upstream oil and gas exploration and production company focused on South Asia.


MINING
Freeport pays Indonesia $1.8B in 2007
The local Indonesian unit of US mining giant Freeport said Monday (4/2/08) that it paid the government $1.8 billion in 2007 amid soaring commodity prices and solid production, Agence France-Presse reported.

Freeport said that besides the amount paid for corporate income tax, employee income tax, regional taxes and levies, it also paid $216 million in dividends and $164 million in royalties to the government.

The annual amount was 12.5% up on the $1.6 billion the company, which is believed to be the nation’s most significant taxpayer, paid in 2006, it said in a statement.

The payment amount fluctuates due to changes in commodity prices, sales and metal production levels.

"In the past two years our production has been good and commodity prices have also skyrocketed," Mindo Pangaribuan, a Freeport spokesman, said.

Freeport Indonesia is 81% owned by US-based Freeport McMoRan. The remaining stakes are shared equally between the Indonesian government and PT Indocopper Investama.


PT Timah doubles earning from tin sales
State-owned tin mining company PT Timah said its sales last year were estimated at Rp8 trillion ($872 million) almost doubling previous year's sales of Rp4.07 trillion, Asia Pulse reported Wednesday (6/2/08).

Corporate secretary Abrun Abubakar said the net profit of the world's largest tin company was estimated to reach Rp1.5 trillion in 2007 up from Rp208.14 billion in 2006.

Abrun, however, attributed the improvement in the performance of the company more to a surge in the prices of tin commodity in international market.

Tin prices averaged $16,000 per ton last year higher than in the previous year. The company sold 58,000 tons of tin last year, up from 43,000 tons in the previous year.

The company plans to acquire high calorie coal mines in Kalimantan and Sumatra. It has establish a subsidiary PT Tanjung Alam Jaya to operate coal mining in South Kalimantan with a reserve of 10 million tons.

Avocet Mining finds positive gold grades
Avocet Mining said Wednesday (6/2/08) it has found positive gold grades in scout drilling from the Mangkaluku prospect in South Sulawesi, Dow Jones Newswires reported.

Avocet said it has completed 12 drill holes evaluating the two most significant vein systems and found good results.

Native gold is visible in seven of the twelve holes, the statement said.

"These results are highly encouraging and warrant follow-up with broad infill drilling to define the resource potential at Mangkaluku," the company said.

Kalimantan finds gold near surface at Jelai
Kalimantan Gold Corp Ltd said it found 'near-surface significant intercepts of gold' during further drilling at the ongoing Jelai epithermal gold property in East Kalimantan, Thomson Financial reported Tuesday (5/2/08).

It said 5.6 grams per ton of gold over an interval of 5.6 meters was discovered.

The exploration company said the drilling results include 17.33 grams per ton of gold over 1.20 meters.

Kalimantan Gold focuses on copper, gold and coal prospects and owns 100% of the Jelai project.

More news can be accessed at ekon.go.id .