March The Ministry of Economy, Trade and Industry

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1 STUDY ON ECONOMIC PARTNERSHIP PROJECTS IN DEVELOPING COUNTRIES IN FY2010 STUDY ON GEOTHERMAL POWER DEVELOPMENT PROJECT IN HULULAIS, INDONESIA FINAL REPORT March 2011 Prepared for: The Ministry of Economy, Trade and Industry Prepared by: Ernst & Young ShinNihon LLC Japan External Trade Organization (JETRO) West Japan Engineering Consultants, Inc.

2 Preface This is a report summarized a result of the study which ERNST & YOUNG SHINNIHON LLC (hereinafter referred to as SNC ) entrusted to West Japan Engineering Consultants, Inc. as part of the Study on Economic Partnership Projects in Developing Countries in FY Prior to implementing Geothermal power development projects in Hululais Indonesia, the study was conducted with the objective of assessing the geothermal development projects for plan of capacity 110MW thru renewable resource such as geothermal power project in Sumatra Island, Indonesia. In the study, evaluation of geothermal resource potentials, power demands for geothermal power substitution, possible for use of power generation and the installed capacities, economic and financial evaluation, and environmental and social impact raised by the project were discussed. We are expecting this report to be helpful in realizing the project. March 2011 West Japan Engineering Consultants, Inc.

3 Location Map of the Study Area (Source: Prepared by SNC study team)

4 Acronyms and Abbreviations ADB AfD AMDAL ANDAL ASEAN BAPEDAL BAPPENAS BI BPS CDM CFC CO 2 CSAMT EBRD EIA EIRR EPC ES FCRS FIRR FS GDP GSF HFC IADB IDR IPCC IPP JBIC JICA KfW KLH LH LNG : Asian Development Bank : Agence Française de Développement : Analisis Mengenai Dampak Lingkungan : Analisis Dampak Lingkungan : Association of South East Asian Nations : Badan Pengendalian Dampak Lingkungan : Badan Perencanaan Pembangunan Nasional : Bank Indonesia : Badan Pusat Statistik (Stastics Indonesia) : Clean Development Mechanism : Chlorofluorocarbon : Carbon dioxide : Controlled Source Audio-frequency Magneto Telluric method : European Bank for Reconstruction and Development : Environmental Impact Assessment : Economic Internal Rate of Return : Engineering Procurement and Construction : Engineering Service : Fluid Collection and Reinjection System : Financial Internal Rate of Return : Feasibility Study : Gross Domestic Product : Great Sumatra Fault : Hydrofluorocarbon : Inter-American Development Bank : Indonesian Rupiah : Intergovernmental Panel on Climate Change : Independent Power Producer : Japan Bank International Cooperation : Japan International Cooperation Agency : Kreditanstalt für Wiederaufbau : Kementerian Negara Lingkungan Hidup : Kantor Menteri Negara Lingkungan Hidup : Liquefied Natural Gas

5 LPG MEMR MHI MOF MT MWe NCG NEP NPV O&M ODA OJT OPEC PPLH PQ PT. PGE PT. PLN RKL RPL RUPTL SNC STEP TDEM T/L TOE UKL UPL US WACC WB WKP WS : Liquefied Petroleum Gas : Ministry of Energy and Mineral Resources : Mitsubishi Heavy Industries, Ltd. : Ministry Of Finance : Magneto-Telluric method : Megawatt electric : Non Condensable Gas : National Energy Policy : Net Present Value : Operation & Maintenance : Official Development Assistance : On-the-Job Training : Organization of the Petroleum Exporting Countries : Pusat Pendidikan Lingkungan Hidup : Pre Qualification : PT. Pertamina Geothermal Energy : PT. Perusahaan Umum Listrik Negara (Persero) : Rencana Pengelolaan Lingkungan Hidup : Rencana Pemantauan Lingkungan Hidup : Rencana Usaha Penyediaan Tenaga Listrik : Ernst & Young ShinNihon LLC : Special Term for Economic Partnership : Time Domain Electro Magnetic : Transmission Line : Ton of Oil Equivalent : Upaya Pengelolaan Lingkungan : Upaya Pemantauan Lingkungan : United States of America : Weighted Average Cost of Capital : World Bank : Geothermal Working Area : Work Shop

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7 Table of Contents CHAPTER 1 OVERVIEW OF HOST COUNTRY AND SECTOR OUTLINE OF ECONOMY AND FINANCE Outline of Indonesia Political and Economical Conditions in Indonesia Energy Situation of Indonesia AN OUTLINE OF THE SECTOR FOR THE PROJECT Power Sector in Indonesia Present Situation of Electric Power Supply and Demand Geothermal Resource and Current State of Geothermal Energy Development in Indonesia THE SITUATION OF THE PROJECT AREA Social Situation of the Bengkulu Province The Situation of Electricity Supply and Demand in the Bengkulu Province CHAPTER 2 STUDY METHODOLOGY CONTENT OF THE STUDY Contents of the Study Objective Field METHODS AND MEMBER OF THE STUDY Method of the Study Study Member and Organization of the Study Implementation Agency STUDY SCHEDULE The 1st Mission The 2nd Mission Persons Interviewed during the Mission Trip CHAPTER 3 JUSTIFICATION, OBJECTIVES AND TECHNICAL FEASIBILITY OF THE PROJECT PROJECT BACKGROUND AND NECESSITY BASIC POLICY FOR THE GEOTHERMAL PROJECT DEVELOPMENT The Priority for the Project and Necessary Study Technical Factors for the Project Planning OUTLINE OF THE PROJECT PLAN Technical Feasibility of the Project... 66

8 3.3.2 Outline of the Project Basic Design and Specifications TECHNICAL TASKS AND THE MEASURES Procedure of Geothermal Power Development and Mitigation of Resources Development Risk Present status and risk mitigation of the development project CHAPTER 4 EVALUATION OF ENVIRONMENTAL AND SOCIAL IMPACTS ANALYSIS OF EXISTING ENVIRONMENTAL AND SOCIAL CONDITIONS Analysis of Existing Conditions Analysis of Present Conditions Future Forecast (in the Case of No Project Implementation) ENVIRONMENT IMPROVEMENT EFFECTS OF PROJECTS Effects of Environmental Improvement Project Potential for CDM ENVIRONMENTAL AND SOCIAL IMPACTS ASSOCIATED WITH THE PROJECT IMPLEMENTATION Environmental and Social Considerations Comparison of the Proposed Project with Other Options that Impose Less Environmental and Social Impacts Results of the Discussions with the Implementing Agency OUTLINE OF THE ENVIRONMENT AND SOCIETY CONSIDERATION LAWS AND RELATIONS Outline of the Environment and Society Consideration Relations and Laws Concerning Projects Implement Contents of EIA needed for the Project Implement in Indonesia ITEMS TO BE CARRIED OUT BY THE BENEFICIARY NATION (IMPLEMENTING AGENCY AND OTHER RELATED AGENCIES) FOR PROJECT REALIZATION CHAPTER 5 FINANCIAL AND ECONOMIC EVALUATION PROJECT COST ESTIMATION Cost Composition Currency and Exchange Rate Project Cost Estimate Finance Procurement Plan RESULTS OF PRELIMINARY ANALYSIS OF FINANCE AND ECONOMY Financial Analysis...132

9 5.2.2 Economic Analysis Evaluation CHAPTER 6 PLANNED PROJECT SCHEDULE CHAPTER 7 IMPLEMENTING ORGANIZATIONS PROJECT IMPLEMENTATION ORGANIZATION Outline of PT. PGE Outline of PT. PLN (Persero) ADVISABLE ORGANIZATION FOR THE PROJECT PT. PGE PT. PLN CHAPTER 8 TECHNOLOGICAL ADVANTAGES OF JAPANESE COMPANY INTERNATIONAL COMPETITIVENESS OF JAPANESE SUPPLIERS AND PROBABILITY OF CONTRACT FOR THE PROJECT (BY FACILITIES, GOODS, AND SERVICES) GOODS AND SERVICES LIKELY PROCURED FROM JAPAN NECESSARY POLICY FOR PROCUREMENT OF JAPANESE GOODS AND SERVICES CHAPTER 9 OUTLOOK OF FINANCING FOR THE PROJECT POLICY OF THE INDONESIAN GOVERNMENT ABOUT PROJECT FINANCING ACTIVITIES OF COMPANIES RELATED TO THE HULULAIS GEOTHERMAL POWER DEVELOPMENT OUTLOOK OF FINANCING FOR THE PROJECT AND POSSIBILITY OF ODA YEN LOAN REQUEST FROM THE INDONESIAN SIDE...165

10 List of Figures Fig. 1-1 Map of Indonesia... 2 Fig. 1-2 Current GDP of Indonesia... 4 Fig. 1-3 Current Exchange Rate of Indonesian Rupiah... 4 Fig. 1-4 Distribution of Volcanoes and Major Geothermal Fields in Indonesia Fig. 1-5 Major Geothermal Fields and Major Tectonic Line in Sumatra Fig. 1-6 Major Geothermal Fields in Java Fig. 1-7 Transmission Network of Sumatra Island Fig. 1-8 Power Balance in the Sumatra System (2010 to 2019) Fig. 2-1 Overall Program of Geothermal Power Development Fig. 2-2 Location of the Hululais Geothermal Field Fig. 2-3 Study Schedule Fig. 3-1 Geothermal Road Map and Crash Program II Fig. 3-2 Location Map of Hululais Field Fig. 3-3 Geological Map of Hululais Field Fig. 3-4 Distribution Map of Hot Springs and Fumaroles in the Hululais field Fig. 3-5 Trilinear Diagram of Anion of Hot Spring Fig. 3-6 δd-δ 18 O(H 2 O) Diagram Fig. 3-7 Bouguer Anomaly Distribution in Hululais Field Fig. 3-8 Schlumberger Apparent Resistivity Distribution in Hululais Field Fig. 3-9 MT Site Locations in Hululais Geothermal Field Fig Example of Observed Data and Calculated MT Response Fig Resistivity Distribution at 325 m Depth Fig Resistivity Distribution at 625 m Depth Fig Resistivity Distribution at 1,375 m Depth Fig Distribution of Faults and Resistivity Map at Depth of 325 m Fig Proposed Prospective Area Fig Conceptual Model For Geothermal System in Hululais Field Fig Result of Monte Carlo Analysis of Resource Potential in Hululais Field Fig Production Characteristics Estimated by WELLFLOW Fig Result of Estimation on Required Number of Make Up Wells Fig Drilling Pad and Power Plant Location in Hululais Field Fig Typical Drilling Pad Layout Fig Types of Fluid Collection and Reinjection System Fig Transmission System of Bengkulu... 74

11 Fig Single Line Diagram of South Sumatra System Fig Single Line Diagram of Existing Pekalongan 150/70/20kV Substation Fig Transportation Route Fig Typical Well Casing Program (Production Well and Reinjection Well) Fig Layout of FCRS and Pipeline Route Fig Outline of FCRS Fig Layout of Single Flush Power Plant Fig Outline of process of single flush Power Plant Fig Geothermal Power Development Procedure Fig Possible Power Plant Site Area Fig. 4-1 Geothermal Working Area owned by PT. Pertamina Fig. 4-2 Planed Development of Hululais Geothermal Field Fig. 4-3 Map of Hululais Geothermal Power Development Project Fig. 4-4 Forest Map of the transmission line for Hululais Geothermal Power Plant Fig. 5-1 Levelized Energy Cost at Variable Discount Rates Fig. 5-2 FIRR Sensitivity of PT. PGE Steam Supply Undertaking to Steam Selling Rate Fig. 5-3 FIRR Sensitivity of PT. PLN Power Generation Undertaking to Power Selling Rate Fig. 5-4 EIRR Sensitivity to Alternative Project Cost Fig. 5-5 EIRR Sensitivity to Coal Cost Fig. 6-1 Project Schedule Fig. 6-2 Project Schedule of Down-Stream (Steam Receiving 2014) Fig. 7-1 PT. PGE Organization Structure Fig. 7-2 PT. PLN Organization Structure Fig. 7-3 Project Implementation Organization of PT. PGE Fig. 7-4 Project Implementation Organization of PT. PLN Fig. 8-1 World Share of Geothermal Power Plant Market...161

12 List of Tables Table 1-1 Estimated Geothermal Potential in Indonesia Table 1-2 List of Geothermal Power Plants in Indonesia Table 1-3 Installed Capacity in Sumatra System (2009) Table 1-4 Power Balance in the Sumatra System (2010 to 2019) Table 2-1 Main Member List of This Study Table 2-2 The 1st Mission Trip Schedule Table 2-3 The 2nd Mission Trip Schedule Table 2-4 Persons Interviewed during the Mission Trip Table 3-1 Possible Proprietors of Major Geothermal Power Development Projects in Indonesia Table 3-2 Criteria for Selecting Fields for Feasibility Study Table 3-3 Chemical Analysis Data of Hot Spring and Fumarole Table 3-4 Chemical Analysis Data of Fumarole and its Calculated Geothermometer Table 3-5 Input Parameters for Borehole Simulator WELLFLOW Table 3-6 Result of Estimation on Required Number of Make Up Wells Table 3-7 Comparison of Geothermal Power Generation Technologies Table 3-8 Required Size of Power Plant, Drilling Pads and Access Road Table 3-9 Timing for adding Make-Up Wells Table 4-1 Climate Parameter Condition in the Study Location Table 4-2 Wild animal species in the study location Table 4-3 Population Number, Area Size, Population Density and Sex Ratio in Talang Sakti, Semelako, Kr. Anyar, Bungin, Mubai and Karang Dapo Villages in Table 4-4 Preconditions Table 4-5 CO 2 Emissions Reduction Effect Resulting Table 4-6 CO 2 Emissions Reduction as a CDM project Table 4-7 Scoping of Environmental and Social Considerrations Table 4-8 Selected Reason of Items in the Environmental Impact Forecasts Table 4-9 Comparison of Geothermal Power and thermal Power with Current Environmental Conditions Table 4-10 Environment Quality Standards for Odor Level Table 4-11 Gas Exhaust Standard (Stationary Source) Table 4-12 Environmental Quality Standard for Water (Drinking Water Usage) Table 4-13 Quality Standards of Liquid Waste Table 4-14 Standards of Noise Level...121

13 Table 4-15 Standards of Vibration Level Table 4-16 Classification of Forest Area Table 4-17 Power Plant Plans and Installed Capacity Subject to AMDAL Table 5-1 Exchange Rates and Escalation Rates Table 5-2 Summary of Cost Estimate Table 5-3 Finance Procurement Conditions Table 5-4 Financing and WACC of PT. PGE Upstream Undertaking Table 5-5 Financing and WACC of PT. PLN Downstream Undertaking Table 5-6 Levelized Energy Costs at Variable Discount Rates Table 5-7 FIRR Calculation Results Table 5-8 PT. PGE: FIRR Calculation Table 5-9 PT. PGE: Repayment Schedule Table 5-10 PT. PGE: Cash Flow Table 5-11 PT. PLN: FIRR Calculation Table 5-12 PT. PLN: Repayment Schedule Table 5-13 PT. PLN: Cash Flow Table 5-14 Project EIRR (With T/L) Table 5-15 Project EIRR (Without T/L) Table 5-16 Summary of Economic and Financial Evaluation Table 7-1 Outline of PT. PLN...156

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15 Executive Summary (1) Project Background and Necessity The Government of Indonesia (GOI) is working on developing and increasing the electricity supply capacity to meet the growing power demand as well as diversifying Indonesia's energy mix by promoting the use of renewable energy sources. To achieve these goals, the GOI has announced a second 10,000 MW development program, known as Crash Program II to fulfill about 35% of the goal of this program, providing 3,583 MW by geothermal power development, according to GOI s document published in January The Hululais geothermal power development project is one of the key projects of Crash Program II. PT. PLN and PT. PGE planned to develop 110 MW geothermal power plants before 2014 in consideration of Crash Program II. They requested to conduct geothermal development study (prefeasibility study) to the Japanese Government in 2010 for obtaining ODA loan. For realizing the ODA loan for geothermal power development, several conditions related to resource potential and, environmental and economic/financial constraints should be clarified through the feasibility study. Regarding the Hululais project, since even prefeasibility study had not been conducted, estimation of resource potential and feasibility of the project should be discussed through the studies. For the JICA financial support for the Hululais geothermal power development, prefeasibility study documents for the Hululais Units 1 and 2 specifying the conditions for an ODA loan were considered to be necessary. The geothermal resource potential and outline of the project should be revealed under the present conditions for deciding basic policy of the Hululais project finance. It was planned that preliminary preparation of an implementation program for steam field development and, construction of the geothermal power plant and associated transmission line and substation was conducted, using results of this study. (2) Basic Policy of Implementation Body for the Project The Hululais field is selected as a prospective field for geothermal development by PT. PGE. In this project, steam field development will be carried out by PT. PGE and PT. PLN will conduct construction and operation of power plant and transmission lines. Geothermal explorations in this field were already carried out by PT. PGE. However, there is no existing geothermal well, though drilling of the first exploration well started in December Obtained data through this i

16 study do not give direct information about condition of geothermal reservoir extending under the ground. Potential of geothermal resource in the Hululais field is estimated by a volumetric method applying Monte Carlo Analysis in this study. From this analysis, potential of more than 125 MWe is estimated at a possibility level of 98 %. To progress this geothermal project successfully, it is recommended to conduct drillings of exploratory wells, discharge test to know actual condition of geothermal reservoir and resource evaluation. And detailed feasibility study shall be done after this process. It is considered that this preliminary power plant design might be reviewed by the results of exploration wells because of uncertainty of geothermal fluid conditions that are indispensable to design power plants. (3) Outline of the Project As geothermal resource in the Hululais field is expected to be hot water of more than 250 o C, a power plant applying steam turbine system is assumed as a suitable geothermal power generating system in this field. Although it is difficult to design the power plant including the generation system with the obtained information, the following 110 MW geothermal project will be proposed. <Geothermal resource development> Site preparation for production wells pad, reinjection wells pad and power plant site Construction of access road Drillings of production wells and reinjection wells <Piping to transport produced hot water (fluid collection and reinjection system)> <Construction of 110 MW steam turbine geothermal power plant> <Construction of switchyard and transmission lines> This project is to be carried out by PT. PGE in steam supply and PT. PLN in power generation and transmission lines. ii

17 Survey Construction Operation (4) Environmental and Social Impacts The environmental improving effect of this project is the reduction of carbon dioxide emission from power generation comparing with other fossil firing power generation. The estimated reduction of CO 2 emissions resulting from this project is about 600 thousand tons CO 2 per year. Crude Oil Conversion CDM ACM0002 Annual power generation (GWh/year) Emission factor (t-co 2 /MWh) Annual emission reduction (t-co 2 /year) 670, ,889 Based on the site survey results and the project characteristics, survey items that presently considered necessary before the project implementation were picked up to ensure appropriate environmental and social considerations. Contents of study on environmental and social impacts in the next step are listed as follows. Items Air Pollution -B -A N Noise and Vibration -B -A N Water Pollution -A -A -A Soil Pollution -B N N Waste -A -A N Ground Subsidence -A N N Offensive Odors -B -A N Geographical Features -A -A N Biota and Ecosystem -A -A -A Water Usage -B -A N Involuntary Resettlement N N N Ethnic Minorities and Indigenous People C C C Cultural Heritage N N N Landscape N N N Local Economy such as Employment and Livelihood, etc. +A +A +A iii

18 Land Use and Utilization of Local Resources +A +A +A Social Institutions such as Social Infrastructure and Local Decision-making Institutions C C C Existing Social Infrastructures and Services +A +A +A The poor, Indigenous Ethnic People C C C Misdistribution of Benefit and Damage C C C Local Conflict of Interests C C C Gender N N N Children's Rights N N N Infectious Diseases such as HIV/AIDS, etc. N N N Global Warming N +A N + : positive impact -: negative impact A : Serious impact is expected B : insignificant impact is expected C : Extent of impact is unknown N : No impact is expected For the current project, interviews were conducted to PT. PGE, PT. PLN, the local government officials and resident around geothermal fields. PT. PGE has already conducted the AMDAL for up-stream project. The ANDAL, RKL and RPL for the Hululais geothermal development project have been approved by the governor of Lebong Regency on 19 December Socialization for the local residences has been done on 16 October The planed project scale is as shown below. The power plant capacity is required to obtain AMDAL according to stipulation in the Decree of the Minister of Environment No. 11 (2006)., The transmission line has not more capacity than that stipulated in the decree, thus no AMDAL is required. Geothermal field Planned capacity Installed capacity subject to submission of AMDAL Hululais Power Plant 2x 55 MW Transmission Line 150kV 55 MW > 150kV Items to be carried out by PT. PLN are to conduct the AMDAL for down-stream project and to disclose of the project information. And the weather observation such as wind speed and wind direction at the project site needs to conduct at least one year because the weather data will be used for not only the conceptual design of the power plant but also concentration prediction of hydrogen sulfide by the power plant operation. iv

19 (5) Project Schedule The figure below shows overall project schedule from the effectiveness date of JICA s ES Loan Agreement up to the completion of the project. The consultant will first be selected, and then procurement for drilling of production/reinjection wells, construction of fluid collection and reinjection system (PT. PGE part) and construction of geothermal power plant and transmission line (PT. PLN part) will be done in parallel. Commencement of commercial operation will be right after the completion of the project. The project period will be sixty-two (62) months from effectiveness date of JICA's ES Loan Agreement to commencement of commercial operation of the unit two (2). Loan Application Pre-Construction Work (Incl. FS) PT. PGE 14 PT. PLN 23 Procurement Engineering Consultant for PT. PLN 9 Engineering Consultant for PT. PGE 9 Contractor for PT. PGE 9 Contractor for PT. PLN 9 Consulting Service ACTIVITY No.of Months PT. PGE 40 PT. PLN ES L/A Project L/A 2016 Construction PT. PGE PT. PGE Drilling & Testing 23 FCRS 24 PT. PLN Power Plant 38 Transmission Line 22 Unit 1 Unit 2 Warranty Period 26 (6) Feasibility of Yen loan request and implementation This project is one of the national projects enlisted in the Crash Program II issued from the President of the Republic and considered as a very significant power expansion project for the South Sumatra area heavily suffering power shortage. In addition, the Project is to generate power making use of indigenous energy source as well as saving the coal fossil energy which may be allocated for export to earn foreign exchange. The Project is focused as environmentally friendly project. As summarized in the following table, the project shows financially, economically and environmentally feasible and worth to pursue. (It is noted, however, that several parameters used in this economic and financial evaluation should be clarified and confirmed after discharge v

20 test of the exploratory wells which PT. PGE is drilling at the site.) Summary of Economic and Financial Evaluation Project 55 MW x 2 Hululais Geothermal Power Project Undertaking Geothermal Steam Supply Geothermal Generation Executing Agency PT. PGE PT. PLN Cost 17,693 MYen( M$) 21,562 MYen( M$) Total Project Cost 39,255 MYen ( M$) Power Generation GWh/year Coal Fuel Saving 424 Million kg, M$ Annual CO 2 Emission Saving 608,889 t-co 2 /year Steam/Power Rate 4.3 cent/kwh 8.8 cent/kwh Opportunity Cost: FIRR (WACC) 10.71% (2.61%) 8.09% (2.34%) Discount Rate : EIRR 14.67% Cash Flow NPV@12% M$ M$ Financial BC Economic BC Ratio@12% 1.14 The Japanese ODA Yen Loan for the Hululais 110 MW geothermal development project is expected as described in the Government s documents. Technical criteria for deciding to support geothermal development projects using ODA Yen Loan are considered to have been set by JICA in consideration of the resource development risk. Existing information and data of project feasibility for deciding ODA Yen Loan for the geothermal power development and plant construction project were insufficient in reference to these criteria. Therefore, the implementation of the feasibility study seems to be necessary to prepare feasibility documents for appraisal of the project. There is a possibility that implementation of the feasibility study after exploratory well drilling is supported by JICA using ES (Engineering Service) Loan. The criteria for conducting feasibility study in Hululais using ES Loan were checked using the results of this study and the resource in this filed was revealed to be worth conducting the feasibility study. (7) Technological Advantages of Japanese Company In geothermal power development, Japanese contractors, with sophisticated technologies and vi

21 skills, are likely awarded for resource development, plant construction and facility supply. Japanese firms have accepted an order for consulting works of the project from resource development to power plant construction in geothermal development project in various geothermal countries. Japanese manufacturer or trading firm has been awarded for plant construction of facility procurement, probably ordered as EPC contract in a package in the various geothermal power developments. Japanese major manufacturers (Mitsubishi, Fuji, and Toshiba) have distinguished track records from facility development to construction, commissioning, and maintenance of geothermal power plants as leading companies in the world. For the design and fabrication of geothermal plant, sophisticated technology is indispensable to manufacture highly reliable steam turbines that can make the best use of geothermal steam with lower temperature and pressure, in consideration of corrosive geothermal fluid and atmosphere. Japanese manufacturers dominate more than 70% of the market of geothermal power plants worldwide. Japanese heavy electric machinery manufacturers have installed 11 units, more than 60% of the 18 units in total, or 690 MW, more than 70% of the total installed capacity in Indonesia. vii

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23 Chapter 1 Overview of Host Country and Sector Chapter 1 Overview of Host Country and Sector 1.1 Outline of Economy and Finance Outline of Indonesia The Republic of Indonesia has five times larger area than Japan, consisting of approximately 18,000 islands. It spreads 5,110 km from east to west along the equator and 1,880 km from north to south. The country s population is the fourth most populous nation in the world next to China, India and United States, and about 60% of the total population is concentrated in Java Island that corresponds to only about 7% of area of the whole country. The basic statistical data are shown as follows: President : Susilo Bambang YUDHOYONO (since October 2004, Administration 5years, Second Administration) Independence : On December 27, 1949 (from the Netherlands) Population : 231 million (as of 2009) Location/Size : Southeastern Asia / approximately 1.9 mil km 2 Major Cities : Jakarta (capital), Surabaya, Bandung, Medan, Semarang, Palembang Languages : Bahasa Indonesia (official), English, Dutch, local dialects including Javanese Ethnic Groups : Javanese (45%), Sundanese (14%), Madurese (7.5%), coastal Malays (7.5%), other (26%) Religions : Muslim (88%), Protestant & Roman Catholic (9%), Hindu (2%), Buddhist (1%), other (0%), Islamism is not state religion, although number of Muslim is the largest in the world. 1

24 Fig. 1-1 Map of Indonesia (Source: The World Factbook, Central Intelligence Agency, US Government) Political and Economical Conditions in Indonesia The country consists of 33 provinces under the Republic Institution, and the head of nation as well as the head of administrative body is represented by the President. The current President corresponds to the 6th one and his name is Susilo Bambang YUDHOYONO lasting his duty until October 20, The parliament of Indonesia is called MPR (Majelis Permusyawaratan Rakyat: People s Consultative Assembly) that is the bicameral system consisting of DPR (Dewan Perwakilan Rakyat: Peoples Representative Council) and DPD (Dewan Perwakilan Daerah: Regional Representative Council). MPR has functions such as establishment and revision of a constitution and formulation of MPR decisions, on the contrary, DPR has functions such as legislative functioning, preparation of national budget, and monitoring function to the government and DPD has functions such as recommendation and participation to the deliberation regarding bill for the local administration, respectively. The numbers of regular member for DPR and DPD are 560 and 132, and they all are selected by direct election. When Asian financial crisis took place in July 1997, Indonesia was one of the most crisis-affected countries in ASEAN members and its GDP growth rate fell off substantially to % in After the crisis, the economy tends to recover with implementation of various reforms. GDP growth rate reached 4.5% in 2003 and 5.13% in After 2005, GDP 2

25 Chapter 1 Overview of Host Country and Sector growth rates had been maintained from more than 5.5% to 6%-plus depended on steady domestic personal consumption and exports. In 2007, GDP growth rate recorded 6.3%, which is the highest rate after the Asian financial crisis. In 2008, although GDP growth rate in the fourth quarter slowed down to 5.2% caused by the reduction of exports to western countries and the global financial crisis of 2008, the whole year rate recorded 6.1%. In 2009, GDP growth rate expanded at 4.5%, higher than most countries, by fiscal stimulus measures and monetary policy to counter the effects of the crisis and steady domestic consumption. The economical statistics are listed below. Currency: Rupiah (IDR) Exchange Rate (2009): US$1 = 10,399 IDR Gross Domestic Product: billion US$ (2009) Real GDP Growth Rate: 4.5% (2009) Inflation rate (Consumer Price Index): 4.8% (2009) Merchandise Exports: billion US$ (2009) Merchandise Imports: 84.3 billion US$ (2009) Major Export Products: Oil and gas, electrical appliances, plywood, textiles, rubber Exports Partners: Japan, Singapore, US, China, South Korea, India, Taiwan, Malaysia Major Import Products: Machinery and equipment, chemicals, fuels, foodstuffs Imports Partners: Singapore, China, Japan, Malaysia, South Korea, US, Thailand (Source: The World Factbook, Central Intelligence Agency, US Government) 3

26 IRP Billion Rupiahs 6,000,000 Fig. 1-2 Current GDP of Indonesia Gross Domestic Product at Current Market Prices 5,000,000 Gross Domestic Product at 2000 Constant Market Prices 4,000,000 3,000,000 2,000,000 1,000, : Provisional figures 2009 : Very provisional figures (Source: BPS) Fig. 1-3 Current Exchange Rate of Indonesian Rupiah 18,000 16, JYN 1US$ 1EUR 14,000 12,000 10,000 8,000 6,000 4,000 2, /1/1 2002/5/ /9/ /2/9 2006/6/ /11/6 2009/3/ /8/2 2011/12/15 (Source: BI) Energy Situation of Indonesia Indonesia has the largest population in Southeast Asia and the fourth largest population in the world behind China, India and the United States. In 1962, Indonesia joined the Organization of 4

27 Chapter 1 Overview of Host Country and Sector the Petroleum Exporting Countries (OPEC) and became a net importer of oil in In 2004, Total Energy Consumption was 4.7 quadrillion BTUs, of which, 53 percent was oil, 30 percent gas, 12 percent coal, 3 percent for other renewable energy such as geothermal, solar, wind, wood and waste electric power, and 2 percent for net hydro. (1) Oil Indonesia had 4.3 billion barrels of proven oil reserves as of January Oil production in Indonesia has decreased steadily during the last decade. During 2008, Indonesian oil production averaged 1.1 million barrels per day (bbl/d), of which 81 percent, or 856,000 bbl/d, was crude oil. Indonesia s total oil production has dropped by 35 percent since 1998, as many of the country s largest oil fields continue to decline in output. Indonesia s current OPEC crude oil output quota is set at 1.45 million bbl/d, well above the country s production capacity. During 2006, Indonesia s oil consumption reached 1.2 million bbl/d, making it a slight net importer of oil for the year. (2) Natural Gas Indonesia had 97.8 trillion cubic feet (Tcf) of proven natural gas reserves as of January Indonesia is the tenth largest holder of proven natural gas reserves in the world and the single largest in the Asia-Pacific region. According to the Indonesian government, more than 70 percent of the country s natural gas reserves are located offshore, with the largest reserves found off Natuna Island, East Kalimantan, South Sumatra, and West Papua. In 2004, Indonesia produced 2.6 Tcf of natural gas while consuming 1.3 Tcf. Also in 2004, Indonesia exported about 1.2 Tcf of liquefied natural gas (LNG) to Japan, South Korea, and Taiwan. Historically, Indonesian natural gas production has been geared toward export markets, but the country has made an effort to shift natural gas toward domestic uses in recent years as a substitute for the country s declining oil output. However, Indonesia s limited natural gas transmission and distribution network remains an obstacle to further domestic consumption. (3) Coal Indonesia has 5.5 billion short tons of recoverable coal reserves, of which 85 percent is lignite and sub-bituminous. Roughly two-thirds of the country s coal reserves are located in Sumatra, with the balance located in Kalimantan, West Java, and Sulawesi. In 2004, Indonesia produced 5

28 142 million short tons (MMst) of coal, up about 68 percent since Coal consumption has remained relatively flat in Indonesia, with 2004 consumption at 24 MMst. Indonesia was the second largest net exporter of coal in the world in 2004, with 118 MMst of apparent net exports. Indonesia adopted a new National Coal Policy in January 2004, which seeks to promote the development of the country s coal resources to meet domestic requirements and to increase coal exports in the long-run. 1.2 An Outline of the Sector for the Project Power Sector in Indonesia Indonesia suffered the largest impact among ASEAN countries in the Asian economic crisis of The Indonesian economy, however, has shown a great improvement since the crisis, energized by the results of various policy reforms and supported by the inflow of investment from foreign and domestic sources. (Source; Indonesia Overview in World Bank homepage) Thus, the Indonesian economy is expanding steadily, and electric power demand is also increasing rapidly. The peak power demand for the whole country reached 24,069 MW in 2009, showing a 5.1% increase from the previous year. The aggregate amount of energy demand in 2009 was TWh, a 4.3% increase from the previous year. The National Electricity Provision Plan 2010 (RUPTL ) estimated that the peak power demand of the country would increase at an average annual rate of 9.5% and would reach 59,863 MW in It also estimated that the energy demand would increase at a higher rate than the power demand and will reach TWh in In order to secure a stable energy supply, the development of power plants to meet these demands is one of the urgent issues confronting the Indonesian power sector. Since demand in the Java-Bali system accounts for 78.2% (as of 2009) of total national demand, power plant development in this system is most important. For this purpose, the Indonesian government promulgated a President Decree in 2006 entitled Crash Program with the aim of developing 10,000 MW in the Java-Bali system. Construction work implementing this program is in progress today. Furthermore, power development in systems other than the Java-Bali system is also very crucial because power demand will increase rapidly due to the expansion of rural electrification and the rural economy. Thus, a second crash program has been promulgated by the Indonesian government in This is also a program to develop 10,000 MW of generating capacity, with 53% being developed in systems other than the Java-Bali system. It is to be noted that most of the plants in these other systems will tap renewable energy, most of them taking the form of IPP-managed geothermal power plants. 6

29 Chapter 1 Overview of Host Country and Sector Another urgent issue that the Indonesian power sector faces is the diversification of energy sources. In the light of high oil prices, it is necessary to reduce dependency on oil as an energy source in order to reduce generation costs and to secure a stable energy supply. For this purpose, the Indonesian government worked out a "National Energy Policy (NEP)" in 2002, and set the target of obtaining 5% or more of primary energy from renewable sources by To achieve this target, the government is placing great reliance on geothermal energy, which is abundant in the country Present Situation of Electric Power Supply and Demand The power demand of Indonesia (sales of electric power) in 2009 was TWh. To meet this demand, TWh of electric power was generated by power plants with an aggregate capacity of 30,320 MW. The breakdown of this capacity is 11,700 MW of steam power plants (38.6%), 7,521 MW of gas combined-cycle power plants (24.8%), 3,648 MW of hydro power plants (12.0%), 2,619 MW of diesel power plants (8.6%), 3,116 MW of gas turbine plants (10.3%), and 1,105 MW of geothermal power plants (3.6%). In 2009, there were 41.0 million power purchase contracts, marking a 16% increase over the year Since many customers are waiting for electric power to become available, the number of contracts would increase at a higher rate than previously, if the power supply were adequate. The national electric power system of Indonesia can be divided into two categories: interconnected electric power systems and isolated electric power systems. The Java-Bali system has already developed and established an interconnected electric power system through an ultra-high-voltage (500 kv) power transmission network. The Sumatra system is also interconnected by a 150 kv transmission network running from north to south. However, since the network voltage (150 kv) is relatively low considering the length of transmission lines, the North and South networks have been operating independently. Power supply systems other than the above two Systems have not been integrated yet and are not completely interconnected with each other. These power systems consist of sub-systems and individually isolated smaller sub-systems, and there are still many independent/isolated regions. 22,906 MW (75.7%) of total power plant capacity is concentrated in the Java-Bali system, and only 4,598 MW (15.2%) of total capacity is generated in the Sumatra system. The two systems account for 90.7% of total national capacity. 7

30 1.2.3 Geothermal Resource and Current State of Geothermal Energy Development in Indonesia Indonesia is situated on plate boundaries, between the Indian-Australian Plate and the Eurasian Plate and between the Eurasian Plate and the Philippine Sea Plate (see Fig. 1-4). A typical island-arc system, characterized by a trench (or trough) and a Quaternary volcanic belt, is identified in Indonesia. For example, there is a trench with a length of about 7,000 km on the south side of an island-arc from Sumatra Island, through Java Island, to Nusa Tenggara Islands. This trench is the plate boundary between the Indian-Australian Plate and the Eurasian Plate. There is a Quaternary volcanic belt running parallel to the trench. This volcanic belt has resulted from tectonics in an island-arc system around the plate boundary between the Indian-Australian Plate and the Eurasian Plate. There are many geothermal fields with considerable potential in and around this volcanic belt (see Fig. 1-4 and Table 1-1). Moreover, there are Quaternary volcanic belts in Slawesi Island and Molucca Islands, around the Philippine Trench being the plate boundary between the Eurasian Plate and the Philippine Sea Plate. Many geothermal fields with considerable potential are also identified along these volcanic belts. There are many volcanoes in Sumatra; for example, Peuet Sague, Geureudong, Sibayak, Sinabung, Toba, Sorikmarapi, Talakmau, Marapi, Tandikat, Talang, Kerinci, Sumbing, Kunjit, Lumutdaun, Dempo and so on. They are distributed along the Great Sumatra Fault (Semangko Fault System), having the same northwest trend as the Sunda Trench. These volcanoes were formed in company with the depression of the Indo-Australia plate. Many geothermal fields with considerable potential, including the Hululais Geothermal Field, are related to these volcanoes; for example, Sibayak, Sarulla, Sibual-buali, Sorik Merapi, Muaralaboh, Sungai Penuh, Lumut Balai, Ulubelu, Suoh, Sekincau and so on (see Fig. 1-5). It is well known as a general trend that geothermal fields around the Great Sumatra fault are characterized by fracture-type geothermal systems with considerably good permeability, where geothermal activity will be controlled mainly by permeable faults. The Java Trench, following the Sunda Trench, runs from west to east. Corresponding to this, the volcanic belt also trends in the same direction, extending east from Java Island to Flores Island. And major geothermal fields distribute along this volcanic belt (see Fig. 1-6). In Java Island, a remarkable tectonic line, such as the Great Sumatra Fault, cannot be identified. Most of existing geothermal power plants are situated in West Java Province, at now (Kamojang, Wayang Windu, and so on). Most of geothermal fields in West Java Province are characterized by an extensive vapor-dominated reservoir (steam cap) upon a deep water-dominated reservoir. And geothermal fluid is mainly produced from the steam cap. From this, amount of produced hot water is rather little and required reinjection wells are not so much. 8

31 Chapter 1 Overview of Host Country and Sector In Indonesia, 265 fields are nominated as a prospective field by MEMR. Among these fields, 70 fields are identified to have sufficient temperature for geothermal development and wells were drilled in 24 fields in And potential of 20,000 MW are estimated for these 24 fields. Among these 24 fields, geothermal development projects in 15 fields are on going now and resources of 2,250 MW are identified. Existing geothermal power plants in Indonesia are Sibayak (12 MW, North Sumatra Province), Kamojang (200 MW, West Java Province), Salak (376.8 MW, West Java Province), Darajat (257.8 MW, West Java Province), Wayang Windu (227 MW, West Java Province), Dieng (60 MW, Central Java Province) and Lahendong (60 MW, excluding binary plant, North Slawesi Province; Table 1-2). Total of their installed capacity is still about 4 % of estimated resource potential in Indonesia. In the Sarula (North Sumatra Province), Lumut Balai (south Sumatra Province), Ulbel (Lampun Province) and Patuha (West Java Province) fields, geothermal development projects aiming construction of geothermal power plant are on going. Moreover, expansion projects of Kamojang, Wayang Windu, Dieng and Lahendong are planned. The Indonesian economy has shown a strong recovery from the Asian economic crisis, and has been continuously expanding in recent years. Accordingly, domestic energy demand is also expanding. On the other hand, oil supply has decreased due to the depletion of existing oilfields or aging of the production facilities. Under the impetus of this worsening situation, the Indonesian government decided to diversify energy sources and to promote domestic energy sources in order to lower oil dependency. The government worked out a "National Energy Policy (NEP) in 2002, and set a target of deriving 5% or more of primary energy from renewable sources by In addition, the government promulgated the Presidential Decree on the National Energy Policy (PD No.5/2006) in 2006, raising the NEP from ministerial level policy to the level of presidential policy. On another front, the government enacted a "Geothermal Energy Law" for the first time in 2003 to promote the participation of the private sector in geothermal power generation. Moreover, in 2004 the Ministry of Energy and Mineral Resources (MEMR) worked out the "Road Map Development Plan for Geothermal Energy" (referred to hereafter as the Road Map") to materialize the national energy plan. This Road Map sets high geothermal development targets of 6,000 MW by 2020 and 9,500 MW by Thus, a basic framework for geothermal energy development has been created and the government has initiated efforts to attain its development targets. 9

32 PHILIPPINE TRENCH PHILIPPINE TRENCH Fig. 1-4 Distribution of Volcanoes and Major Geothermal Fields in Indonesia (a) Distribution of Quaternary Volcanoes EURASIAN PLATE PHILIPPINE SEA PLATE PACIFIC OCEAN W N S E NEW GUINEA TRENCH MOLUCCA SUMATRA KALIMANTAN SEA SUNDA TRENCH JAVA JAVA SEA FLORES SEA BANDA SEA TIMOR TROUGH INDIAN OCEAN JAVA TRENCH INDIAN-AUSTRALIAN PLATE k m LEGEND Trench (Trough) Quaternary Volcano (Source: T. Simkin and L. Siebert, 1994) (b) Distribution of Major Geothermal Field EURASIAN PLATE PHILIPPINE SEA PLATE W N E S PACIFIC OCEAN NEW GUINEA TRENCH SUMATRA KALIMANTAN SULAWESI MOLUCCA SEA SUNDA TRENCH JAVA SEA BANDA SEA JAVA FLORES SEA INDIAN OCEAN JAVA TRENCH INDIAN-AUSTRALIAN PLATE TIMOR TROUGH k m LEGEND Trench (Trough) Major Geothermal Fields (Source: MEMR, 2009) 10

33 Chapter 1 Overview of Host Country and Sector Fig. 1-5 Major Geothermal Fields and Major Tectonic Line in Sumatra N THAILAND W E S Banda Aceh Medan 21 D. To ba MALAYSIA Kualalumpur Pekanbaru EURASIAN PLATE SINGAPORE Tanjungpinang EQATOR Padang 52 Jambi SUNDA TRENCH Pangkalpinang Palembang Bengkulu 68 INDIAN-AUSTRALIAN PLATE INDIAN OCEAN Bandar Lampung Serang Jakarta 0 100km GREAT SUMATRA FAULT 1 Iboih 15 Kafi 29 Namora Ilangit 43 Sumani 57 Graho Nyabu 71 Wai Selabung 2 Lhok Pria Laot 16 Gunung Kembar 30 Sibubuhan 44 Priangan 58 Sungai Tenang 72 Wai Umpu 3 Jabol 17 Dolok Perkirapan 31 Sorik Marapi 45 Bukit Kili 59 Tambang Sawah 73 Danau Ranau 4 Ie Seum-Krueng Raya 18 Beras Tepu 32 Sampuranga 46 Surian 60 Bukit Gedong-Hulu Lais 74 Purunan 5 Seulawah Agam 19 Lau Debuk-Debuk-Sibayak 33 Roburan 47 Gunung Talang 61 Lebong Simpang 75 G. Sekincau 6 Alur Canang 20 Marike 34 Simisioh 48 Muaralabuh 62 Suban Gergok 76 Bacingot 7 Alue Long-Bangga 21 Dolok Marawa 35 Cubadak 49 Liki-Pinangawan 63 Sungai Liat 77 Suoh-Antatai 8 Tangse 22 PusukBuhit-Danau Toba 36 Talu 50 Pasir Pangarayan 64 Pangkal Pinang 78 Fajar Bulan 9 Rimba Raya 23 Simbolon-Samosir 37 Panti 51 Gunung Kapur 65 Air Tembaga 79 Natar 10 G. Geureudong 24 Pagaran 38 Lubuk Sikaping 52 Gunung Kaca 66 Tanjungsakti 80 Ulubelu 11 Simpang Balik 25 Helatoba 39 Situjuh 53 Sungai Betung 67 Rantau Dedap-Segamit 81 Lempasing 12 Silih Nara 26 Sipaholon Ria-Ria 40 Bonjol 54 Semurup 68 Lumut Balai 82 Wai Ratai 13 Meranti 27 Sarula 41 Kota Baru-Marapi 55 Lempur 69 Ulu Danau 83 Lalianda 14 Brawang Buaya 28 Sibual-buali 42 Maninjau 56 Air Dikit 70 Marga Bayur 84 Pematang Belirang (Source: MEMR, 2009) 11

34 Fig. 1-6 Major Geothermal Fields in Java Serang JAKARTA JAVA SEA W N S E 89 Bandung Semarang 99 Surabaya km Yogyakarta INDIAN OCEAN Rawa Dano 96 Selabintana 107 Tangkuban Parahu 118 Gunung Galunggung 129 Cibingbin 140 Candi Umbul-Telomoyo 151 Songgoriti 86 Gunung Karang 97 Cisolok 108 Sagalaherang 119 Ciheuras 130 Banyugaram 141 Kuwuk 152 Tirtosari 87 Gunung Pulosari 98 Gunung Pancar 109 Ciarinem 120 Cigunung 131 Bumiayu 142 Gunung Lawu 153 Iyang-Argopuro 88 Gunung Endut 99 Jampang 110 G. Papandayan 121 Cibalong 132 Baturaden 143 Klepu 154 Tiris 89 Pamancalan 100 Tanggeung-Cibungur 111 G. Masigit-Guntur 122 Gunung Karaha 133 Guci 144 Parangtritis 155 Blawan-Ijen 90 Kawah Ratu 101 Saguling 112 Kamojang 123 Gunung Sawal 134 Mangunan-Wanayasa 145 Melati 91 Klaraberes 102 Cilayu 113 Darajat 124 Cipanas-Ciawi 135 Candradim uka 146 Rejosari 92 Awi Bengkok 103 Kawah Cibuni 114 Gunung Tampomas 125 Gunung Cakrabuana 136 Dieng 147 Telaga Ngebel 93 Ciseeng 104 Gunung Patuha 115 Cipacing 126 Gunung Kromong 137 Krakal 148 Gunung Pandan 94 Bujal-Jasinga 105 Kawah Ciwidey 116 Wayang-Windu 127 Sangkanhurip 138 Panurisan 149 Gunung Arjuno-Welirang 95 Cisukarame 106 Marbaya 117 Gunung Talagabodas 128 Subang 139 Gunung Ungaran 150 Cangar (Source: MEMR, 2009) Table 1-1 Estimated Geothermal Potential in Indonesia Resources(MWe) Installed Speculative Hypotetic Possible Probable Proven Capacity (MWe) Sumatra 4,925 2,076 5, Java 1,935 1,946 3, ,815 1,117 Bali Nusa Tenggara Kalimantan Sulawesi 1, Maluku Papua Total 265 Locations 8,935 4,551 11,369 1,050 2,288 13,486 15,042 Total:28,528 Total 1,189 (Source: MEMR, 2009) 12

35 Chapter 1 Overview of Host Country and Sector Table 1-2 List of Geothermal Power Plants in Indonesia Power Plant Sibayak Salak Wayang- Windu Kamojang Darajat Dieng Lahendong Location Unit MW Turbine Steam Power Operation Maker Supply Generation #1 2 Unknown 1996 PT. Pertamina North #2 5 Unknown 2007 PT. PT. Sumatra #3 5 Unknown 2007 Pertamina Dizamatra #1 60 ANSALDO 1994 Chevron #2 60 ANSALDO 1994 Geothermal PT. PLN West #3 60 ANSALDO 1994 Indonesia Java # Fuji 1997 Chevron Geothermal # Fuji 1997 Indonesia West Java West Java West Java Central Java North Sulawesi Total # Fuji 1997 #1 110 Fuji 2000 Mandala Nusantara Ltd #2 117 Fuji 2009 #1 30 MHI 1983 PT. #2 55 MHI 1988 PT. PLN Pertamina #3 55 MHI 1988 #4 60 Fuji 2008 PT. Pertamina # MHI 1994 Chevron Geothermal Indonesia PT. PLN #2 90 MHI 2000 PT. Chevron Geothermal #3 110 MHI 2007 Indonesia #1 60 ANSALDO 1999 Geodipa Energi #1 20 ALSTOM 2001 #2 20 Fuji 2007 #3 20 Fuji ,193.6MW PT. Pertamina PT. Pertamina PT. Pertamina PT. PLN PT. PLN PT. PLN (Source: Prepared by SNC study team) 1.3 The Situation of the Project Area Social Situation of the Bengkulu Province The surveyed area in this study is in Bengkulu Province, which is the southwestern part of the Sumatra Island, Indonesia. Bengkulu Province is surrounded by West Sumatra Province, Jambi Province, South Sumatra Province and Lampung Province. Hululais area is located at about 50 km north from Bengkulu city, capital city of Bengkulu Province and in Bengkulu side of the mountain Range, which separates Bengkulu Province and South Sumatra Province. The total area of Bengkulu Province is 19,789 km 2, and accounts for 1.1% of the whole 13

36 Indonesian land. The total population of the province is 1,713,000 according to the national population estimation for 2010, and it accounts for 0.7% of the entire Indonesian population. (Source: Population of Indonesia by Province 1971, 1980, 1990, 1995, 2000 and 2010)The regional Gross Domestic Production (GDP) of the province totals 14,447 billion IDR in 2008, and accounts for 0.3% of the whole Indonesia. The regional GDPs of Industrial Origin are 5,902.2 billion IDR (41%) for Agriculture, (3%) for Mining & Quarrying, (4%) for Manufacturing Industries, 68.1 (0%) for Electricity, Gas and Water Supply, (3%) for Construction, 2,846.2 (20%) for Trade, Restaurant & Hotel, 1,252.4 (9%) for Transportation & Communication, (4%) for Finance, Leasing and Business Services, 2,282.0 (16%) for Services that include Public Administration. Main Industry in Bengkulu is agriculture and most products of manufacturing Industries are processed from agricultural produce. As these numbers show, Bengkulu Province has been behind the development compared with the other provinces in Indonesia. This is mainly due to the poorness of mineral & petroleum resources and the geographic characteristic of remoteness from large cities. The poor population ratio over the total population in Bengkulu Province exceeds 14.15% of the Indonesia average; 18.59%. (As of March 2009) The Situation of Electricity Supply and Demand in the Bengkulu Province Installed capacity in the Sumatra system reached 4,070 MW in 2009, as shown in Table 1-3. However, 378 MW or 9.3 % of installed capacity was installed more than 20 years ago, 403 MW or 9.9 % of installed capacity consists of diesel power plants which are being phased out starting from 2007 for technical or economic reasons, and 855 MW or 21 % of installed capacity consists of hydropower plants, which depend on seasonal conditions. 14

37 Chapter 1 Overview of Host Country and Sector Table 1-3 Installed Capacity in Sumatra System (2009) Name of PP Fuel Install Capacity [MW] Net Capacity [MW] Northern Sumatra HPP Hydro GTPP HSD STCFPP MFO STCFPP Coal CCPP Gas/HSD Diesel HSD Micro Hydro Hydro Geo PP Geo Rent Diesel HSD Sun Total Southrn - Central Sumatra HPP Hydro GTPP Gas GTPP HSD STCFPP Coal STCFPP Gas CCPP Gas Micro Gas Gas Diesel HSD Diesel IDO Diesel MFO Sub Total Total (Source: PT. PLN data) Fig. 1-7 shows the transmission network of Sumatra Island. The network is interconnected through 150 kv transmission lines between NAD province (northernmost) and Lampung province (southernmost). As mentioned in section above, the north and south networks have been operating independently. 15

38 187 Fig. 1-7 Transmission Network of Sumatra Island (Source: RUPTL ) Fig. 1-8 and Table 1-4 show the power balance in the Sumatra System (2010 to 2019) in accordance with RUPTL Energy production in the Sumatra system is expected to rise at an average 10.9% per year between 2010 and 2019, increasing from 21,533 GWh in 2010 to 54,807 GWh in Load factor is estimated to be from 65.4% to 66.9%. Peak load in 2010 is 3,743 MW and will grow at an average of 10.7% per year, reaching 9,355 MW in It seems that the generating capacity is quite sufficient to meet the demand, as shown in Fig However, in the future development plan, there are as-yet unnamed projects in the list whose capacity is approximately 2,125 MW in total. In addition, generating capacity frequently decreases for various reasons such as regular maintenance of units, forced outages of units, low 16

39 Chapter 1 Overview of Host Country and Sector water flow rate of hydropower plants, etc. Fig. 1-8 Power Balance in the Sumatra System (2010 to 2019) 16,000 Dependable Capacity excluding Unnamed projects Unnamed projects Peak load 14,000 12,000 10,000 MW 8, ,425 1,725 2,125 6,000 4,000 2,000 4,572 5,200 6,192 6,635 8,531 9,051 9,625 10,130 10,860 11, Year (Source: Based on RUPTL ) 17

40 Table 1-4 Power Balance in the Sumatra System (2010 to 2019) Year Demand Energy production GWh 21,533 23,470 25,707 28,345 31,829 35,805 40,266 44,886 49,626 54,807 Peak load MW 3,743 4,099 4,487 4,958 5,553 6,219 6,965 7,731 8,505 9,355 Load factor % Supply Existing Installed capacity MW 4,038 3,778 3,621 3,006 3,006 3,006 2,940 2,940 2,940 2,940 PLN 3,683 3,387 3,230 2,680 2,680 2,380 2,680 2,680 2,680 2,680 IPP Lease PLN projects ,734 2,304 2,614 2,614 3,089 3,764 4,064 4,464 Ongoing Projects ,634 1,534 1,534 1,534 1,534 1,534 1,534 1,534 Planned Projects ,080 1,080 1,555 2,230 2,530 2,930 IPP ,324 3,060 4,080 4,495 4,850 5,580 6,510 Ongoing Projects Simpang Belimbing PLTG 227 Asahan I PLTA 180 Planned Projects ,653 3,673 4,088 4,443 5,173 6,103 Sewa PLTG Jambi Merang PLTG Gunung Megang, ST Cycle PLTGU 30 Banjarsari PLTU Jambi (Infrastruktur) PLTU Sumsel - 2 (Keban Agung) PLTU Sumsel - 6, Mulut Tambang PLTU Riau Mulut Tambang (Cirenti) PLTU Tarahan #1,2 PLTU Sumbar - 1 PLTU 200 Sumsel - 5 PLTU Sumsel - 7 PLTU Sumut - 2 PLTU 225 Ulubelu #3,4 (FTP2) PLTP Lumut Balai (FTP2) PLTP 220 Seulawah (FTP2) PLTP 55 Sarulla I (FTP2) PLTP Rajabasa (FTP2) PLTP 220 Muara Laboh (FTP2) PLTP 220 Rantau Dedap (FTP2) PLTP 220 Sarulla II (FTP2) PLTP 110 Wai Ratai PLTP 55 Pusuk Bukit PLTP Sorik Merapi (FTP2) PLTP 55 Sipaholon PLTP 55 G. Talang PLTP 20 Suoh Sekincau PLTP Danau Ranau PLTP 110 Wampu PLTA 45 Lawe Mamas PLTA Asahan #4,5 PLTA 60 Simpang Aur (FTP2) PLTA 29 Total Capacity MW 4,572 5,200 6,192 6,635 8,681 9,701 10,525 11,555 12,585 13,915 Dependable Capacity excluding Unnamed projects MW 4,572 5,200 6,192 6,635 8,531 9,051 9,625 10,130 10,860 11,790 Unnamed projects MW ,425 1,725 2,125 Reserve margin % 22% 27% 38% 34% 56% 56% 51% 49% 48% 49% (Source: Based on RUPTL ) 18

41 Chapter 2 Study Methodology Chapter 2 Study Methodology 2.1 Content of the Study Contents of the Study Geothermal power development projects in Hululais field were studied for the Yen Loan project formation. To study geothermal projects, the following information is required; information about geothermal resources, information about electricity demand, environmental condition and so on. In this study, expected potential of geothermal resource, economic and financial feasibility of the project, social and natural environment conditions were evaluated through existing data collection/review and site reconnaissance (Fig. 2-1). Contents of this study are summarized as follows. 1) Collection/review of existing data and information Geological survey Geochemical survey Geophysical survey Geothermal structural modeling and resource evaluation Electricity demand and transmission line 2) Study on development plan Geothermal exploration and resource development Power plant and transmission lines 3) Consideration of natural and social environment 4) Economic and Financial Analysis 5) Report to SNC and Japanese Government 19

42 Fig. 2-1 Overall Program of Geothermal Power Development THIS STUDY GEOTHERMAL RESOURCES Collection of data/information of the geothermal field Geoscientific review of the data/information Geothermal conceptual modeling Compilation of geoscientific and environmental information Capacity evaluation of the geothermal resource POWER PLANT FACILITIES Collection of data/information Conceptual design of power plant and transmission line & substation equipment, well drilling, cost estimation, and construction plan SOCIAL AND NATURAL ENVIRONMENT/ CDM POTENCIAL ECONOMIC AND FINAMCIAL ANALYSIS REPORT OF THE STUDY PT.PGE Well drilling Well Testing ENGINEERING SERVICE LOAN OF DOWNSTREAM ENGINEERING SERVICE LOAN OF UPSTREAM DETAIL DESIGN OF GEOTHERMAL POWER PLANT/ WELLS DRILLING CONSTRUCTION OF POWER PLANT (Source: Prepared by SNC study team) 20

43 Chapter 2 Study Methodology Objective Field Objective field is Hululais in Bengkulu province located at southern part of Sumatra Island (Fig. 2-2). Fig. 2-2 Location of the Hululais Geothermal Field (Source: Prepared by SNC study team) 2.2 Methods and Member of the Study Method of the Study For this study, existing data and required information were collected in Jakarta and field trip was conducted. And collected data and information were reviewed and analyzed in Japan. The study team had well discussion about the study results and project scope with implementation body of the project (PT. PGE, and PT. PLN). The mission trip to Indonesia was conducted two times as follows. 21

44 The 1st mission trip was conducted in middle of December The study team visited PT. PGE and PT. PLN and explained outline of this study, and collected existing data and information. In this trip field trip was also carried out. The 2nd mission trip was conducted middle of January 2011, to explain the study results. Through the 1st and 2nd mission trips, report of this study was prepared in Japan Study Member and Organization of the Study Implementation Agency The main members are shown in Table 2-1. Table 2-1 Main Member List of This Study Name Specialty Assignment OISHI Kohei Study Project Manager Project Administration SHIMADA Kan ichi Geochemist Geothermal Resource Evaluation, Geochemistry AKASAKO Hideo Geologist Geothermal Resource Evaluation, Geology NAGANO Hiroshi UCHIYAMA Noriaki FUKUOKA Koichirou Environmentalist Economist Geophysicist Geochemist Environmentalist Geophysicist Reservoir Engineer Geothermal Resource Evaluation Implementation Plan Social and Environmental Consideration CDM Geothermal Resource Evaluation, Geochemistry Geothermal Resource Evaluation, Geophysics ONIKI Shigeru Electrical Engineer Transmission Line, Substation Power Sector FUJII Kenji Economist Financial and Economic Evaluation Implementation Plan IKEDA Tetsu Drilling Engineer Well Drilling TAKAFUJI Tsuyoshi Plant Engineer Power Plant Conceptual Design (Source: Prepared by SNC study team) 22

45 Chapter 2 Study Methodology 2.3 Study Schedule The study was conducted from 29 November 2010 to 21 February The study schedule is shown in Fig Fig. 2-3 Study Schedule December 2010 January 2011 February 2011 (Work in Indonesia) 1Data collection 2Explanation/discussion of draft report 12/12/10-18/12/10 16/01/11- (In Japan) 20/01/11 1Preparation for field survey 2Preparation for draft report 3Financial/economical evaluation 4Finalize report (Report to Japanese Government) 1Draft report 2Final report 11/01/11 21/02/11 (Source: Prepared by SNC study team) The 1st Mission The 1st mission was conducted from 12 December to 18 December The study team explained about study contents to counterparts and related organizations collected information from counterparts. Field survey was also conducted (Table 2-2). 23

46 Table 2-2 The 1st Mission Trip Schedule Days Month Date Day Activity Sun Trip from Fukuoka to Jakarta via Singapore (Oishi, Akasako, Oniki, Nagano, Fukuoka, Uchiyama) Mon Meeting with PT. PGE Tue Meeting with PT. PLN, Meeting with JETRO Move from Jakarta to Bengkulu Wed Field Reconnaissance: Hululais field Thu Move from Bengkulu to Jakarta (Oishi, Akasako, Oniki, Nagano, Fukuoka, Uchiyama), Meeting with PT. PGE Trip from Jakarta to Singapore (Oishi) Fri Trip from Singapore to Fukuoka via Haneda (Oishi) Meeting with JICA, Trip from Jakarta to Singapore (Akasako, Oniki, Nagano, Fukuoka, Uchiyama) Sat Trip from Singapore to Fukuoka (Akasako, Oniki, Nagano, Fukuoka, Uchiyama) The 2nd Mission The 2ndt mission was conducted from 16 January to 20 January The study team had meetings with counterparts and related organizations to report and discuss about the study results. Mission trip schedule is shown in Table

47 Chapter 2 Study Methodology Table 2-3 The 2nd Mission Trip Schedule Days Month Date Day Activity Sun Trip from Fukuoka to Jakarta via Singapore (Oishi, Shimada, Akasako, Nagano, Uchiyama) Mon Meeting with PT. PGE Tue Meeting with PT. PLN, Meeting with JETRO Fri Meeting with JICA Trip from Jakarta to Singapore (Oishi, Shimada, Akasako, Nagano, Uchiyama) Sat Trip from Singapore to Fukuoka (Oishi, Shimada, Akasako, Nagano, Uchiyama) Persons Interviewed during the Mission Trip During the mission trips, the study team visited the following persons to brief them the study, and obtained useful information and data. Table 2-4 Persons Interviewed during the Mission Trip Affiliation Position PT. PGE PT. PLN JICA JETRO Vice president General manager of renewable energy department Jakarta office, Representative Jakarta center, Vice president director 25

48 Chapter 3 Justification, Objectives and Technical Feasibility of the Project Chapter 3 Justification, Objectives and Technical Feasibility of the Project 3.1 Project Background and Necessity According to National Electricity General Plan (RUKN ) of the MEMR, the peak electricity demand in 2008 was 25,407 MW against installed capacity of 24,509 MW. And future electricity demand is forecasted to increase at an average rate of 9.1% every year until Regarding the Sumatra grid, the peak electricity demand for in 2008 was 3,316 MW and it is forecasted to increase at an average rate of 7.9% every year until 2017, reaching 6,602 MW. The installed capacity in 2008 was, 3,700 MW, but greater capacity needs to be developed rapidly as degradation of capacity and growth in demand are expected. The Government of Indonesia (GOI) is working on developing and increasing the electricity supply capacity to meet the growing power demand as well as diversifying Indonesia's energy mix by promoting the use of renewable energy sources. To achieve these goals, the GOI has announced a second 10,000 MW development program, known as Crash Program II, which plans to tap the large geothermal resources for power generation- Indonesia s reserves are estimated at 27,000 MW - to fulfill about 35% of the goal of this program, providing 3,583 MW according to GOI s document published in January At present, only 1,193.6 MW of geothermal power has been developed so far of the potential of 27,000 MW. To accelerate geothermal power development, the MEMR launched a Geothermal Road Map aiming at the development of 9,500 MW geothermal power by the year 2025 as nonbinding target of the Indonesian Government. 26

49 Fig. 3-1 Geothermal Road Map and Crash Program II MW (Production) 2,000 3,442 4,600 6,000 9,500 MW 1,148 MW 1,442 MW 1,158 MW 1,400 MW 3,500 MW Existing Existing Existing New WKP New WKP WKP WKP WKP + New 1,193.6 MW Crash Program Current Condition Scenario Phase II (Source) Presentation material of MEMR(2009) (revised) The target was set based on New Energy Policy (2002) for 5% supply of necessary energy in 2020 to 2025 by geothermal energy utilization and was described in Presidential Decree (PD) No.5/2006, The Crash Program is designed to develop geothermal power far faster and in a bolder manner than the Road Map. Of the 9,500 MW of geothermal power development planned in the Road Map, about the development of 6,500 MW is derived from PT. PGE-related geothermal fields in Indonesia according to the JICA Master Plan of PT. PGE planned to develop geothermal resources from steam field development to power plant construction in their Working Areas and to supply geothermal steam to power plants constructed by PT. PLN in some of geothermal fields. According to geothermal development policy summarized by BAPPENAS, the steam field development and the power plants construction in the Hululais field are considered to be conducted by PT. PGE and PT. PLN respectively. Thus, in attaining the government goal for geothermal power development, PT. PGE s and PT. PLN s roles are very significant and critical in achieving realization of the expected development. 27

50 Chapter 3 Justification, Objectives and Technical Feasibility of the Project Table 3-1 Possible Proprietors of Major Geothermal Power Development Projects in Indonesia Project Steam Field Power Plant Output Development Lumut Balai #1&2 PT. PGE PT. PGE 110 MW Lahendong #5&6 PT. PGE PT. PGE 40 MW Ulubelu #3&4 PT. PGE PT. PGE 110 MW Karaha #1 PT. PGE PT. PGE 30 MW Karaha #2 PT. PGE PT. PGE 110 MW Lumut Balai #3&4 PT. PGE PT. PGE 110 MW Hululais #1&2 PT. PGE PT. PLN 110 MW Kotamobagu#1-4 PT. PGE PT. PLN 80 MW Sungai Penuh#1&2 PT. PGE PT. PLN 110 MW Kamojang #5 PT. PGE PT. PLN(PT. PGE) MW (Source: BAPPENAS data) PT. PGE has already developed 7 of the 18 geothermal fields belonging to them through Joint Operating Contracts (JOC) with the private developers and PT. PGE is now accelerating the development of the remaining 11 geothermal fields, including the Hululais geothermal field with which we are concerned here. In Crash Program II, three geothermal power development programs in Hululais, Sungai Penuh and Kotamobagu were planned as new joint projects of steam field development/steam supply by PT. PGE and power plant construction/operation /maintenance by PT. PLN. Great stride power development by PT. PGE/PT. PLN is expected from the viewpoints of domestic energy use and prevention of global warming by CO 2 emission. Regarding the Hululais geothermal power development, PT. PLN plans to develop 110 MW geothermal power plants before 2014 in consideration of Crash Program II. n PT. PGE is announcing about the Hululais development to the public as follows. The project has a capacity potential of 300 MW. The project is very much counted on to help overcome the deficit of electric energy needs in Bengkulu region and the nearby regions. Currently, the activity conducted in Hululais Project is in an infrastructure and drilling preparatory stage. PT. PGE has targeted that two Units of geothermal power plants with a capacity of 2 x 55 MW will be in a commercial operation in

51 For preparing the project, PT. PGE requested to conduct geothermal study (prefeasibility study) to the Japanese Government through West JEC in Additionally, PT. PLN requested the financial support for the development project to the Japanese Government. For realizing the ODA loan for geothermal power development, several conditions related to resource potential and, environmental and economic/financial constraints should be clarified through feasibility study. Regarding the Hululais project, since even prefeasibility study had not been conducted, resource potential and feasibility of the project should be discussed through the geothermal study. Usually, existence of geothermal resources, which can be used for geothermal power generation, and resource quality and quantity, should be confirmed by well drilling as preconditions for deciding JICA finance as the ODA Yen Loan project. In the Hululais field, the resource existence has not been confirmed and the steam condition for conceptual design of geothermal power plant has not been obtained so far. Therefore, it is considered that application of Engineering Service (ES) Loan is an adequate measure for preparation of the Hululais projects of steam field development by PT. PGE and power plant construction by PT. PLN, if the geothermal resource has sufficient potential and adequate quality. For realizing the JICA support for the Hululais geothermal power development, prefeasibility study documents for the Hululais Units 1 and 2 specifying the conditions for an ODA loan are necessary. The geothermal resource potential and outline of the project should be revealed under the present condition. It was planned that preliminary preparation of an implementation program for steam field development, construction of the geothermal power plant and associated transmission line and substation was conducted, using a result of the said assessment. 3.2 Basic Policy for the Geothermal Project Development The Priority for the Project and Necessary Study As described previously, the Hululais geothermal power development project is one of the key projects of Crash Program II and priority of the project is considered to be relatively high for the Indonesian Government, PT.PGE and PT.PLN. They wish to contrive to commence commercial operation of the geothermal power plant in Hululais by The development of geothermal resource and power plants should be started as soon as possible. Considering the present development condition of the geothermal resources and procedure of ODA Yen Loan, devices to shorten periods for the procedures and the development are definitely required. Application of Engineering Service (ES) Loan to the Hululais project is effective assistance by 29

52 Chapter 3 Justification, Objectives and Technical Feasibility of the Project JICA to PT. PGE and PT. PLN s projects for preparation of ODA Yen Loan. Usually, information and data of project feasibility are necessary for deciding ODA Yen Loan for the geothermal power development and plant construction project. Since these data and information were insufficient in 2010, the application of the ES Loan to preparation of the project seems to be adequate. Feasibility study including resource evaluation by using well data should be mainly conducted during the ES Loan project. However, even if the finance amount is a little, the ES Loan is a kind of ODA loan. Therefore, it seems that the finance conditions for the project will be set, in technical consideration of development risk Technical Factors for the Project Planning (1) Conditions deciding ODA Yen Loan for Geothermal Power Development and ES Loan for Feasibility Study including Exploratory Well Drilling For deciding ODA Yen Loan to support geothermal development, appraisal of the planned geothermal power development project is carried out usually by JICA. The feasibilities of the following items will be checked considering the procedures for the Lumut Balai and Ulubel Yen Loan projects. Therefore, feasibility documents for evaluation these items should be prepared before JICA appraisal using ES Loan, own budget or other support. Resource Development Project for PT. PGE 1. Adequate results of resource evaluation using reasonable methods and proper data 1-1. Geothermal resource data (including exploratory well data) and model for steam field development plan and power plant design 1-2. Resource potential estimated by using reservoir simulation and resource development scenario as results of the simulation 2. Adequate resource (steam field) development plan (well drilling and FCRS) 2-1. Plan of drilling of production wells and reinjection wells, and FCRS construction 2-2. Cost estimation for the resource development 3. Adequate consideration of social and natural environment for the resource development (AMDAL, countermeasures etc.) 4. Adequate results economic/financial analysis 5. Adequate implementation program of the resource development (including schedule of well drilling and FCRS) Power Plant and Transmission Line Construction Project for PT. PLN 30

53 1. Future power demand and power supply for verifying necessity of the project 2. Adequate conceptual design of geothermal power plant, ancillary equipment and transmission line 2-3. Conceptual design and construction planning of geothermal power plants (including transmission line construction) 2-4. Cost estimation of power plant construction 3. Adequate consideration of social and natural environment for power plant construction (AMDAL, countermeasures etc.) 4. Adequate results economic/financial analysis 5. Adequate implementation program of the power plant and transmission line construction In this study, if geothermal resource in the Hululais field is qualified for feasibility study using ES Loan was checked with existing surface survey data as preparation study. The following criteria for selecting the adequate field were used. Criteria for selecting geothermal fields to conduct feasibility study were described in final report of JICA Preparatory Survey for Geothermal Power Development, Sector Loan (2010). These criteria can be regarded as pre-conditions for deciding the ES Loan project, because feasibility study will be mainly conducted in the ES Loan project. The conditions and criteria in regard to selecting geothermal field for (resource) feasibility study are described as follows. 31

54 Chapter 3 Justification, Objectives and Technical Feasibility of the Project Table 3-2 Criteria for Selecting Fields for Feasibility Study Essential item A) Existence of geotherm al reservoir Heat/Fluid B) Reservoir temperatu re Heat/Fluid C) Existence of volcanic rocks and activity of as heat sources Heat D) Existence of alteration rocks by hydrother mal activity Heat/Fluid E)Existence of geologica l structure suitable f formation of geotherm al reservoirs Structure Method Criterion Priority Remarks Geochemical (and isotopic) data of hot spring water and fumarolic gases (or well discharge) Geochemical (and isotopic) thermometers of neutral ph chloride type water and/or fumarolic gases derived from the reservoirs (or well discharge) (Fluid inclusion homogenized temperature) Geological data of rock dating Geological data of alteration rock dating Structural data in geological study and geophysical surveys such as gravity survey and resistivity surveys Neutral ph chloride 1 st Neural ph Cl type type water(chloride hot spring water ion content of higher than some hundreds ppm) and/or fumarolic gases derived from the reservoirs, fluid originated from meteoric water or sea water strongly indicates the reservoir existence. circulating water (not trapped or magmatic water) Higher than 200 o C 1 st Temperature of neutral ph Cl type water is the most reliable information. Temperature from the fumarolic gases and the fluid inclusion are given decreased priority due to many and large disturbing factors. Younger than nd million years ago Younger than 0.3 million years ago Possibility of existence of high permeability along faults and in formation. Possibility of existence of impermeability as cap rocks or sealing zones around the reservoirs 2 nd 2 nd (Source: Prepared by SNC study team) 32

55 For conducting feasibility study, basic design, etc. for geothermal power development in the surveyed fields (using ES loan), it is necessary to show that geothermal resources in the objective field meet the requirements described above. Most of all data and information of the items described above are usually deduced from surface survey data. Therefore, validity of these data and information should be confirmed by exploratory well drilling and tests before starting the design and preparation works of geothermal power plant construction. Provided that existence of geothermal resources in the objective field is verified by the surface surveys and/or exploratory well drilling, potential of the resource should be calculated to discuss whether the power plant can receive enough steam or not. A method of stored heat simulation combined with Monte Carlo analysis is generally used for evaluating potential of the geothermal resource at this stage. In case that the geothermal resources is judged to have enough capacity to supply steam or energy to geothermal power plants, feasibility study, basic design and preparation for geothermal power development may be stared using the ES loan. (2) Outline of Hululais Field The Great Sumatra Fault runs from the northwest to the southeast, approximately along the provincial boundary between Bengkulu Province and Jambi Province and along that between Bengkulu Province and South Sumatra Province. Many geothermal fields occur around these provincial boundaries (see Fig. 3-2). The Hululais field is one of these geothermal fields. This field is situated about 80 km north from Bengkulu City (Capital city of Bengkulu Province) and has area of about 120 km 2. This field belongs to Lebong District and North Bengkulu District. However, planned development area is in South Lebong Sub-district, Lebong District. A ridge runs northwest to southeast in the southwestern part of the Hululais field, from Mt. Lumut to Mt. Beritikecil, through Mt. Hululais (2,130 m above sea level). The northeastern part of this field has rather flat topographic futures and its elevation is around 500 m above sea level. The River Ketahun flows down toward the northwest in the northeastern part. 33

56 Chapter 3 Justification, Objectives and Technical Feasibility of the Project Fig. 3-2 Location Map of Hululais Field NORTHING (m) 900 Mt. Koleng River Ketahun Muaraaman 700 LEBONG DISTRICT NORTH LEBONG SUB-DISTRICT Hululais Field Mt. Reges W N S E Semalako River Santan River Aman Mt. Lumut Mt. Cemeh Turunlalang Lake Tes NORTH BENGKULU DISTRICT Suban Gregok Mt. Hululais Suban Agung 1700 Mt. Beritibesar 1500 Mt. Beritikecil 700 SOUTH LEBONG SUB-DISTRICT Mt. Pabuar LAIS SUB-DISTRICT Mt. Tiga EASTING (m) (Source: MEMR, 2009, Bakosurtanal, PT. PGE) 34

57 (3) Geology and Geological Structure Quaternary volcanic rocks mainly cover the surface in and around the Hululais field (see Fig. 3-3). They consist of volcanoes, Mt. Lumut, Mt. Hululais, Mt. Beritibesar, Mt. Beritikecil, and Mt. Koleng. They are classified into 9 formations; Pabuar obsidian (PBO) in Holocene, Lumut andesite (LMA), Pabus tuff (PBT), Hululais andesite (HLA), Tiga andesite (TGA), Koleng andesite (KLA), Lekat andesite (LKA), Resam andesite (RSA) and Mubai Breccia (MBB) in Pleistocene. The oldest formations cropping out in the area given in Fig. 3-3 are Cuguk andesite (CGA) in the northeastern part and Cogong diorite (CGD) in the southern part. Both formations are regarded to be a formation in Miocene. Alluvium extends along the River Ketahun. As a basement rock in this field, sedimentary rocks in Pre-neogene are estimated, though they do not crop out in and around this field. Granite in Miocene and Granodiorite in Cretaceous crop out Around Tambang Sawah, being about 8 km northwest from the area shown in Fig As silicic rocks crop out around the field and andesitic magmatism from Pleistocene is identified in this field, this continuous magmatism can be regarded as a heat source of geothermal activity in and around this field. In and around the Hululais field, 8 faults are estimated (see Fig. 3-3): Faults F1, F2, F3 and F5 trending northwest to southeast. These faults must be closely related with the Great Sumatra Fault. Fault F4 trending north-northeast to south-southwest, fault F6 trending south to north, fault F7 trending northeast to southwest and fault F8 trending east-northeast to west-southwest have shorter length, compared with the former 4 faults trending northwest to southeast. (4) Geothermal Manifestations and Altered Ground Geothermal manifestations such, as fumaroles and hot springs, and altered ground are identified on the northeastern side of the ridge trending northwest to southeast, from Mt. Lumut to Mt. Beritikecil. Around the summit of Mt. Hululais, fumaroles and altered ground occur, namely Suban Agung. Moreover, mudpools (Suban Gregok) and hot springs occur on the northern slope of Mt. Hululais. On the northern slope of Mt. Beritibesar, mudpools and hot springs also occur. These mudpools are situated at a higher elevation, though hot springs occur at a lower elevation. Detailed consideration about these geothermal manifestations will be described in the following section. 35

58 NORTHING (m) Chapter 3 Justification, Objectives and Technical Feasibility of the Project Fig. 3-3 Geological Map of Hululais Field Neogene Miocene Quarternary Pleistocene Holocene LKA Muaraaman F3 River Ketahun Mt. Koleng B KLA Mt. Reges W N S E 500 al F1 PBT Semalako F2 700 CGA 1500 River Santan RSA LMA River Aman Mt. Lumut 1500 Mt. Cemeh Turanlalang MBB F4 Lake Tes F6 Suban Gregok F5 F7 Mt. Hululais F8 Suban Agung 1700 HLA Mt. Beritibesar 1500 Mt. Beritikecil Mt. Pabuar A Mt. Tiga 1300 PBO TGA 300 CGD 1300 A EASTING (m) Mt. Hululais Suban Agun B TGA F1 Suban Gregok Mt. Cemeh SO4 HLA HCO3 Semalako Cl-HCO3 Punduk Badaro RSA Legend TGA CGA RSA MBB F8 F5 F2 al PBO LMA PBT HLA TGA KLA LKA RSA MBB CGD CGA Alluvium Pabuar Obsidian Lumut Andesite Pabus T uff Hululais Andesite Tiga Andesite Koleng Andesite Lekat Andesite Resam Andesite Mubai Breccia Cogong Diorite Cuguk Andesite A B Fumarole Mudpool Hot Spring Altered Ground Collapse Structure Fault Cross Section al CGA HCO3 KLA MBB Pre-neogene Sedimentary Rocks Andesitic Intrusive (Source: PT. PGE) 36

59 (5) Chemistry of Geothermal Fluid Origin, temperature and fluid flow of geothermal fluid is considered by chemical analysis data of hot spring, fumaroles and geothermal well. In this field, there is no data of geothermal well, so hot spring and fumaroles data were used for analysis. PT. Pertamina had surveyed 16 hot springs and 2 fumaroles in this field in 1994 (Fig. 3-4; Budiardjo et al., 2001). And one hot spring and one fumarole were surveyed in the JICA Geothermal Master Plan study (JICA, 2007). These data were used for analysis. Outflow temperature of these hot spring and fumaroles were 40 to 98 o C, relatively active geothermal manifestation. About the chemical characteristics of hot spring, low Chloride content, acid SO 4 -type and steam mixing type in southern area, whereas high Chloride content, neutral, Cl-HCO 3 to Cl-type(Cl max=3,160mg/l)steam heated- deep reservoir fluid mixing- type(fig. 3-5, and Table 3-1). δd-δ 18 O(H 2 O) diagram(fig. 3-6)shows the origin of this field is meteoric water and there will be no contribution of seawater. So the high Chloride concentration of the northern part shows mixing of deep geothermal fluid interacted with rock under high temperature. Based on the distribution of Cl/HCO 3, HCO 3 /SO 4 and Hg content in soil air, deep geothermal fluid is up-welling at southern part(suban Agun) and flow out to northern part. Besides, a part of deep geothermal fluid is flowing out to the surface at southern part(suban Agun), because Chloride concentration of hot spring is slightly high (1,400mg/L). About the temperature of the reservoir, it is possible to calculate from the ratio of chemical component of hot spring and fumaroles after water-rock interaction. Geothermometer from hot spring of this field shows only about 200 o C(Na-K geothermometer), but 250 to 280 o C is calculated(co 2 -H 2 S-H 2 -CH 4 geothermometer, CO 2 /Ar geothermometer, Table 3-2). And hot water is thought to be conductively cooled while it is outflowing, so temperature of deep geothermal fluid is considered 250 to 280 o C. Chemical characteristics of geothermal fluid will be neutral and Cl-type, Chloride concentration will be more than about 3,000 mg/l. Silica (SiO 2 ) is contained in the geothermal brine and precipitates and blocks the reinjection line after cooling, so high temperature reinjection method or others will be desired. Noncondensable gas content is assumed 1.0 wt% same as nearby Lumut Balai field, because there is no available data in this field. 37

60 Chapter 3 Justification, Objectives and Technical Feasibility of the Project Fig. 3-4 Distribution Map of Hot Springs and Fumaroles in the Hululais field (Source: Budiardjo et al., 2001) Fig. 3-5 Trilinear Diagram of Anion of Hot Spring (Source: Budiardjo et al., 2001) 38

61 Fig. 3-6 δd-δ 18 O(H 2 O) Diagram (Source: Budiardjo et al., 2001) Table 3-3 Chemical Analysis Data of Hot Spring and Fumarole (Source: PT. PGE) 39

62 Chapter 3 Justification, Objectives and Technical Feasibility of the Project Table 3-4 Chemical Analysis Data of Fumarole and its Calculated Geothermometer Item unit Value NCG vol% 15.7 CO 2 vol% H 2 S vol% 0.41 H 2 vol% N 2 vol% 1.36 CH 4 vol% Ar vol% Geothermometer CO 2 -H 2 S-H 2 -CH 4 o C 250 CO 2 /Ar o C 280 (Source: Prepared by SNC study team based on JICA, 2007) (6) Geophysical Data (a) Gravity Survey Detailed specifications such as the period of the field work, the number and locations of stations, or data processing procedure are unknown. The distribution of Bouguer anomaly is shown in Fig In Fig. 3-7, a general trend that high anomalies distribute at southwestern region and low anomalies distribute at northeast region is apparent. The general trend is consistent with averaged strike directions of faults F1, F2, F3 and F5 that are delineated in Fig Thus the distribution of Bouguer anomaly possibly reflects the regional geological structure in the Hululais geothermal field. An isolated high Bouguer anomaly (shaded in blue color in Fig. 3-7) that overrides the general SW-NE trend can be found at northeastern flank of Mt. Hululais. In general, high Bouguer anomalies are indications of the existence of high-density rocks such as intrusive rocks. The origin of the high isolated anomaly cannot be clarified due to limited information. A moderate shaped high anomaly can be found at the northeastern flank of Mt. Beritkecil, and 40

63 two peaks can be identified inside of the high anomaly. The locations and the shapes of the high anomalies are consistent with the locations of faults F6 and F7 shown in Fig This feature can be interpreted as those high anomalies reflect the existence of blocked region bounded by the faults. As a whole, the result of the gravity survey generally agrees with the regional geological structure in Hululais area. However, the above mentioned SW-NE trend is so obvious and it screens small scale local characteristics of Bouguer anomaly. Spatial filtering analysis is necessary to investigate the local structure. 41

64 Chapter 3 Justification, Objectives and Technical Feasibility of the Project Fig. 3-7 Bouguer Anomaly Distribution in Hululais Field (Source: PT. PGE) (b) Schlumberger Resistivity Survey A contour plot of Schlumberger apparent resistivity with electrode spacing AB/2=750 m is shown in Fig As depths of investigation for Schlumberger array are roughly equivalent to electrode spacing AB/2, the figure illustrates an averaged resistivity structure in Hululais field from the surface down to approximately 750 m depth. A fairly long line span (1,500 m) is necessary for conducting a Schlumberger sounding with AB/2=750 m, it was likely that the Schlumberger sounding sites were rather sparsely placed in the field. The crosses shown in Fig. 3-8 possibly corresponds to Schlumberger sounding sites. 42

65 The distribution of apparent resistivity shows a sketchy feature that a resistive region that exceeds 60 ohm-m is surrounded by three conductive regions. As the site locations might be rather sparse, no site can be indentified inside of the resistive region, and no reason for dividing two conductive regions at southern area. However, the shape of two conductive regions at southern area agrees fairly well with high Bouguer anomalies, and the resistive region corresponds to steep changes in Bouguer anomaly distribution. Surface manifestations such as hot springs or fumaroles are included in the conductive region that distributes near National Road. In general, resistivity structures in geothermal fields are less affected by differences in rock types but rather strongly affected by differences in porosity and altered mineral contents. Different types of altered minerals are generated under different temperature conditions, and their resistivity varies accordingly. For example, smectite form stably under low temperature environment, and it is conductive as less than 10 ohm-m. Illite or chlorite form under high temperature environment and their resistivity are several tens of ohm-m that are significantly higher than smectite resistivity. From the discussions written in the previous section, a hypothesis could be deduced from geochemical characteristics of geothermal fluid in Hululais field. The parental fluid of Hululais area ascends from the deeper region beneath Mt. Hululais, and flows laterally northward, and flows out at the surface as surface manifestations while mixed and diluted with meteoric water. On the other hand, manifestations near the summit of Mt. Hululais probably originated from the heating by the steam separated from the parental fluid. The distribution of Schlumberger apparent resistivity agrees with the above hypothesis. Among the conductive areas that surround the resistive region, the one distributes near the summit of Mt. Hululais possibly corresponds to the manifestations originated by steam heating, and the one that can be seen near the National Road probably corresponds to manifestations of the mixture of parental fluid and meteoric water. The distribution of Schlumberger apparent resistivity can be interpreted consistently with the hypothesis deduced from the geochemical data. However, the interpretation must be rather qualitative because of the limitations that the data is unprocessed apparent resistivity and the 43

66 Chapter 3 Justification, Objectives and Technical Feasibility of the Project sites are quite sparsely placed. Detailed interpretations should be made by results of MT data analysis written in the next section. Fig. 3-8 Schlumberger Apparent Resistivity Distribution in Hululais Field (Source: PT. PGE) 44

67 (c) Magneto-Telluric Survey A Magneto-telluric (MT) survey that utilized 30 stations was conducted in Hululais geothermal field. The site locations are shown in Fig Five (5) NE-SW lines and four (4) NW-SE lines were placed in the surveyed area. The line spicing varied from 2 km to 3.5 km, and observations sites were placed in approximately 1km spacing on each line. TDEM measurements with central-loop configuration were made at each MT station in order to correct so-called static shift effect and topographic effect that frequently cause difficulties in MT data analysis. A computer code used in the analysis was the finite-difference, Gauss-Newton algorithm of Sasaki (2004). A finite-difference grid was aligned in right-hand system with N40W direction as x-direction, vertical down as z-direction. The finite-difference mesh was devised into 65 nodes in x-direction, 49 nodes in y-direction, and 33 nodes in z-direction, respectively. Coarser grids were placed near the end of the numerical grid in each direction, and finer discretization was used in the central portion to reduce the effect of boundary conditions. Owing to the topographic correction by TDEM method, the surface was treated as a planar air-earth interface. An inversion cell composed of 2x2 finite-different cells horizontally and one finite-difference cell vertically. The matching target data were amplitudes and phases in XY-mode (electric field in x-direction, magnetic field in y-direction) and YX-mode (electric field in y-direction, magnetic field in x-direction). To achieve an efficient inversion runs, the data were binned to a set of 14 frequencies spaced four per decade from 56 Hz to Hz. The setting was adopted based on the results of sensitivity analysis for delineating structures from 100m to 5 km. The inversion runs started with homogeneous (10 ohm-m) half space, and converged to RMS=4.7 after six or seven iterations. An example of comparison between observed data and calculated response is shown Fig Fairly good matching was achieved. No indications for static-shift effects (stripes are conspicuous only in apparent resistivity pseudo section, not in phase) is apparent in the figure. Thus the corrections for static-shift and topographic effects might be effective. 45

68 Chapter 3 Justification, Objectives and Technical Feasibility of the Project As a whole, the 3D inversion process contained no drawbacks and it could be concluded that reliable resistivity structure was obtained. Plan views of the resistivity structure obtained by the 3D inversion are shown in Figs to Fig Fig shows the resistivity distribution at 325m depth, Fig is that for 675 m depth, and Fig shows the resistivity distribution at 1,375m depth. From these figures, it is apparent that a conductive layer of which resistivity less than 1 ohm-m covers most of Hululais field at 325 m depth. The distribution of conductive layer reflects the contents of altered minerals that form under relatively low temperature, such as smectite, and the layer possibly corresponds to the cap rock of geothermal reservoir in Hululais. In the figure, higher resistivity distributes near the sites MT-16 and MT-22, and MT-14. The resistivity values around these sites exceed 50 ohm-m, and the high resistivity zone spreads to the sites MT-10, to MT-16 and 17, and in southeast direction it reaches to MT-26 and 27. The high resistive zone possibly corresponds to the contents of altered mineral that forms under higher temperature, such as chlorite or illite, and it corresponds to the up flow zone of geothermal fluid. At depth level 1,350 m, the area with low resistivity become smaller than high resistivity zone, and the center of the high resistivity migrates beneath the body of Mt. Hululais and Mt. Beritibesar. These features agree with hypothetical flow path of geothermal fluid, and it supports the assumption that the heat source of Hululais field probably situates beneath the two mountains. At the depth level of 1,350 m, two isolated conductive bodies are apparent, and a high resistivity zone exists at northeast of the conductive bodies. A medium resistivity zone connects the high resistivity to the center of upflow zone beneath Mt. Hululais and Mt. Beritibesar. The medium resistivity zone corresponds to can be interpreted to be the path of lateral flow of geothermal fluid in the Hululais area. Currently, an exploration well in under the drilling process, aiming at the medium resistivity zone (shown in red dotted ellipse in Fig. 3-13). It is preferable to refine geothermal conceptual model of the Hululais area by combined interpretation of MT results and the drilling results. 46

69 Fig. 3-9 MT Site Locations in Hululais Geothermal Field (Source: Prepared by SNC study team) 47

70 Chapter 3 Justification, Objectives and Technical Feasibility of the Project Fig Example of Observed Data and Calculated MT Response (Source: PT. PGE) 48

71 Fig Resistivity Distribution at 325 m Depth (Source: PT. PGE) 49

72 Chapter 3 Justification, Objectives and Technical Feasibility of the Project Fig Resistivity Distribution at 625 m Depth (Source: PT. PGE) 50

73 Fig Resistivity Distribution at 1,375 m Depth (Source: PT. PGE) 51

74 Chapter 3 Justification, Objectives and Technical Feasibility of the Project (7) Conceptual Model of Geothermal System in the Hululais Field (i) Prospective Area and Geological Units Controlling Permeability Rocks in and around geothermal reservoir of a water-dominated type are altered through water-rock interaction. As temperature of hot water decreases toward a marginal part from the center of the reservoir, resulted secondary minerals from hydrothermal alteration become lower temperature phase, toward the marginal part. When alteration temperature is lower than 200 o C, resulted secondary minerals are mainly composed of smectite, chlorite-smectite interstratified mineral, illite-smectite interstratified mineral, quartz (chalcedony and/or cristobalite, when temperature is lower than 100 o C), halloysite, and so on. Among these secondary minerals, smectite and smectite component in interstratified clay minerals contain exchangeable cations. Therefore, when argillized rock is mainly composed of smectite and/or interstratified clay minerals containing smectite component, resistivity of argillized rock is low. On the other hand, resulted secondary minerals are mainly composed of chlorite, illite, epidote, and so on, when alteration temperature is higher than 200 o C. These secondary minerals do not give resistivity decreasing from original rocks. In the most of geothermal fields, a low resistivity zone is detected above a geothermal reservoir and relatively high resistivity zone is also detected under the low resistivity zone. And a productive zone is identified in the relatively high resistivity zone extending under the low resistivity zone. In these cases, the low resistivity zone shows features of impermeable zone (cap rock). For example, lost circulation while drilling is scarcely occurred and temperature profile is conductive type in the low resistivity zone. Moreover, identified secondary minerals in the low resistivity zone are usually smectite, chlorite-smectite interstratified mineral and/or illite-smectite interstratified mineral. And temperature at the bottom of the low resistivity zone is about 200 o C. From these, a low resistivity zone with considerable extent at a shallow depth, together with underlying high resistivity zone, will characterize a prospective area for geothermal development. In the Hululais field, the following resistivity structure is detected by MT survey, a low resistivity zone extends at a shallow depth upon a high resistivity zone at a deep depth. This means that prospective geothermal resources will be expected in this field. A resistivity map at a depth of 325 m is shown in Fig A low resistivity zone (lower than 10 ohm-m) extends on the southwestern side of the fault F3 and many geothermal manifestations are identified in this low resistivity zone. This low resistivity zone is limited by the fault F4 on its northwestern margin, by the fault F7 on its southeastern margin. From this, prospective geothermal resources can be expected in the area (an extensive low resistivity zone) surrounded by the faults F3, F4 and F7. 52

75 Generally, a fractured zone resulted from faulting is a major permeable zone controlling geothermal activity in a volcanic terrain. And intensively argillized layer is an impermeable layer, being a cap rock. In the Hululais field, the low resistivity zone described in the above is correlated with a cap rock. And the bottom of the cap rock is estimated to be about 500 m deep from the surface. Most of geothermal manifestations in the Hululais field occur along the faults F2, F3, F4, F5, F6 and F8. From this, it can be regarded that the above 6 faults are major permeable zones in this field. As a low resistivity zone (lower than 5 ohm-m) extends along the fault F5 trending northwest to southeast, a prospective geothermal reservoir can be expected along this fault. An area, where relatively high resistivity zone extending under a low resistivity zone is identified at a shallower depth, can be regarded generally to be a geothermal activity center (upflow area). From this, an area where a low resistivity zone extends at a depth of 325 m and a relatively high resistivity zone extends at a depth of 675 m is defined as a minimum area of the prospective area. And a maximum area of the prospective area is defined by extent of low resistivity zone at a depth of 325 m. The defined areas are given in Fig Proposed maximum area and minimum area are about 84.5 km 2 and 22.9 km 2, respectively. 53

76 Chapter 3 Justification, Objectives and Technical Feasibility of the Project Fig Distribution of Faults and Resistivity Map at Depth of 325 m NORTHING (m) Muaraaman F3 River Ketahun Mt. Koleng Mt. Reges W N S E 500 Hululais Field F1 Semalako F River Santan River Aman Mt. Lumut 1500 Mt. Cemeh Turanlalang F4 Lake Tes Suban Gregok Mt. Hululais F8 Suban Agung 1700 Mt. Beritibesar 1500 F6 F5 F7 Mt. Beritikecil Mt. Pabuar Mt. Tiga EASTING (m) Legend Fault Fumarole Mudpool Hot spring Resistivity (ohm m) (Source: Prepared by SNC study team) 54

77 Fig Proposed Prospective Area NORTHING (m) Muaraaman F3 River Ketahun Mt. Koleng Mt. Reges W N S E Legend Fault Fumarole Hululais Field 500 Maximum Prospective Area (about 84.5 km 2 ) Semalako F2 F1 River Santan River Aman Mt. Lumut 1500 Mt. Cemeh Turanlalang F4 Lake Tes Suban Gregok Mt. Hululais F8 Suban Agung 1700 Mt. Beritibesar 1500 F6 F5 F Mt. Pabuar 1500 Minimum Prospective Area (about 22.9 km 2 ) Mt. Beritikecil Mudpool Hot spring Mt. Tiga EASTING (m) (Source: Prepared by SNC study team) (ii) Conceptual Model Conceptual Model about a geothermal system in the Hululais field is given in Fig A geothermal activity center (upflow area) in the Hululais field should extend on the northern side of the ridge trending northwest to southeast, from the Mt. Hululais to Mt. Beritikecil, judging from a distribution of manifestations and results of MT survey. From this geothermal activity center, geothermal reservoir extends along the faults F3, F4, F5, F6, and F8. Judging from chemistry of fumarolic gases, reservoir temperature of 250 to 280 o C can be expected and geothermal brine in this deep geothermal reservoir will be classified into a Cl type. An argillized impermeable layer, corresponding with the detected low resistivity zone by MT survey, will extend in a shallow depth. This impermeable layer must prevent deep geothermal brine from flowing up to the surface, and geothermal brine under the impermeable layer flows mainly to north along the faults F8, F4 and F6. Moreover, flowing of geothermal brine along the faults F4 55

78 Chapter 3 Justification, Objectives and Technical Feasibility of the Project and F6 will branch out along the faults F5 and F3. Considering a depth of the low resistivity zone bottom, a drilling depth of more than 500 m (vertical depth) will be required to reach the deep geothermal reservoir. Local aquifers of hot water occur in the area around Subang Agung to Subang Gregok. These hot waters are derived from ground water by ascending gases and heat through the impermeable layer, from the deep geothermal reservoir. Resulted hot water is acidic water of SO 4 type; this property is brought about by oxidation of H 2 S gas (H 2 S+2O 2 H 2 +SO 4 ) on this process. Around Subang Agung, deep geothermal brine is flowing into local aquifer of acidic hot water along the fault F8. From this, mixing between deep geothermal brine (Cl type) and acidic hot water (SO 4 type) occurs and hot water of Cl-SO 4 type is resulted from this mixing. Ascending of gases from the deep geothermal reservoir is not remarkable in the area on the northern side of Subang Gregok. In this area, local aquifers of HCO 3 type hot water resulted from ground water by conductive heat through the impermeable layer. Around Semalako, situating at the crossing point of the fault F4 with the fault F3, hot waters of Cl-HCO 3 type are seeping out. This hot water must be resulted from mixing between shallow hot water of HCO 3 type and deep geothermal brine of Cl type seeping out along the faults. 56

79 Fig Conceptual Model For Geothermal System in Hululais Field A Mt. Hululais B Suban Agun Mixing SO 4 & Cl type waters Oxidation H 2 S SO 4 Oxidation H 2 S SO 4 Suban Gregok Mixing HCO 3 & Cl type waters SO4 Mt. Cemeh Semalako HCO3 Cl-HCO3 Upflowing of geothermal fluid Punduk Badaro HCO o C? Lateral flowing of geothermal brine along F4 & F6 F2 F1 F8 F5 F3 Argillized Impermeable Zone (Source: Prepared by SNC study team) 57

80 Chapter 3 Justification, Objectives and Technical Feasibility of the Project (8) Potential Estimation of Geothermal Resources in Hululais Field The stored heat method, a type of volumetric method, gives a general estimate of geothermal resource potentials which is usually estimated on the conservative rather than optimistic side because the method ignores the recharge of geothermal fluids from the surrounding hydrothermal system. The stored heat method applies the following equations. Stored Heat (S.H.) =(Tr-Ta) {( 1-φ)Cprρr+φCpwρw} V Heat Recovery (H.R.) = S.H. Recovery Factor Power Output = H.R. C.E.)/(Lf P.L.) where Tr :Reservoir Temperature( o C) Ta : Abandonment Temperature( o C) φ : Porosity(%) ρr : Rock Density(kg/m 3 ) ρw : Fluid Density(kg/m 3 ) Cpr : Rock Specific Heat(kJ/kg o C) Cpw : Fluid Specific Heat(kJ/kg o C) V : Reservoir Volume(km 3 ) C.E. Lf P.L. : Conversion Efficiency(%) : Plant Life(year) : Load Factor(%) In order to compensate for the uncertainty of each reservoir parameter mentioned above, a statistical analysis called Monte Carlo Analysis is usually combined with the stored heat method. Monte Carlo Analysis considers the acceptable ranges of each parameter and statistically evaluates the most likely estimate of resource potential by providing frequency and probability distributions for the power capacity of the development area. The variations in reservoir parameters which are applied for the Monte Carlo analysis are shown 58

81 in Fig together with the result of analysis. For the areal extent of the reservoir, the minimum (22.9 km 2 ) and the maximum areal extent (84.5 km 2 ) that were estimated in the previous section were adopted. The maximum extent of the conductive cap rock layer at 487.5m depth level (84.5 km 2 ) was adopted as the maximum extent of the reservoir. For the vertical extent of the reservoir, it was assumed that the reservoir distributes from the depth where high resistivity started to appear in the cap rock layer (500 m depth) to the upper face of the coarse blocks (3,500 m) placed near the bottom surface of the numerical model. For rock properties, a set of parameter ranges that are commonly seen in similar geothermal fields were adopted. It is commonly adopted that to use 2.5 times porosity as the recovery factor. Thus the rule-of-thumb was used in the analysis. The heat-electricity conversion factor, the load factor of the power plant, and plant life were assigned to be 12% to 14%, 0.7 to 0.9, and 30 years, respectively. According to the result of Monte Carlo analysis, the resource potential in Hululais field was estimated to be MW (modal frequency 6.93%). However, the frequency for MW showed similar frequency of 6.94%, and that for MW was 6.84 %. Moreover, the cumulative probability that the resource potential to be less than 125 MW was quite small (1.84%), on the contrary, the possibility that the resource potential exceeds 125 MW exceeded 98%. Accepting the resource with probability of 80% or higher as a resource potential, the reserved geothermal resources in Hululais field is estimated to be 300 MW. As a summary, it can be concluded that the resource potential of Hululais geothermal field is much greater than the current development plan (2 x 55 MW). 59

82 Distribution(%) Frequency Chapter 3 Justification, Objectives and Technical Feasibility of the Project Fig Result of Monte Carlo Analysis of Resource Potential in Hululais Field Parameter min. most likely max. Reservoir Area (km 2 ) Reservoir Thickness (m) Rock Density (kg/m 3 ) Porosity (-) Recovery factor (-) Rock Specific Heat (kj/kg o C) Reservoir Average Temperature ( o C) Reservoir Average Pressure (MPa) Heat-Electricity Conversion Efficiency (-) Plant Life (year) Load Factor (-) Abandonment Temperature ( o C) % 7.0% Number of calculation times: % 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Output (MWe) Resource Estimate with 80% probability :300 MW Output (MWe) Accumulation Possibility (Source: Prepared by SNC study team) 60

83 (9) Estimation on Well Productivity and Development Scale For the estimation of required number of wells in Hululais area, estimation on well productivity is necessary. In the current study, a borehole simulator WELLFLOW Tokita et al., (2002) was utilized for the estimation on well productivities. The simulator WELLFLOW had been applied for the analysis of well characteristics data in many fields and its performance had been proven to be effective with actual field data. The simulator WELLFLOW is equipped with a functionality that calculates deliverability curve of a production well under various range of well head pressure, using thermodynamic conditions of a reservoir. Thus the simulator will provide the estimates on well productivity. In the Hululais area, a drilling of an exploratory well has just begun, and almost no information on thermodynamic conditions of the reservoir is available. Therefore, the thermodynamic condition was estimated based on the results of surface study. The input parameters applied to the simulator is shown in Table 3-5. The casing program used was determined so that it is equivalent with the actual casing program adopted in the exploratory currently being drilled. The estimated well deliverability by the simulator WELLFLOW is shown in Fig From the figure, the steam and brine mass flow under the well head pressure 0.5 MPaG is estimated to be 89.3 t/h and t/h, respectively. Assuming that the well head pressure to be 0.5 MPaG and the turbine inlet pressure to be 0.4 MPaG, and the steam consumption for 1 MW electric power generation to be 8 (t/h)/mw, then the necessary amount of steam production for 110 MW power generation is calculated to be 880 t/h. Therefore total 10 production wells are required for 110MW power generation since any single production well will produce 89.3 t/h steam. When the 110 MW power generations commenced, 10 production wells will produce 2,897 t/h brine in total. Thus the maximum injection capacity of 2,900 t/h will be required. Estimates on injectivities are also required in order to estimate the required number of injection wells. It is uncertain, however, as there exists almost no data on well injectivity in Hululais field. Generally, injectivities must agree with productivity, since these two properties are basically same but only difference is the direction of fluid flow. Thus injectivities can be estimated to be nearly 390 t/h 61

84 Chapter 3 Justification, Objectives and Technical Feasibility of the Project since any single well will produce the same amount of geothermal fluid. Moreover, the pressure at loss zones would be higher due to the presence of water column above the loss zones. Accordingly, an injectivity can be estimated to be 500 t/h. Then the required number of injection wells is seven (7), taking into account a marginal backup of one extra injection well. After the commencement of the power generation, fluid production will decline due to mass extraction and cooling by reinjection. Precipitations of scale are another major cause of decline of mass production. Make up wells will be drilled when the steam production or reinjection capacity decline below the necessary amount for rated power output. Assuming that the decline rate of steam production due to the decreasing of reservoir pressure/temperature and scale precipitation is 3%/year, the required number of make up wells for production and reinjection can be estimated as shown in Fig and Table 3-6. As a summary, the required number of wells for 110 MW power generation at Hululais geothermal field are, 10 production wells and seven (7) reinjection wells for initial wells and eight (8) make up wells for production and five (5) reinjection wells will be required during the rated power output for 30 years. Table 3-5 Input Parameters for Borehole Simulator WELLFLOW Reservoir Pressure = (MPaA) Reservoir Temperature = ( ) Permeability-Thickness (kh) = 5.00 (darcy-m) Production Casing Depth = (m) Feed Point Depth = (m) Production Casing Diameter = (m) Liner Diameter = (m) Skin Factor = 0.00 (Source: Prepared by SNC study team) 62

85 Fig Production Characteristics Estimated by WELLFLOW (Source: Prepared by SNC study team) 63

86 Chapter 3 Justification, Objectives and Technical Feasibility of the Project Table 3-6 Result of Estimation on Required Number of Make Up Wells Injection Make Up Wells Make Up Wells Years Production Capacity (Production) (Injection) Total 8 5 (Source: Prepared by SNC study team) 64

87 Injection Capacity (t/h) Steam Procution (t/h) Fig Result of Estimation on Required Number of Make Up Wells Years Years (Source: Prepared by SNC study team) 3.3 Outline of the Project Plan Obtained data through this study do not give direct information about condition of geothermal reservoir extending under the ground. Potential of geothermal resource in the Hululais field is estimated by a volumetric method applying Monte Carlo Analysis in this study. From this analysis, potential of more than 125 MWe is estimated at a possibility level of 98 %. To progress this geothermal project successfully, it is recommended to conduct drillings of exploratory wells, discharge test to know actual condition of geothermal reservoir and resource evaluation. And detailed feasibility study shall be done after this process. It is considered that this preliminary power plant design might be reviewed by the results of exploration wells because of uncertainty of geothermal fluid condition that is indispensable to design power plants. 65

88 Chapter 3 Justification, Objectives and Technical Feasibility of the Project Technical Feasibility of the Project (1) Proposed Site for Power Plant and Well Pad The Hululais geothermal field, eastern foot of Mt. Hululais, is characterized by a relatively gentle topography. In this area two drilling pads (Cluster A and Cluster B) have already been constructed by PT. PGE. At the existing drilling pad of Cluster B, 1 well (HLS B-1) is under drilling. The existing drilling pads, Cluster A and Cluster B, should be applied for development well drilling and that will be able to accommodate approximately 4-8 well drilling respectively. Based upon the field development planning stated above for 55 MW x 2 Units geothermal power generation, 10 start-up production wells and 7 start-up reinjection wells are estimated to be required. Therefore, it will be necessary to prepare additional drilling pad and access road for development and make-up well drilling. According to the land condition around the project area, west side of existing drilling pads where gentle piedmont, will be applicable to 2 drilling pads and power plant for 55 MW x 2 Units. Proposed 2 drilling pads should be for reinjection well drilling, where the elevation is lower than existing pads, so that the brine reinjection allows to increasing the reinjection capacity of the wells. As expanse of flat terrain, around 8 wells will be able to drill in the new drilling pad. If the access road construction seems that difficult to crossing over a deep valley, installation of a new truss or concrete bridge should be conducted. The drilling pad location is summarized in Fig. 3-20; drilling pad layout, including rig equipment arrangement, is shown in Fig Whether it was possible to drill from selected production well pad and reinjection well pad to the geological structure related to the geothermal activity was estimated based on the following assumption. Drilling targets for production wells can be located along the permeable zone (fractures/lineaments) F5, F6 and F8. On the other hand, drilling targets for reinjection wells can be located north of production zone. Kick off point of drilling well is set at a depth of around 500m. Buildup rate is 1 deg./10 to 20 meters, maximum drift angle is 20 deg. to 40 deg. Attaining maximum drift angle, angle will be kept until reaching target depth. Average drilling depth set within 2,500m. As a result of examination under above-mentioned drilling condition, enough number of targets for proposed project can be drilled from planed drilling pads (10 production well targets and 7 reinjection well targets can be drilled from planed drilling pads). Therefore location of planned 66

89 drilling pads is appropriate for proposed project. Fig Drilling Pad and Power Plant Location in Hululais Field 1000 REGEND 900 Power Plant Production Well Pad Reinjection Well Pad Access Road (Existing) Access Road (New) Production Pipe Line Reinjection Pipe Line 800 Cluster D (New) Cluster B (Existing) W N S E Cluster C (New) Mt. Hululais Cluster A (Existing) Mt. Beritibesar km (Source: Prepared by SNC study team) 67

90 AIR COMPRESSOR WATER TANK 150m Chapter 3 Justification, Objectives and Technical Feasibility of the Project Fig Typical Drilling Pad Layout 100m SUMP PIT SUMP PIT WATER PIT WATER PIT ACTIVE TANK INTERMEDIATE TANK SHAKER TANK WELL NO.1 WELL NO.4 PIPE RACK MP #3 MP #2 MP #1 #3 SCR #2 #1 RIG GENERATORS WATER COOLING H2S LOG MUD LOG BOP CONTROL WELL NO.5 WELL NO.2 WELL NO.3 WELL NO.6WELL NO.7 WELL NO.8 STRORAGE YARD Casing Pipe, Drilling Tools, Cementing Equipment, Drilling Mud & Chemical, Waste material, ect. FUEL TANK ELECTRIC MECHANIC RIG MANAGER SHOP & SHOP SHOP & OFFICE ROOM & OFFICE HSE OFFICE MEDICAL FACILITY DINING ROOM SECURITY POST MAIN GATE (Source: Prepared by SNC study team) (2) Type of Fluid Collection and Reinjection System So-called FCRS is geothermal fluid collection from production well and reinjection system. Applicable type of FCRS generally depends on geothermal fluid conditions, topography, elevations of production well pads, power plant site and reinjection well pads. In the case that produced fluid is only steam, dry steam transportation type will be applied; dry steam from production wells will be transported through only one pipeline. On the other hand, when produced fluid is in two-phase (steam and brine), the most suitable type FCRS should be selected from among four types; (1) wellhead separation type, (2) two-phase flow type, (3) separator station type and (4) well pumping type as given in Fig

91 In the case of wellhead separation type, steam and brine will be separated at each production well pad. And each separated steam will be transported to a power plant station jointly or independently and remained brine will be transported to reinjection wells. Therefore, it is required to construct two types of pipelines, one is for steam to a power plant and the other is for brine to reinjection wells. This type can transport the fluids more stable than two-phase flow and will be available for various topographies. In the case of two-phase flow type, both of produced steam and brine will be transported to a separator station adjacent to a power plant. Separated steam at a separator station will be transported to a power plant and the remained brine will be transported to reinjection wells. In this case, it is required to construct one type of pipeline (two-phase flow-line) between production well pads and a separator station. Pressure loss of two-phase pipeline is more than that of steam pipeline in the case of wellhead separation type. Design of pipe layout and size to keep the stable flow (Mist flow-annular flow) is important. In general two-phase flow pipeline is suitable for down slope topography. In the case of central separation type, both of produced steam and brine is transported to separator station(s) through two-phase flow pipeline as the two-phase flow. Separated steam will be transported from the separator station to power plant while brine will be transported to reinjection well pads. In this case, it is required to construct one type of pipeline (two-phase flow pipeline) between production well pad and separator station. In the case of well pumping type, a pump is installed in a production well and geothermal fluid is produced as pressurized liquid state. Well pumping type is appropriate in the following cases (a) Brine of medium temperature is used for geothermal power generating. (b) Mass of brine from production well increases by using the pump. (c) Brine is everywhere kept at a pressure above its flash point for the fluid temperature to prevent the break of steam and non-condensable gases that could lead calcite scaling in the piping. (d) Brine temperature is not allowed to drop to the point where silica scaling could become an issue in the preheater and in the piping and reinjection wells. In this project, a separator station type is suitable for FCRS, taking into account the fact that the geothermal reservoir is high temperature, steam flow handling is easier than two phase flow handling and location of production well pad in this field. 69

92 Chapter 3 Justification, Objectives and Technical Feasibility of the Project Fig Types of Fluid Collection and Reinjection System Separators Production Wells Separators Production Wells Separator station Separator station Steam Header Steam Header Reinjection Wells Power Plant Reinjection Well Reinjection Wells Power Plant Reinjection Well Wellhead separation type Production Wells Separator station type Production well Well pump Production well Well pump Sand Production well Well pump Sand Sand Separator Brine header Power Plant Reinjection Well Reinjection Wells Two phase flow type Reinjection Power Plant Well pumping type (Source: Prepared by SNC study team) (3) Generation System There are basically three types of geothermal power plants used to generate electricity:(a) Direct steam plant, (b) Flash steam plant, (c) Binary power plant. The type of plant is determined primarily by the nature of the geothermal resource at the site. Comparison of Geothermal Power Generation Technologies is given in Table 3-7. The direct steam plant use a dry saturated or superheated steam at pressures above atmospheric vapor dominated reservoirs (Reservoir temperature o C over). A steam after passing through separators is fed to the turbine for electric power generation. Between each wellhead and the plant separator is situated near the wellhead to remove particulates such as dust and rock bits. Drain pots are situated along the pipelines to remove condensate formed during transportation, and a final moisture remover at the entrance to the turbine. 70

93 These were the earliest types of plants developed in Italy and in the U.S. Vapor dominated fields are rare and exist in only a few places in the world. Flash steam plant is applicable for water- dominated fields with high temperature resources (Reservoir temperature o C). These fields are much more common than vapor dominated ones. The pressurized mixture of steam and brine is produced in water- dominated field. This mixture fluid cannot be fed to standard turbines without risk of damage to the turbine blades. Therefore, separators are installed in water- dominated reservoir field for separating steam from water. The geothermal fluid from the production well is delivered to separator and steam is directed to the turbine. The separated brine is directed to reinjection well. Double flash steam plant is applicable in higher temperature resources field (Resource temperature o C). This plant uses two stages of flash vessels; the brine separated at the separator is directed to a second stage flash vessel (flasher) where more steam is separated. Remained brine from the flasher is then directed to reinjection well. The double flash plant delivers steam at two different pressures to the turbine. About 15-25% more power can be generated from same geothermal fluid mass flow rate by using this plant technology, but the plant is more complex, more costly and requires more maintenance. The third type of geothermal power plant is called a binary plant. It is able to exploit the low to medium temperature resources ( o C) for electric generation. In binary plants a heat exchanger transfers heat from the geothermal fluid in a primary loop to a low boiling- point working fluid in a secondary loop. The working fluid in the secondary loop is evaporated in the two heat exchangers in a series of a preheater and a vaporizer by geothermal heat provided in the primary loop. The working fluid vapor is passed to turbine coupled to the generator. The vapor exits the turbine to the condenser where it is converted back to a liquid. Liquid working fluid from the condenser is pumped back to the preheater/vaporizer by feed pump to reheat the cycle. According to the study of geo science, the characteristic of geothermal resource in this field is high temperature. Additionally, amount of the brine and non-condensate gas from production well is unclear at the present moment. Therefore, single flash steam plant system is recommendable for power generating for the project. This system is the most general geothermal power plant system. Moreover, condensate turbine type is recommendable for turbine type in consideration of effective utilization of the geothermal resource. 71

94 Flash Steam plant Direct Steam plant Chapter 3 Justification, Objectives and Technical Feasibility of the Project Table 3-7 Comparison of Geothermal Power Generation Technologies Cycle Reservoir temperature ( o C) Not applicable Not applicable Type of Process Back Pressure Steam Turbine production well Condensing Steam Turbine production well condenser atmosphere cooling tower Features Suitable to superheated or dry saturated steam of high non-condensable gas (NCG) content Small capacity Lower efficiency compared to the condensing steam turbine Low construction cost High steam rate High exhaust noise level Suitable to superheated or dry saturated steam of low NCG content Large capacity High efficiency Most economical when steam quality is good Not applicable Good Single Flash with Back Pressure Steam Turbine separator production well brine steam atmosphere Single Flash with Condensing Steam Turbine separator production well condenser cooling tower Suitable to water dominated resources of high NCG content Small capacity. Usually installed as a wellhead generating pilot plant Lower efficiency compared to the condensing steam turbine Low construction cost High steam rate High exhaust noise level Suitable to water dominated resources of low NCG content Large capacity Low efficiency in utilizing geothermal energy for geo fluid of low specific enthalpy In some cases, higher pressure / temperature of separated brine compared to double flash make single flash favorable to double flash in preventing silica scale in reinjection line and reducing rejection pump power or the number of reinjection wells 72

95 Binary plant Not applicable Not applicable Not applicable Not applicable Double Flash with Condensing Steam Turbine production separator flasher cooling tower Suitable to water dominated resources of low NCG content. Large capacity 15 to 25% more output compared to single flash depending on quantity of brine Construction cost is about 6% higher than that of single flash Less brine to be reinjected Brine Binary The driving fluid is vaporized by heat transferred from the geo fluid through the heat G exchangers, and drives the Condenser heat exchanger turbine brine Applicable to low enthalpy resources which are not suitable P for flash steam plant P Packaged type of small capacity Simple. Good for unattended operation Two-phase (Biphase) Binary Suitable to water dominated resources of moderate to separator G medium specific enthalpy Condenser No gas extraction system steam (ejector and vacuum pump) is heat exchanger P needed. brine It would be possible to reinject all NCG. P P High efficiency since it utilizes both steam and brine Simple Unit capacity is up to around 10 MW. Combined Binary Cycle Suitable to high pressure, mid to separator high specific enthalpy resources back pressure No gas extraction system is needed. G G steam All NCG is reinjected in an Condenser actual plant. brine heat exchanger Technically possible to utilize brine too Usually, a few binary units will P P be connected to the back pressure steam turbine. Large capacity is possible. 73

96 Chapter 3 Justification, Objectives and Technical Feasibility of the Project Not applicable Hybrid Type (Bottoming Cycle) Suitable to water dominated, medium specific enthalpy separator steam brine Main Plant Condensing steam turbine, or Combined binary Bottoming Plant Simple binary resources High efficiency since it utilizes both steam and brine. The bottoming plant can adjoin the separator station and be monitored / controlled form the main plant. (Source: Prepared by SNC study team) (4) Transmission and Distribution Facilities 1) Bengkulu Province and South Sumatra Transmission System Fig Transmission System of Bengkulu (Source: PT. PLN, 2010) 74

97 Fig Single Line Diagram of South Sumatra System (Source: PT. PLN, 2010) The 150 kv transmission lines between the Southern Sumatra system and the Central Sumatra system were completed in July The 150 kv South Sumatra to Central Sumatra interconnection is already designed for 275 kv between Lahat substation in South Sumatra and Kiliranjao substation in West Sumatra. According to RUPTL , transmission lines between Lahat substation and Kiliranjao will be upgraded to 275kV grid in Lahat substation will be upgraded to a 275/150/20 kv substation. Hululais geothermal power plant will be connected to Pekalongan 150/70/20kV substation by 150kV. The Pekalongan is a key substation of Bengkulu Province, and connected to Lubuk Linggau substation between the Lahat substation and the Kilirangajao substation. 75

98 Chapter 3 Justification, Objectives and Technical Feasibility of the Project 2) Transmission Line between Hululais geothermal power station and Pekalongan substation Fig Single Line Diagram of Existing Pekalongan 150/70/20kV Substation (Source: PT. PLN data) (Source: Prepared by SNC study team) (Source: Prepared by SNC study team) Photo Pekalongan Substation 150kV Yard 76

99 The real Hululais geothermal power site is the west mountainside of Tes in Bengkulu province. Pekalongan substation to Hululais geothermal power station have an estimated transmission line distance of 50 km (Ref. Transmission line distance between Tes hydro power station and Pekalongan substation is 45.86km). Pekalongan substation is needed expansion two span, which is coffee garden, for two bays to next to Lubuk Linggau bays about 150kV double bus for connecting to Hululais station by 2cct/150kV transmission line. Existing house for control panel, protection panel, power line carried communication panel, etc, need to be reviewed. Because there was no concrete plan to build the Hululais geothermal power station when Pekalongan substation was built, though there is enough space in the existing house Outline of the Project For 55 MWe geothermal power plant in Hululais field, the work items are listed below, as the resource development will be required by the commencement of power plant operation. Geothermal resource development Construction of drilling pad Construction of access road Drilling of production wells and reinjection wells Installation of FCRS (Fluid Collection and Reinjection System) Installation of power plant Civil works Construction of generating facilities Architectural works Construction of transmission lines In this project, geothermal resource development and installation of FCRS will be carried out by PT. PGE and PT. PLN will conduct construction, installation and operation of power plant and transmission lines. 77

100 Chapter 3 Justification, Objectives and Technical Feasibility of the Project Basic Design and Specifications (1) Development Plan of Geothermal Resource (i) Earthwork for Power Plant, Drilling Pad and Access Road For the geothermal development in Hululais field, 4 drilling pads and its access road will be needed. Two (2) drilling pads (Cluster A and Cluster B) and its access road have already been constructed by PT. PGE. It is necessary to construct new 2 drilling pads (Cluster C and Cluster D) and associated access roads. The size of each pad should be determined by required number of drilling wells. Five (5) meters width of access road will allow a large truck to pass through between each drilling pad. It is recommended to install a truss bridge on the way where needing to cross over deep valley, these from Cluster C to Cluster B and Cluster D respectively. The detail topographic survey should be carried out prior to designing of the earthwork of power plant site, drilling pads and access road. And also geotechnical investigation, including but not limited to the field investigation, laboratory test and analysis shall be conducted to understand subsurface conditions for the design and construction plan for site preparation and civil structures. Table 3-8 shows required size of power plant, drilling pads and access road. Table 3-8 Required Size of Power Plant, Drilling Pads and Access Road Item Size Note Power Plant 240m x 275m 55MW x 2 Units Drilling Pad : Cluster A 100m x 150m Existing pad, 4 Production Wells Drilling Pad : Cluster B 100m x 150m Existing pad, 4 Production Wells Drilling Pad : Cluster C 100m x 150m New pad, 2 Production Wells Drilling Pad : Cluster D 100m x 150m New pad, 7 Reinjection wells Access Road 5mW x 100m 5mW x 3,500m 5mW x 1,800m 5mW x 2,000m 5mW x 1,800m 6mW x 20m New road, Between branch and power plant Existing road, Between Tes and Site Existing road, Between Cluster A and Cluster B New road, Between Cluster B and Cluster C New road, Between Cluster C and Cluster D 2 bridges, Between Cluster C and Cluster B,D (Source: Prepared by SNC study team) Hululais is located in Bengkulu Province and roughly 150 km north away from Bengkulu, which is the capital city of the Province. All the equipment, facilities and materials for development of 78

101 power plant can be unloaded at the Bengkulu seaport, and they will be transported by land from the seaport to the Hululais field through high way with a long-body trailer. Fig shows transportation routes between Bengkulu and the Hululais project area. Since the maximum unit weight of the equipment exceeds the capacity of the cranes, which are currently installed in the port, it will be necessary to employ a 100-ton mobile crane or crane barge/vessel to discharge the cargo directly from the vessel to wharf. The project cargo is expected to be limited to the following range as long as the maximum unit capacity to be 55 MW: Maximum Weight (generator) : tons per cargo Maximum Length (generator) : meters per cargo The road form Bengkulu to the Hululais project area is mostly paved and no major obstacle was found for transporting by passenger vehicles. Nevertheless, as a few truss and concrete bridges exist on the route, it is strongly recommended that a detail survey, including inspection of height of the truss bridges and their strength be carried out to ensure safe transportation of the equipment, facilities and materials by a long-body trailer. Upgrading/reinforcement of the existing road and construction of the new road and bridges from the seaport to the field should be conducted if required. Fresh water for well drilling and power plant operation can be supplied from the river, flowing through the east side of the site, by steel pipe line for water transportation. A water line for Cluster B and a water supply system at the river have already been installed. 79

102 N S E WEST SUMATRA PROVINCE SOUTH PESISIR DISTRICT MUKOMUKO Mt. Mantago Lubukpinang Jujun L. Kerinci Tamiai KERINCI DISTRICT Mt. Raya Lempur Terasterujam Mt. Kunjit Mt. Sumbing Mt. Grekah Mt. Masurai Mt. Tengahteras Mt. Bungkuk Pondoksuguh MERANGIN DISTRICT JAMBI PROVINCE Mt. Hulunilo NANGGROE ACEH ARUSSALAM Chapter 3 Justification, Objectives Pulaupandan and Technical Bukit Asai Feasibility of the Project Jangkat Mt. Besar Mt. Pandan Bongsu Muaramenderas Mt. Kayuaro MUKOMUKO DISTRICT Pasaripuh Mt. Gedang Mt. Tungkat Muarasiau Mt. Kunyit Fig Transportation Route Mt. Seblat Mt. Hnau Mt. Runcing Tanjungagung SAROLANGUN S DISTRICT SAROLANGUN SOUTH SUMATRA PROVINCE Mt. Pandan Mt. Kubang Muaraklingi Muaraaman LEBONG DISTRICT NORTH BENGKULU DISTRICT Tabah Baru TES Srikaton Tugumulyo Hululais L. Tes Seblat LUBUKLINGGAU MUARABELITI Mt. Gedanghulu り ais CITY Rimbopengadang LUBUKLINGGAU Padang Jaya Kp. Melayu Ketahun Mt. Condong Mt. Daun Padangulaktanding ARGAMAKMUR REJANG LEBONG DISTRICT Sukarami CURUP Darau Airduku Beringin 3 Pelawan Surulangun MUSIRAWAS DISTRICT Trawas Mt. Kaba Lais Ujanmas Tanjungagung Ujanmas Tebingtinggi Pondok Kelapa KEPAHIANG DISTRICT PRABUMUL KEPAHIANG Mt. Balai Tabalkarau MUARAENIM CITY Talangkambu BENGKULU PROVINCE Bungamas Fajarbulan Bermani Talangpadang Arahan Padangtapung BENGKULU Talangmumpo Tanjungenim Mt. Sanggud Pendopo LAHAT Karangag Tanjunggraman Negeriagung LAHAT DISTRICT Penyandingan Muarapinang Pulaupinang Jarai SELUMA Mt. Kutung Tanjungagung N Sukaraja Jujun L. Kerinci DISTRICT Tamiai Mt. Dempo WEST SUMATRA KERINCI DISTRICT Mt. Dingin Mt. Isauisau SAROLANGUN DISTRICT PAGARALAM Mt. Raya Lempur MERANGIN DISTRICT Suginwaras MUARAENIM Ulakpandan TAIS W E PROVINCE PAGARALAM Mt. Mantago Mt. Kunjit Muarasiau CITY Kotaagung DISTRICT Pengadonan SOUTH PESISIR Mt. Jambul P. Panggung BATURAJA S DISTRICT Masmambang Mt. Hulunilo Mt. HitamJAMBI PROVINCE Mt. Balai Lubukpinang BATURA Mt. Sumbing Aremantai Pulaupandan Fajarbulan Mt. Tungkat Mt. Nanti CITY Mt. Grekah Mt. Lumut Talangmumpo SOUTH BENGKULU Mt. Patah Mt. Masurai Jangkat Mt. Tengahteras DISTRICT OGAN KOMERING ULU DISTRICT MUKOMUKO Terasterujam Mt. Bungkuk Masat Mt. Kunyit Mt. Bepagut Muaraduakisam 0 50 km Mt. Besar Pasarpino Mt. Pandan Bongsu Muaramenderas Simpang MANNA Mt. Kayuaro MUKOMUKO DISTRICT Mt. Gedang Pondoksuguh Binginteluk Banda Aceh 0 100km (Source: Prepared Mt. by Seblat SNC study team) Mt. Hnau Mt. Runcing EQATOR Medan NORTH SUMATRA INDIAN OCEAN T HAIL AND Padang WEST SUMATRA MAL AYS IA RIAU Pekanbaru Bengkulu BENGKULU JAMBI S INGAP ORE Jambi Tanjung Pinang SOUTH SUMATRA KEPULAUAN RIA LAMPUNG SOUTH SUMATRA PROVINCE Tanjungagung KEP. BAN BELITUN Palembang W Pangk Bandar Lamp Serang BANTEN J (ii) Production and Reinjection Well Drilling Pasaripuh Ketahun The detailed drilling depth and well profile (casing program) should be determined Mt. by Daun means of geothermal conceptual model that result of exploratory well test and surface study that integrated Tanjungagung Pondok Kelapa geology, geochemistry and geophysics. In this study, specifications of a production well and reinjection well are estimated based on the following assumptions. Mt. Pandan Mt. Kubang Muaraaman LEBONG DISTRICT NORTH BENGKULU DISTRICT Tabah Baru TES L. Tes Seblat LUBUKLINGGAU Mt. Gedanghulu り ais CITY Rimbopengadang Padang Jaya Kp. Melayu Mt. Condong ARGAMAKMUR REJANG LEBONG DISTRICT CURUP Airduku Beringin 3 Lais BENGKULU PROVINCE BENGKULU Mt. Kaba Ujanmas KEPAHIANG DISTRICT KEPAHIANG Tabalkarau Talangkambu Bermani Mt. Sanggud Drilling targets for production zones will be depth at 1,000 m to 2,500 m Sukaraja and the fluid temperature will be 265 o C at an average depth of 2,000 m. Drilling targets for reinjection wells are currently assumed fractures/lineaments where located north of production zones. Reinjection capacity will be 500 tons/hour per well SELUMA DISTRICT TAIS Masmambang Talangmumpo Fajarbulan A 13-3/8 production casing shoe will be set at depth of 1,000 m to increasing steam flow and brine reinjection. Under a production casing, 12-1/4 and 9-7/8 bore hole intervals, should be covered by perforated pipes to avoid formation collapse. For the well profile, to ensure enough closure that maximum around 1,000 m to tap the estimated reservoir and high permeability zone, the drilling depth will be at 2,500 m and maximum drift angle will be 40 degrees. The typical 80

103 casing program, production well and reinjection well, is shown in Fig It is recommended that the Drilling Rig/Machine will be to have more than 2,000 HP output for well drilling to an average depth of 2,500 m. It is important to be conducted detail investigation for mobilization and demobilization, cost estimation of drilling equipment and materials. For development well drilling, 10 start-up production wells and 7 start-up reinjection wells are estimated to be required. It is assumed that distribution of well drilling, 4 production wells each will be drilled at the existing pads of Cluster A and Cluster B. The remaining 2 production wells will be drilled at the new pad of Cluster C. The 7 reinjection wells will be drilled at the new drilling pad of Cluster D. Distribution of well location is referred to Table 3-8. For make-up wells, though the decline rates of productivity and reinjection capacity due to silica or other scaling of each well are not predictable at present, the calculated number of make-up wells, mentioned above, required to maintain the rated power output and reinjection capacity over 30 years of plant operation was determined assuming the following annual rate of decline for power output and the injection capacity of reinjection wells as an ordinary value. Power output of production wells : 3% per year Injection capacity of reinjection wells : 3% per year Accordingly, it is estimated that 8 production wells and 5 reinjection wells will be required for the make-up wells over 30 years of plant operation in this study. As a result of development well drilling, testing and capability while operating, it should be constructed new pad or expanded existing pad for make-up well drilling if required. Table 3-9 shows the timing for adding make-up wells. 81

104 Chapter 3 Justification, Objectives and Technical Feasibility of the Project Fig Typical Well Casing Program (Production Well and Reinjection Well) 12" Master Valve CASING 30" Stovepipe down to 30m Conductor BORE HOLE 20" Casing down to 450m 26" Hole down to 450m Intermediate KOP at 500m Liner Top (13 3 / 8 " x 10 3 / 4 ") at 980m 17 1 / 2 " Hole down to 1,000m 13 3 / 8 " Casing down to 1,000m Production & Anchor Liner Top (10 3 / 4 " x 8 5 / 8 ") at 1,580m 12 1 / 4 " Hole down to 1,600m 10 3 / 4 " Casing down to 1,600m Perforated Liner 8 5 / 8 " Casing down to 2,500m Perforated Liner 9 7 / 8 " Hole down to 2,500m (Source: Prepared by SNC study team) 82

105 Table 3-9 Timing for adding Make-Up Wells Year Production Wells Reinjection Wells Total Total (Source: Prepared by SNC study team) 83

106 Chapter 3 Justification, Objectives and Technical Feasibility of the Project (2) Layout of FCRS and Pipeline Route (i) Overall Layout Fig shows the layout of site in Hululais field. Production pipeline will be constructed from production wells to the power plant. And reinjection pipeline will be constructed from the steam separator to the reinjection well pad. Fig Layout of FCRS and Pipeline Route N W E S D C B A 凡例 Power Plant Production well Reinjection well Steam pipeline Reinjection (Source: Prepared by SNC study team) (ii) Production and Reinjection Pipeline The geothermal fluid from each production well is separated to steam and brine by the steam separator, and steam is transported to the power plant through the steam pipeline. When steam turbine inlet pressure is 0.4 MPa(G), it is required about 880 t/h steam to get generator output 110 MW (55 MW x 2) and is necessary to get 350 t/h steam from each production well pad equally in consideration of 20% margin. The steam pipeline size is selected as 48 inches in 84

107 consideration of the steam flow velocity within steam pipeline (approximately 35 m/s). The steam pipeline is installed along access road and length of the steam pipeline is shown as follows; From A pad to power plant : approximately 1,800 m From B pad to power plant : approximately 400 m From C pad to power plant : approximately 2,000 m Separated brine is transported to the reinjection well through the brine pipeline. Necessary brine flow rate is about 3,500 t/h. And 1,400 t/h brine is generated from each production well pad equally in consideration of 20% margin. The brine pipeline size is selected as 20 inches in consideration of the brine flow velocity within brine pipeline (approximately 2 m/s). The brine pipeline is installed along access road and length of the brine pipeline is shown as follows; From A pad to D pad : approximately 5,600 m From B pad to D pad : approximately 3,800 m From B pad to D pad : approximately 1,800 m Carbon steel pipes for ordinary piping will be selected for brine pipeline. Pipeline thickness will be designed to meet the pressure and flow rate of the brine in consideration of the corrosion and erosion by fluid. A bending pipe method will be selected for the pipeline expansion countermeasure. FCRS monitoring item is proposed as following. Production well pad: Brine discharge pond: Reinjection well: production wellhead pressure /flow rate/temperature, production well pad outlet pressure, power plant inlet pressure/ flow rate water level Reinjection well inlet pressure/flow rate/temperature Data transmission local panels are installed at production well pads, reinjection pad, emergency pond, etc. Data will be transmitted from local panels through electric cable. Electric cables are wired along pipeline and protected by cable tray. Local panels are made by steel and painted by anti-corrosion painting. Monitoring panel will be installed central control room in the power plant. 85

108 Chapter 3 Justification, Objectives and Technical Feasibility of the Project (iii) Ancillary Facilities Wellhead silencer and brine pit will be installed in the production pad for using to store the discharge brine temporarily. Fig.3-29 shows the outline of FCRS. Fig Outline of FCRS Seperator Silencer 20B 48B A Pad Seperator Silencer 20B 48B B Pad Seperator Silencer 20B 48B C Pad D Pad #1 Unit 55MW #2 unit 55MW (Source: Prepared by SNC study team) 86

109 (3) Plan for Geothermal Power Plant (i) Layout of Power Plant Generally the following points must be considered when planning the layout of a geothermal power plant: (a) Direction of steam piping from steam field, (b) Direction of transmission lines, (c) Wind direction for optimum placement of the cooling tower The single flush power plant (55 MW x 2) will be constructed in the center of the plant site. Substation, raw water storage tank and administration buildings will be installed around the generation units. The cooling tower will be located downwind of the switchyard so that cooling tower exhaust with corrosive non-condensable gas and mist will not affect electric equipment. The main transformer will be installed in the substation. Fig shows Layout of single flush Power Plant. Fig Layout of Single Flush Power Plant 240,000 Guard house Sub station Parking area for heavy eqpt Warehouse Administration Building control room Power house 275,000 Work shop Cooling tower Cooling tower Raw water storage pond Punping station Raw water storage tank Survice water storage tank Water treatment plant station (Source: Prepared by SNC study team) 87

110 Chapter 3 Justification, Objectives and Technical Feasibility of the Project (ii) Outline of process Fig shows outline of process of single flush Power Plant. Steam from production well pad is supplied to the turbine through the demister. Expanded steam in the steam turbine is condensed in the condenser. Condensed steam in the condenser (hot water) is supplied to cooling tower by hot water pump, is returned to condenser as cooling water after cooling in the cooling tower. Part of the main steam is used for ejector as the condenser vacuum device. Fig Outline of process of single flush Power Plant Steam turbine ~ ejector From production well Demister Generator Cooling toewer Condenser Hot water pump Oil cooler Generator cooler Others Bearing cooling water pump Bearing cooling water cooler (Source: Prepared by SNC study team) 88

111 (iii) Power Generating Facilities Essentially power plant design requires the steam conditions of production well and the meteorological data in the field. There is little data for the design at the present, because this field is no geothermal development. The trial design of the geothermal power plant in Hululais field is as below. Main specifications of facilities Turbine Type Rated Output No. of unit Speed Double flow, condensate turbine 55 MW 2 units 1,500 rpm Generator Type Frequency Power Factor Three- phase Synchronous Generator 50Hz 0.9 lagging Excitation System Brushless Exciter No. of unit 1 set/ 1 unit Condenser Type No. of unit Direct cooling splay type 1 set/ 1 unit Cooling tower Type Mechanical draft 89

112 Chapter 3 Justification, Objectives and Technical Feasibility of the Project Structure No. of unit Steel reinforced concrete 1 set/ 1 unit (iv) Ancillary Facilities Water Supply and Storage Facilities A raw water storage tank will be laid in the plant site to storage intake water from Dhauli Ganga river. Fire control Equipment Hydrants and/or fire monitor nozzles will be installed outdoors around binary plant and flammable materials warehouse. Diesel and motor driven fire pumps will supply water from the raw water storage tank to the hydrants and monitor nozzles. Deluge systems will be provided for the main transformers. Portable dry- chemical extinguishers will be placed in the buildings. Air compressor Air compressor will be installed as source of power for air- driving valves. Maintenance Facilities A maintenance shop and a storage area for spare parts and tools will be provided. Air Conditioning System An air conditioning system will be installed for the control room, electrical rooms, and the administration office. Communication system A microwave communication system will be used for communication between the grid and the power plant. 3.4 Technical Tasks and the Measures Procedure of Geothermal Power Development and Mitigation of Resources Development Risk In general, geothermal development starts with a wide area survey and proceeds, focusing on a promising area gradually. Therefore, the biggest resource risk lies in the early stage of 90

113 development. For mitigating the resource development risk in the early stage, the study is divided into two steps in general. Namely, surface resource study and resource study by exploratory well drilling are conducted respectively as the initial survey. The surface resource study is conducted for revealing a possibility of geothermal resource existence and delineating geothermal reservoir in outline using geological and geochemical techniques (and geophysical survey such as gravity survey and others for wide area). Since the development study area is narrowed down and promising areas are detected based on the results of the surface study, the risk and cost are suppressed comparatively. A geothermal model including geological structure model and fluid flow model (geochemical model) is prepared for understanding characteristics and potential of the geothermal resources in the objective area and for considering development strategy. Cost of the surface resource study is relatively low in the geothermal power development. After detecting the promising areas by the surface studies, the geological structures, which define reservoir extent and control behavior of subsurface geothermal fluid, are assumed by detailed geophysical survey such as MT, TDEM, CSAMT, etc. and are confirmed by resource study by exploratory well drilling. Using exploratory wells, well-logs such as measurements of temperature, pressure and flow rate and well tests (of injection, interference and discharge) are conducted for confirming resource (geothermal fluid in the reservoir), and reservoir structure and for revealing physical and chemical characteristics of the reservoir fluid). The geothermal model is improved based on the results of the exploratory well study. In order to raise the precision of the model and to reveal extent of the reservoir for the resource development, drilling of two or three exploratory wells is desirable as the initial stage of development in general. A generation capacity of the geothermal resources in the objective area is clarified with reservoir evaluation methods with the geothermal model and the exploratory well data. Usually, stored heat method or reservoir simulation is applied as the reservoir evaluation method. To conduct more accurate evaluation and adequate programming for steam field development, geothermal reservoir simulation is employed. The resource development risk in the future can be reduced drastically by application of the reservoir simulation to the geothermal power development. However, data of the well tests (of injection, interference and discharge) are required for accurate reservoir simulation. Cost of the resource study including the exploratory well drilling, the well logging, the well tests (of injection, interference and discharge) and the reservoir simulation are relatively high. However, the resource development risk is reduced drastically and a reliable development strategy can be formulated. Referring to future power demand, site condition for power plant 91

114 Chapter 3 Justification, Objectives and Technical Feasibility of the Project construction, environmental constraints etc., and adequate power capacity and steam field development program are decided based on the resource study. This study (using exploratory well and reservoir simulation technology) is believed to be indispensable for geothermal power developer and financiers. Recently financiers for geothermal power development are requesting to show evidence of the resource existence and forecast of continuous steam supply to the reservoir by the reservoir simulation. Unless exploratory well drilling is conducted, the developer cannot meet the request. The exploratory well drilling is considered to bear a crucial part in the geothermal power development. Procedure of geothermal power development in consideration of mitigating the resource development risk is summarized as shown in Fig Fig Geothermal Power Development Procedure STAGE 1 Applied Exploration to detect a prospective area for following development stage Geological Survey Geochemical Survey (hot spring water, ground water, fumarolic gas, etc.) Gravity Survey Resistivity Survey (Heat Holes) Etc. Estimate Geological Structure Controlling Geothermal Activity Drilling Targets Expected Geothermal Potential EXPLORATION STAGE STAGE 2 Applied Exploration in Selected Area to know actual geothermal reservoir conditions Etc. Additional Explorations, if they are required Well Drilling Borehole Loggings Heat up Test Production Test Injection Test Interferrence Test Etc. Estimate Geothermal Conceptual Model Evaluate Steam Quality RESERVOIR SYMULATION using 3-D NUMERICAL MODEL Estimate a Optimum Condition for Sustainable Steam Field Operation FEASIBILITY STUDY FINANCING DRILLING OF PRODUCTION WELLS & REINJECTION WELLS DEVELOPMENT STAGE PLANT DESIGNING CONSTRUCTION OF FLUID COLLECTION & REINJECTION SYSTEM CONSTRUCTION OF POWER PLANT & TRANSMISSION LINES COMISSIONING OPERATION & MAINTENACE OF PLANT & STEAM FIELD (Source: Prepared by SNC study team) 92

115 3.4.2 Present status and risk mitigation of the development project (1) Geothermal Resource Development in Hululais In Hululais area, some technical tasks for geothermal resources remain because the exploitable geothermal reservoir has not been ascertained by drilling. Present data in Hululais is not sufficient to evaluate geothermal resources, and existence of geothermal reservoir for power generation is not confirmed yet. Thus as mentioned above, the risk for resource development is thought to be relatively high. In order to reduce this fatal risk for the economical geothermal power development, it is indispensable to acquire the confirmation concerned with the geothermal conceptual model, geothermal reservoir information on physical and chemical characteristics of geothermal fluids, geothermal reservoir temperature, porosity and so on. In addition, to lower the risk, it is effective to carry out reservoir simulation using 3D numerical model. For the development stage in Fig. 3-32, it is necessary to obtain continuous geothermal fluid flow of plural wells from three wells being drilled by PT. PGE. The geothermal fluid obtained by the discharge test will reveal that the reservoir can supply steam for power generation. Volume and pressure of steam and chemical components of steam and brine, are necessary for designing power plants. Preferable items for further study are listed as follows: Exploratory well drillings/testing and evaluation Feasibility Study Additional exploratory well drilling (To decide additional drilling by the result of 3 exploration wells) Well logging and well test for additional wells Construction of geothermal conceptual model, potential evaluation (3 Dreservoir simulation) Steam field development planning Basic design of power plant (Engineering FS) Financial and economic evaluation Environmental Impact Assessment Main objective of this Preparatory Study is as follows: To reduce geothermal resource development risks To confirm existence of geothermal resource (geothermal fluid reservoir) 93

116 Chapter 3 Justification, Objectives and Technical Feasibility of the Project To make clear the resource potential and characteristics for power generation It is difficult to conclude the best power plant site because the exploitable geothermal reservoir has not been ascertained by drilling. In this report, the power plant site is selected based on the assumption that geothermal fluid comes from cluster A, B, C, equally in same condition. Actually, basic power plant and FCRS design will be conducted from the result of flow test of geothermal wells and also the suitable power plant site will be considered in this basic design procedure. For the reference, possible power plant site area is shown in Fig 3-33 based on the topography and the layout of well sites. It is suggested another three possible power plant sites except the power plant site shown in Fig in this possible power plant site area. Fig Possible Power Plant Site Area N W E S Possible power plant site Possible power plant site area 2km (Source: Prepared by SNC study team) (2) Possible Procedure of Geothermal Power Development in Hululais, using ODA Yen Loan As described previously, the 110 MW geothermal development project in this field will be 94

117 supported by the Japanese finance using ODA Yen Loan. Technical criteria for deciding to support geothermal development projects using ODA Yen Loan are considered to be set by JICA in consideration of the resource development risk. Therefore, it is necessary to understand the criteria for going through procedure of project finance using ODA Yen Loan. Since existing information and data of project feasibility for deciding ODA Yen Loan for the geothermal power development and plant construction project were insufficient in 2010, the application of the ES Loan seems to be adequate for support the Hululais project. Feasibility study including resource evaluation by using well data should be mainly conducted in the ES Loan project. The criteria for conducting feasibility study in Hululais were checked using the resource study results as described previously. Since exploratory well drilling has not been completed, existence and potential of the geothermal resources in this field cannot be verified until now. However, the geothermal resources in the field are regarded to have enough potential to conduct geothermal power development from the surface survey data. Studies results related to the criteria for implementation of feasibility study are summarized as follows. Existence of geothermal reservoir; Estimated by surface survey (Water dominated fluid), (Recommendation of confirmation by exploratory well drilling and blow test) Reservoir temperature; Estimated by surface survey (higher than 250 o C) (Recommendation of confirmation by exploratory well drilling, well logging and blow test) Heat source; No data of age (but young volcanic activity) Hydrothermal alteration age; Existence of hydrothermal alteration but no data Geological structure (permeability); Existence of faults related permeability revealed by surface survey (Recommendation of confirmation by exploratory well drilling, well logging and blow test) Resource potential; Enough potential based on estimation of the surface surveys (larger than 110 MW) (3) Advisable components of the ES Loan (for FS) Based on the present development status, the following components should be included in the ES Loan project. If the exploratory wells are successfully drilled and can tap geothermal reservoirs in Hululais, the following works are recommended to be conducted using the ES loan for the consulting work. 95

118 Chapter 3 Justification, Objectives and Technical Feasibility of the Project Resource Development Project for PT. PGE Resource capacity evaluation Review of geothermal resource data (including exploratory well data) and geothermal model Reservoir simulation (3D) and formulation of a resource development scenario Resource (steam field) development plan (well drilling and FCRS construction) Planning of drilling of production wells and reinjection wells, and FCRS construction Cost estimation Consulting work for Consideration of social and natural environment, considering JICA Guideline Project cost estimation and economic/financial analysis Preparation of implementation program of the resource development (well drilling and FCRS) Basic design of production wells, reinjection wells and FCRS Preparation and support work for PQ for well drilling and FCRS construction Power Plant and Transmission Line Construction Project for PT. PLN Study on power demand and power supply Conceptual design of geothermal power plant, ancillary equipment and transmission line Conceptual design and construction planning of geothermal power plants Cost estimation Consulting work for Consideration of social and natural environment, considering JICA Guideline Economic/financial analysis Preparation of implementation program of the power plant and transmission line construction Basic design of the power plant and transmission line Preparation and support work for PQ for EPC contractor AMDAL for power plant and transmission line If the exploratory wells are not successfully drilled and can not tap geothermal reservoir in HuluLais, drilling of additional three exploratory wells is recommended to be included in the ES loan. 96

119 <Reference> Bambang Budiardjo, Djoko Hantono, Heni Agus and Nugroho, (2001) Geochemical characterization of thermal waters in Hululais geothermal prospect, Stanford Geothermal Workshop Sasaki, Y. (2004) Three-dimensional inversion of static-shifted magnetotelluric data, Earth Planets Space, 56, Tokita H., Momita M., Matsuda K., Takagi H., Tosha T., and Koide K. (2002) A Rough estimation of Deep Geothermal Potentials of the Hohi and Ogiri Areas, Japan with Simplified Numerical Model Proceedings of 23rd Annual PNOC-EDC Geothermal Conference, 2002,

120 Chapter 4 Evaluation of Environmental and Social Impacts Chapter 4 Evaluation of Environmental and Social Impacts 4.1 Analysis of Existing Environmental and Social Conditions Analysis of Existing Conditions (1) Location The Hululais geothermal field is a prospect in the Geothermal Working Area (WKP) owned by PT. Pertamina in Bengkulu under authorization of Dir EP Migas No. 58/DMG/1996 dated January 26, 1996, which is located in Lebong District at the coordinates of South Latitude and East Longitude (Fig. 4-1). The current status is in exploration stage to obtain more accurate data on the reservoir characteristics and proven potential. Fig. 4-1 Geothermal Working Area owned by PT. Pertamina (Source: PT. PGE) The Hululais geothermal field is located in Lebong Tengah and Lebong Selatan Sub-Districts, Lebong District, Bengkulu Province, about 180 km away from Bengkulu City stretching along the road of Bengkulu-Curup-Muara Aman. The project activity will rest in a hilly area with a total prospect size of around 20 km 2 at an elevation of about 950 meters. 98

121 The Hululais geothermal field indicates that most of the land use is engaged as agricultural land owned by the local communities especially in the vicinity of main prospect site while the rest of it is occupied by protected forest stretching along the western part of the slope. The site map of the planned development of Hululais geothermal field is shown on Fig Fig. 4-2 Planed Development of Hululais Geothermal Field Planed Well Drilling Site Existing Road Road Plan Stage I Planed Water Pump Station -1 Planed Road Stage II Planed Building/Office/Logyard (Source: PT. PGE) The area for construction of geothermal power plant facilities is located in highland which was widely utilized by local people for agriculture and plantation activities such as coffee, rubber, cinnamon and paddy field. The highlands in mountainous area are protection forest and conservation forest areas. Administratively, the project location includes Village of Talang Sakti, 99

122 Chapter 4 Evaluation of Environmental and Social Impacts BT. WAUWAU TN. KERINCI SEBLAT District of Central Lebong and Mubai Village, District of South Lebong. The forest map of the Hululais geothermal power development project is shown in Fig The highlands in mountainous area are protection forest and conservation forest areas. Fig. 4-4 BT. shows KUBANG the route of the transmission line in the forest map. The south-western and north-eastern sides T.1775of planed transmission line are protection PG. PARUNGLUPU forest and conservation forest respectively. PG. PANJANG Fig. 4-3 Map of Hululais Geothermal Power Development Project BT. SEBAYUR MUARAAMAN # Talangsinjau # Preservation Forest Protection Forest Limited Production Forest Permanent Production Forest Other Utilization Area Village/habitation Benchmark Lake Road River BT. GEDANGHULULAI 2130 G. TAWANGWALAN BT. PEBUAR 1354 # Airputih G. HULUKOKAL # Kotabaru Paldelapan # Balam # ARGAMAMUR # (Source: PT. PGE) Sungaipiring # Talanggambir # Tanjungberingin # Sukalangu Airmerah # # CURUP Caw # # Talangtua # Tabahpadang Tanjungdalam # Sungaiare LAIS Talangtembok Pebo Tabahpenyengat Sawahlebar Lalangrenahkandis Pasarkerap Talangpanjang # PagarG # 100 # Punjung KEPAHIANG # Ulaklebar Pondokelapa Tamungdalam #

123 Fig. 4-4 Forest Map of the transmission line for Hululais Geothermal Power Plant Preservation Forest Protection Forest Limited Production Forest Permanent Production Forest Other Utilization Area Village/habitation Benchmark Lake Road River (Source: PT. PGE) (2) Natural Environment (i) Meteorology and Climatology Table 4-1 shows the climate parameter conditions in the study location. The mountain wind blows not too fast at an average of 3.5 km/h, with maximum air temperature of 30.2 o C during the day that occurs in April and minimum air temperature of 19.5 o C at night that occurs at the end of rainy season in June. The daily average of air temperature is 24.0 o C creating a cool enough atmosphere, with a fairly high relative humidity this is in line with the air pressure of 1,012.5 hpa on the average 101

124 Chapter 4 Evaluation of Environmental and Social Impacts Table 4-1 Climate Parameter Condition in the Study Location Daily Averages Month Wind velocity (km/hour) Maximum air temperature (ºC) Minimum air temperature (ºC) Average air temperature (ºC) Relative humidity (%) Air pressure (hpa) Jan ,012.4 Feb ,013.1 Mar ,013.2 Apr ,011.6 May ,012.1 Jun ,011.5 Jul ,012.8 Aug ,012.9 Sep ,013.3 Oct ,013.0 Nov ,012.8 Dec ,011.8 Average ,012.5 (Source: BMG and BPS of Lebong Regency, 2006) (ii) Flora and Fauna The type of plant ecosystem around the project site in Lebong District is of a secondary forest and mixed plantations owned by the local residents. In addition, to the rest are protected and conservation forests (Kerinci Seblat National Park). The vegetation is dominated by mixed plantations of coffee, cinnamon, cocoa, rubber and also rice fields. The some species of wildlife found in this primary forest are belonging to rare and protected species by the Law of the Republic of Indonesia, such as Cobra (Naja naja), Parrot (Gracula religiosa), Wild Fowl (Gallus Gallus), Pigmy deer (Tragulus javanicus), Deer (Cervus sp), Sumatran Tiger (Panthera tigris sumatrensis), Sun Bear (Heterctos malayanus). The existence of various animal species in the studied area indicates that the region is still capable of supporting various kinds of wildlife. 102

125 The wildlife species in the studied area were observed by direct observation in the field and based on information from the local community as presented in Table 4-2 by PT. PGE(2008) Table 4-2 Wild animal species in the study location No. Class Local Name Latin Name Population Estimation Description Conservation Status 1 Amphibia Frog Leptophryne + Observation TDL borbinica 2 Aves Partridge Gallus gallus + Interview TDL 3 Aves Parrot / Gracula religiosa + Interview DL Ketiong 4 Aves Parakeet / Psittacula sp + Interview DL Parrot,reed 5 Aves Lathe Centropus +++ Observation TDL bengalensis 6 Aves Honey bird Antrhreptes cf. ++ Observation DL simplex 7 Aves Cekakak Halcyon sp ++ Observation DL 8 Aves Cucak yellow Phycnonotus + Observation TDL melanicterus 9 Aves Cucak finch Phycnonotus ++ Observation TDL augrigaster 10 Aves Delimukan Chacophaps indica + Observation TDL emerald 11 Aves Hawk,looming Haliastur sp + Interview DL 12 Aves Gold / Aceros undulatus + Observation DL Hornbill 13 Aves Kacer Copsychus sp ++ Observation TDL 14 Aves Orioles Orilus sp + Interview DL 15 Aves Kipasan Rhipidura sp + Observation DL 16 Aves Merbah Pycnonotus sp +++ Observation TDL 17 Aves Sparrow Locnchura Malacca ++ Observation TDL 18 Aves Common Streptopelia ++ Observation TDL cuckoo chinemsis 19 Aves Swallow Collocalia sp +++ Observation TDL 20 Mammals Wild boar Sus sp +++ Interview TDL 21 Mammals Squirre Callosciurus sp +++ Observation TDL 22 Mammals Beaver Lutra sp + Interview DL 23 Mammals Honey bear Helarctos malayanus + Scratches DL 24 Mammals Ape Macaca nemestrina ++ Observation TDL 25 Mammals Cingkuk Presbytis sp ++ Observation 26 Mammals Flying-fox Rousettus sp ++ Arrest TDL 27 Mammals Sumatran tiger Panthera tigris + Interview DL sumatrensis 28 Mammals Clever Tragulus sp + Interview DL individual 29 Mammals Bat Rhinolopus sp +++ Arrest TDL 30 Mammals Long-tailed Macaca fascicularis ++ Interview TDL macaques 31 Mammals Lemur Nycticebus coucang + Interview DL 32 Mammals Weasel Paradoxurus sp ++ Interview TDL 33 Mammals Deer Cervus sp? Interview DL 103

126 Chapter 4 Evaluation of Environmental and Social Impacts 34 Mammals Gibbon Hylobates syndactilus + Interview DL 35 Mammals Hoop Presbytis sp +++ Interview DL 36 Mammals Rat Rattus sp +++ Interview TDL 37 Mammals Forest rat Maxomys surifer ++ Observation TDL 38 Mammals Anteater Manis javanica + Interview DL 39 Reptile Lizards Varanus salvator ++ Interview TDL 40 Reptile Lizard Mabouya sp ++ Observation TDL 41 Reptile Snake welang, Cf. natrix + Observation? 42 Reptile Brown snake Phyton sp + Interview DL 43 Reptile Cobra Naja sp ++ Interview DL Remarks TDL: Not protected by law of Indonesia DL: Protected by law of Indonesia (iii) Land Use (Source: PT. PGE EIA Report, 2008) The land use in the studied area is distributed to various purposes in accordance with what the local people do for a living. Therefore, the available lands are used mainly for plantations (coffee, rubber, and cocoa) and rice fields and others. However: some of which are still forested grove, while some other parts remain dense forests. (3) Social Environment The project site is located in Lebong Regency Bengkulu Province. While the study boundary is located in six villages namely Talang Sakti, Semelako, and Karang Anyar Villages of Lebong Tengah District and Bungin, Karang Dapo and Mubai villages of Lebong Selatan District. Lebong Regency has the area of 192,924 hectares that consists Districts of South Lebong, Rimbo Pengadang, Central Lebong, North Lebong and Upper Lebong. (i) Population Profile The largest population of 2,631 persons lives in Semelako Village, followed by Mubai village of 2,444. While the least population of 440 person dwells in Karang Anyar Village. A detailed demographic profile can be seen in Table 4-3. From Table 4-3, it is evident that the densest population is in Semelako Village, i.e inhabitants /km2, followed by Karang Dapo, inhabitants/km 2. On the other hand, the least population is respectively in Karang Anyar, i.e inhabitants /km 2, and Bungin inhabitants /km 2. As for the sex ratio, Talang Sakti has the smallest ratio of Given a constant of 100, this will mean that to every proportion of 100 female, there are 77 male members. In the meantime Karang Dapo and Bungin have both sex ratio of greater than 1, i.e and 1.10 respectively. This means that to every proportion of 100 inhabitants, there are 105 female and 110 male members. 104

127 Table 4-3 Population Number, Area Size, Population Density and Sex Ratio in Talang Sakti, Semelako, Kr. Anyar, Bungin, Mubai and Karang Dapo Villages in 2007 No. Village Name Population Number (persons) Male (persons) Female (persons) Area Size (km 2 ) Population Density Sex Ratio 1 Tl. Sakti 1, Semelako 2,631 1,298 1, K. Anyar Bungin 1, Mubai 2,444 1,182 1, , K.Dapo 1, (Source: Monograph of Talang Sakti, Semelako, Karang Anyar, Bungin, Mubai dan Karang Dapo Villages, 2008) (ii) Livelihood The livelihood observation will be conducted in the sample villages of Talang Sakti, Semelako and Karang Anyar of Lebong Tengah District and Bungin, Karang Dapo and Mubai of Lebong Selatan District. Most of the population in the 6 (six) sample villages earn their living from coffee and rice farming. And some others earn their living from rubber and cocoa plantations and vegetables farming. The average ownership of coffee plantations is around 2-3 hectares with production range from 700 kg 1,000 kg per hectare per year. The price level during the study is IDR 12,500 per kg contributing an income level from this sector at 2 x 700 x IDR 12,500 = IDR 17,500,000 per year. As for the field rice sector, the production reaches up to 2,000 kg of field rice at a price of IDR 5,000 per kg = IDR 10,000,000 per year. Apart from these basic sectors for a living, income are also generated from fish ponds, palm sugar, small scale vendors and many other ventures. (iii) Public Perception The public perception with respect to the project by PT. PGE to be located in Lebong District, Bengkulu Province, includes mainly what they want and expect out of the project. In general, the respondents claimed to have known that there will be a geothermal development project, but they are not entirely clear about it. Most of the community members around the project site state that they agree on the planned drilling activity provided that it will cause no harm to them. The public perception in this relation is divided into strongly agree, agree and disagree. Most of the community agrees with project on certain terms and conditions. What is proposed by the community first includes the land acquisition, as they expect that no harm will affect to the land owners. The second relates to the employment in which more local people around the 105

128 Chapter 4 Evaluation of Environmental and Social Impacts project site expect to get involved, especially the unskilled workers, and the third relates to the project s concern to the public interests. In the meantime, disagreement is shown by some others assuming that the project will not have any concern to the social interests, especially employment issues. In this relation, they refer to the past experience that the project tended to give higher priority to the recruits from rather outside areas than the project surroundings Analysis of Present Conditions During the work in Indonesia, we visited the study area and checked present conditions. The project area is located at a highland spreading at the foot of the mountain Hululais (Photo-1). Four clusters (Photo-2), which name are A and B for geothermal well drilling with its access road (Photo-3) have been completed. They are constructed in private land acquisition to avoid the conservation forest of the high altitude in the southwest. The access road is away from residential and its traffic is only used for coffee plantation and the vehicles for the project. The exploratory well drilling has started at Cluster-B (Photo-4). Smoking in the drilling field is prohibited but a smoking area is provided (photo-5). The water for drilling is water from the river near Cluster-A (Photo-6). The flow rate of the river was sufficient for drilling when we visited the project area. The project area is in the coppice forest and coffee plantations. The nearest village from the project area is Tes village, which is 6 km apart from the planed power plant site. Photo-1 Hululais Site View Photo-2 Cluster-B Photo-3 Access Road Photo-4 Drilling Rig for Exploratory Well 106

129 Photo-5 Smoking Area Photo-6 Water Pump Future Forecast (in the Case of No Project Implementation) The following are what are forecasted if the project is not implemented: Locally, the environmental conditions in the study area will be stable. Regionally, some thermal, geothermal or hydro power plants in the south Sumatra grid, which are shown in Table 1-4 Power Balance in the Sumatra System (2010 to 2019) will be constructed for additional power plants to overcome the electricity shortage. However, the residents' living conditions will worsen due to an increase in the environmental aftereffects within the additional power plant site. Greenhouse gas emissions will increase if the electricity generation from thermal power plant will increase for substitution of geothermal power. 4.2 Environment Improvement Effects of Projects Effects of Environmental Improvement The environmental improving effect of this project is the reduction of carbon dioxide emission from electricity generation using renewable geothermal energy comparing with other fossil firing power generation. The estimated reduction of CO 2 emissions resulting from this project is 670,351 tons CO 2 per year. The detailed computation is as below. 107

130 Chapter 4 Evaluation of Environmental and Social Impacts (1) Methodology (i) Preconditions Conduct calculation using the energy saving (or energy substitution) effect (crude oil conversion) Concerning greenhouse gases other than CO 2, multiply by an index which is determined according to the type of gas In cases where the cause of reduction in greenhouse gas emissions is something other than energy saving or substitution, the formula established by the Intergovernmental Panel on Climate Change (IPCC) for that portion is used. (ii) Calculation Formula Cases where the cause of reduction in greenhouse gas emissions is energy saving or substitution only: CO2 conversion volume = crude oil conversion of energy saving or substitution effect (k toe/y) x x 20 x 0.99 x 44/12 1) Energy saving (or energy substitution) effect (crude oil conversion ktoe/y) 10,000 kcal/kg for the heating value conversion of crude oil 2,646 kcal/kwh for the heating value conversion of electricity 2) Conversion to unit of energy (heating value: TJ) 2)=1) x TJ/kt (conversion factor) 3) Conversion to base unit of carbon discharge 3)=2) x 20 tc/tj (base unit of carbon discharge) 4) Correction of incomplete combustion portion 4)=3) x 0.99 (oxidation rate factor of carbon) 5) Conversion to CO 2 5)=4) x 44/12 (Molecular weight ratio) 108

131 (2) Results of Calculating Reduction of CO 2 Emissions (i) Preconditions Application utilization rates are shown in Table 4-4 for that calculated from development resource potential and annual geothermal power generation. Table 4-4 Preconditions Field Development resource Annual power generation Utilization rates potential (MW) (GWh) Hululais (Source: Prepared by SNC study team) (ii) Calculation of CO 2 emissions reduction effect 1) Crude oil conversion of power (toe/y) 2,646 kcal/kwh/10,000 kcal/kg=264.6 kg/mwh 2) Conversion to unit of energy (TJ) kg/ MWh x TJ/kt= TJ/MWh 3) Conversion to base unit of carbon discharge TJ/ MWh x 20 t-c/tj = t-c/mwh 4) Correction of incomplete combustion portion t-c/ MWh x 0.99 =0.223 t-c/ MWh 5) CO2 conversion quantity t-c/ MWh x 44/12 = t-co 2 / MWh 6) Annual power generation Annual power generation (MWh/year) =Development resource potential (MW) x 24(h/day) x 365 (day) x utilization rates (%) 109

132 Chapter 4 Evaluation of Environmental and Social Impacts 7) CO 2 emissions reduction effect Annual emission reduction (t-co2/year) = (t-co2/mwh) x annual power generation (MWh) The CO 2 emissions reduction effect resulting from the Project is shown in Table 4-5. Table 4-5 CO 2 Emissions Reduction Effect Resulting Crude Oil Conversion Annual power generation(gwh/year) Emission factor (t-co 2 /MWh) Annual emission reduction (t-co 2 /year) 670,351 (Source: Prepared by SNC study team) Project Potential for CDM For the baseline methodology for this project, ACM0002 grid-connected electricity generation from renewable sources can be applied. The baseline emission factor of this baseline methodology is open to the public as a database of National Commission for Clean Development Mechanism through internet home page < The result of baseline emissions is shown in Table 4-6. Table 4-6 CO 2 Emissions Reduction as a CDM project CDM ACM0002 Annual power generation(gwh/year) Emission factor (t-co 2 /MWh) Annual emission reduction (t-co 2 /year) 608,889 (Source: Prepared by SNC study team) 4.3 Environmental and Social Impacts Associated with the Project Implementation Environmental and Social Considerations Based on the site survey results and the project characteristics, survey items that presently considered necessary before the project implementation were picked up to ensure appropriate environmental and social considerations. 110

133 Selection of items was made for three parts; geothermal resource (drilling and piping), power plant and transmission line. Regarding the social considerations items, the evaluation of positive (+) and negative (-) impact was made for (A) significant impact, (B) insignificant impact, (C) impact unknown, and (N) impact not assumed. The results are given in Table 4-7. Table 4-8 shows the reasons for selecting items for which impact is anticipated. 111

134 Resource Development Power Plant Transmission Line Chapter 4 Evaluation of Environmental and Social Impacts Table 4-7 Scoping of Environmental and Social Considerrations Items Air Pollution -B -A N Noise and Vibration -B -A N Water Pollution -A -A -A Soil Pollution -B N N Waste -A -A N Ground Subsidence -A N N Offensive Odors -B -A N Geographical Features -A -A N Biota and Ecosystem -A -A -A Water Usage -B -A N Involuntary resettlement N N N Ethnic Minorities and Indigenous People C C C Cultural Heritage N N N Landscape N N N Local Economy such as employment and livelihood etc. +A +A +A Land Use and Utilization of Local Resources +A +A +A Social institutions such as social infrastructure and local decision-making institutions C C C Existing social infrastructures and services +A +A +A The poor, indigenous of ethnic people C C C Misdistribution of benefit and damage C C C Local conflict of interests C C C Gender N N N Children's rights N N N Infectious diseases such as HIV/AIDS etc. N N N Global Warming N +A N + : positive impact -: negative impact A : Serious impact is expected B : insignificant impact is expected C : Extent of impact is unknown N : No impact is expected (Source: Prepared by SNC study team) 112

135 Air Quality Table 4-8 Selected Reason of Items in the Environmental Impact Forecasts Items Geothermal Resource Power Plant Transmission Line Hydroge n sulfide (H 2 S) Production test to be conducted for reservoir evaluation will involve gas emission containing H 2 S, which will temporarily affect the surrounding areas. Nitrogen Transportation of oxide (NOx) equipment and materials during construction will not affect an extensive area. However, there may be private homes near the transportation route, which will be temporarily affected. Dust, Vehicles transporting etc. equipment and materials during construction will raise dirt and dust clouds, but the affected area will be limited. However, there may be private homes near the transportation route, which will be affected. There will be noise emitted Noise & from geothermal fluid vibration escaping from the drilled wells, and working noise and vibration from the construction equipment while working. However, such noise and vibration are only temporary, and thus deemed to have only a minor impact on the environment. Water Quality Muddy water will be generated during excavation. As the geothermal fluid containing H 2 S will be used as steam for generating electricity, H 2 S will be emitted with the steam through the cooling tower to the atmosphere, which will affect the environment near the power plant. Transportation of equipment and materials during construction will not affect an extensive area. However, there may be private homes near the transportation route, which will be temporarily affected. Vehicles transporting equipment and materials during construction will raise dirt and dust clouds, but the affected area will be limited. However, there may be private homes near the transportation route, which will be affected. During in-service, noise and vibration will be generated from the cooling towers, steam turbines, generators and other such equipment, which will affect the environment near the power plant. During in-service, the effluent from the power plant to adversely affect the surrounding water environment The effluent from the soil runoff from the bare lands to adversely affect the surrounding water environment. 113

136 Natural environment Waste Chapter 4 Evaluation of Environmental and Social Impacts Soil Contamination Subsidence Odor Industria l waste Civil engineeri ng work waste soil Civil engineering work will generate waste soil. Reduction of the volume and appropriate disposal to the spoil bank must be studied. As geothermal fluid will be extracted from deep underground and hot water will be returned to deep underground, ground subsidence is forecasted in the neighborhood of the power plant. Unpleasant or foul odors of H 2 S generated in the well-discharge tests are projected to temporarily affect the neighboring areas. Water use Construction will use surface water /groundwater, which may affect the rive flow /groundwater level. However, water intake will be temporary and the amount is so limited that only a slight impact is expected. Topograph y and Geology At the survey and construction stages when the reinjection system would not have been completed, the soil pollution is feared as the geothermal fluid would leak to the surrounding. During construction, industrial waste (excavation sludge, and construction waste and debris) will be generated. It is anticipated that survey, and drilling of production wells and power plant construction work could cause some change in the topography. - - During in-service, industrial waste (such as sludge and waste oil) will be generated Unpleasant or foul odors of H 2 S generated during the in-service period are projected to affect the power-plant neighboring areas. During in-service, surface water /groundwater will be used for power generation. There is a concern about the water intake affecting the rive flow /groundwater level, swamps and bogs. It is anticipated that the power plant construction work could cause some change in the topography It is anticipated that the power line tower construction work could cause some change in the topography. 114

137 Others Social Environment Flora & Fauna Ecological Systems Local economy such as employme nt and livelihood etc. Land use and utilization of local resources Existing social infrastruct ures and services Global Warming Modification of the land and the presence of facilities will affect the distribution and habitat environment of the animals and the important plant species and their communities. Modification of the land and the presence of facilities will presumably change the distribution of the animals and plants, and their habitat and breeding environment. Increase in employment opportunity, surveys, local procurement of construction materials and equipment, and local purchase of food for workers are expected to bring about positive effects on the local economy and residents livelihood. Land use and utilization of local resources are expected to arise from setting up the survey and construction work bases and construction of access roads. Social infrastructure can be expected to improve with the construction and improvement of roads in the survey and construction period. - Modification of the land and the presence of facilities will affect the distribution and habitat environment of the animals and the important plant species and their communities. Modification of the land and the presence of facilities will presumably change the distribution of the animals and plants, and their habitat and breeding environment. Increase in employment opportunity, local procurement of materials and equipment for power plant management and maintenance, and local purchase of food for power plant workers are expected to bring about positive effects on the local economy and residents livelihood. Land use and utilization of local resources are expected to arise from the power plants and relevant facilities. Positive effects can be expected from the existence of power plants and other relevant facilities, such as construction, maintenance and management of the roads and supply of electric energy to the local residents. Positive effects can be expected, as replacement of the fossil fuel will lead to reduction in greenhouse gas generation, and geothermal power generation involves lower greenhouse gas emissions compared with other types of steam-power generation. Modification of the land and the presence of facilities will affect the distribution and habitat environment of the animals and the important plant species and their communities. Modification of the land and the presence of facilities will presumably change the distribution of the animals and plants, and their habitat and breeding environment (Source: Prepared by SNC study team) 115

138 Chapter 4 Evaluation of Environmental and Social Impacts Comparison of the Proposed Project with Other Options that Impose Less Environmental and Social Impacts At this moment, the possible power sources in the project areas are thermal power and renewable energies of geothermal, hydraulic, wind, and solar power. Of these power sources, thermal, hydro and geothermal power generation can be regarded as a base power source. The remaining wind, and solar power generation serve only as supplementary, not a base power source. It is generally believed that thermal power generation imposes a high environment load. In addition, thermal power generation, which has a large single unit capacity, is not suitable for the project area. No hydropower project as same capacity as this geothermal power project is planned in the Sumatra grid. Therefore, the hydropower and geothermal power can be the base power source at the study area. Table 4-9 is shown the matrix comparing the two options with the present conditions; one is the existing power generation to continue, the other alternatives are geothermal power and thermal power. 116

139 Table 4-9 Comparison of Geothermal Power and thermal Power with Current Environmental Environmental items Atmosphere Conditions Current environmental conditions Geothermal power generation Thermal power generation NOx, Sox H 2 S 0 (-) 0 Noise Water quality Surface water 0 (-) - Groundwater Soil Wastes Natural environment Living environment Greenhouse gases Costs When the geothermal power and hydropower are respectively compared with the current environmental conditions: : worse 0: no change +: better (-): insignificantly worse (Source: Prepared by SNC study team) Results of the Discussions with the Implementing Agency For the current project, interviews were conducted with persons in charge at the head office of the implementing agency, PT. PGE, PT. PLN and the local government officials and residents around Hululais geothermal field. The results are as given below. (1) PT. PGE, Head office and local office PT. PGE has been conducted the AMDAL for up-stream project. The ANDAL, RKL and RPL for the Hululais geothermal development project have been approved by governor of Lebong Regency on 19 December Socialization for the local residences has been done on 16 October The area for the Hululais geothermal development will be about 80 ha, which is private territory and not include protection and conservation forest. PT. PGE will employ 300 non-skill workers from local people. 117

140 Chapter 4 Evaluation of Environmental and Social Impacts (2) PT. PLN Head Office The AMDAL has already been starting for the down-stream project and the transmission line. The AMDAL for the down-stream project and the transmission line will be finished by May The root of transmission line will design not to run in protection and conservation forest area. (3) Local Government Official The local government official and residents are in favor of such a project and show no opposition to its development. People expect new job opportunity. More than 100 people attended the socialization of the project by PT. PGE The socialization was good opportunity to understand the project for local official and people. Some people afraid to happen the mud volcano Lapindo disaster in Sidoarjo, East Java. (4) Local Resident We have been living here for 21 years. I own 1ha coffee plantation. I don t know what project is conducting. We use the well water for drinking. A part of coffee plantation has been sold to PT. PGE at the price of 5,000IDR/m 2 and the compensation of coffee plant is 5,000IDR. 4.4 Outline of the Environment and Society Consideration Laws and Relations Outline of the Environment and Society Consideration Relations and Laws Concerning Projects Implement (1) Legislation, Standards and Regulations Relating to the Environment (Geothermal Development Related) (i) Air 1) Environment Standards Environmental standards were established in 1988 for the purpose of preventing air pollution, and were amended in 1999 by Government Regulation on Air Pollution Control (No. 41, 118

141 1999). For hydrogen sulfide closely associated with geothermal development, the foul odor standards were stipulated in the Decree of the Minister of Environment No. 50 in 1996 (KEP-50/MENLH/11/1996). Environmental standards on the foul odor of hydrogen sulfide are shown in Table Table 4-10 Environment Quality Standards for Odor Level Item Unit Standard value (ppm) Hydrogen sulfide (H 2 S) ppm 0.02 (= 28μg/m 3 ) (Source: Decree of the State Minister for Environment concerning Offensive Odor Level Standards (KEP-50/MENLH/11/1996)) 2) Exhaust Standards Standards for the discharge of hydrogen sulfide from stationary sources were revised in 1995, and the new geothermal power plant (January 1, 2000 onwards) will be regulated in the manner shown in Table Table 4-11 Gas Exhaust Standard (Stationary Source) Item Unit Standard value Hydrogen sulfide (H 2 S) (Total Reduced Sulfur) mg/ m 3 35 (approx. 25ppm) (Source: Decree of the State Minister for Environment concerning Emission Standards for Stationary Sources (KEP-13/MENLH/3/1995)) (ii) Water 1) Environment Standards Environmental standards for water quality were amended by the Government Regulation on the Water Contamination Control (No. 82/2001). The standards are stipulated for the following four categories of water classified according to its intended utilization. Type I: Water that can be used for drinking directly without any treatment Type II: Water that can be used as raw material for processing and conversion to 119

142 Chapter 4 Evaluation of Environmental and Social Impacts drinking water Type III: Water that can be used for aquatic product industry and livestock farming Type IV: Water that can be used for agriculture, small-scale enterprises, industry and hydroelectric power generation Control items in the standards consist of 48 items divided into four categories of physical items, chemical items, microorganisms, and radioactive substances. Environmental standards for quality of Type I water relevant to geothermal development are shown in Table Table 4-12 Environmental Quality Standard for Water (Drinking Water Usage) No. Item Unit Maximum concentration Remark 1 Temperature 2 Total Dissolved Solid Substances (TDS) o C ±3(air-temperature) mg/l 1,000 3 Total Substances(TSS) mg/l 50 4 ph Mini-Max 5 BOD mg/l 2 6 COD mg/l 10 7 DO mg/l 6 8 Total Phosphorous (T-P) mg/l Nitrate (NO 3 -N) mg/l NH 3 -N Arsenic (As) Boron (B) Fluoride (F) Chloride (Cl) Mercury (Hg) Sulfated Sulphide (H 2 S) mg/l mg/l mg/l mg/l mg/l mg/l mg/l mg/l (Source: Government Regulation Number 82/2001, regarding Management of Water Quality and Control of Water Pollution, dated, December 14, 2001)

143 2) Quality Standards of Liquid Waste The quality standards of liquid waste from geothermal activity was not clear in Government Regulation No. 20/1990, it was revised by decree of state minister of Environment Quality standards of liquid waste of natural and gas as well as Geothermal activities decree No. Kep-42/MENLH/10/1996. The quality standards of liquid waste for geothermal exploration and production activities are in Table Table 4-13 Quality Standards of Liquid Waste Item Unit maximum Dissolved sulphide acid (as H 2 S) mg/l 1 Dissolved ammonia (as NH 3 ) mg/l 10 Mercury mg/l Arsenic mg/l 0.5 Temperature o C 45 ph (Source: Decree of the State Minister for Population and Environment concerning Standards of Liquid Waste for Industry Activities (KEP-42/MENLH/10/ 1996)) (iii) Noise Standards for noise according to type of land use and activity area are shown in Table Noise abatement measures should achieve either the levels given in below: The Indonesia do not have regulations concerning noise emission, and targeted are maintenance of environmental standards (<55dB) Table 4-14 Standards of Noise Level Items db (A) a. Area Usage 1. Residential Commercial Office and Trade Open Green Area Industry Government and Public facility Recreation (Resort) Special - Airport * - Train station * 121

144 Chapter 4 Evaluation of Environmental and Social Impacts - Shipyard 70 - National Port 60 b. Activity Area 1. Hospital School Place for pray / Church / Temple / Mosque 55 *: By the Ministry of Communications (Source : Decree of the State Minister for Population and Environment concerning Noise Level Standards KEP 48 / MENLH / 11 /1996)) (iv) Vibration The environmental standard for vibration is as shown in Table Table 4-15 Standards of Vibration Level Frequency (HZ) Not disturb Discomfort Uncomfortable Painful 4 < > > < > > < > > < > > < > > < > > < > > < > > < > > < > > < > > < > > < > 9-12 > 12 (Source: Decree of the State Minister for Population and Environment concerning vibration Level Standards KEP 49 / MENLH / 11 /1996)) (2) Forest law Indonesia has serious concern about forest protection, so forest law has been revised in 1967, 1990, and In accordance to the Act on Forestry No. 41/1999, forest area is categorized as Conservation Forest, Protection Forest and Production Forest, for which is defined as in Table4-16. Conservation Forest is a forest area having specific characteristic established for the purposes of conservation of animal and plant species and their ecosystem. 122

145 Protection Forest is a forest area designated to serve life support system, maintain hydrological system, prevent of flood, erosion control, seawater intrusion, and maintain soil fertility. Production forest is a forest area designated mainly to promote sustainable forest production. Production forest is classified as permanent production forest, limited production forest, and convertible production forest. Geothermal power development activity can be conducted in the forest restricts in special circumstances. Government Regulation No.2/2008 approves geothermal power development activity in protection forest and production forest in exchange for tariff or government income on using forest area. Geothermal power development activity in kinds of the conservation forest is not allowed according to government regulation No.41/1999. The project implementation body should pay attention about the location of prospect where is included conservation forest or not. Table 4-16 Classification of Forest Area Forest Area (Kawasan Hutan) Conservation Forest (Hutan Consavasi) Sanctuary Reserve area (Kawasan suaka alam) Strict Nature Reserve (CA: Cagar Alam) Wildlife Sanctuary (SM: Suaka Margasatwa) Nature conservation area (Kawasan pelestarian alam) National Park (TN: Taman Nasional) Grand Forest Park (THR: Taman Hutan Raya) Nature Recreation Park (TWA: Taman Wisata Alam) Game Hunting Park (TB: Taman Buru) Protection Forest (Hutan Lindung) Production forest (Hutan produksi) Permanent production forest (HP: Hutan Produksi Tetap) Limited production forest (HPT: Hutan Produksi Terbatas) Convertible production forest (Hutan Produksi yang dapat dikonversi) (Source: Prepared by SNC study team) 123

146 Chapter 4 Evaluation of Environmental and Social Impacts Contents of EIA needed for the Project Implement in Indonesia (1) Environmental Assessment System PPLH, which took part of environmental administration, was established in 1978 in Indonesia. Act of the Republic of Indonesia concerning environmental management (act No. 4, 1982), which was described national environmental administration issues, was promulgated. PPLH transformed into KLH in For strengthening the function of KLH, BAPEDAL was established as an implementation agency for environmental administration based on Degree of President No.23, KLH was divided and LH was established in March BAPEDAL was transformed the structure and strengthened the function by Degree of President No.77, 1994, which brushed up the system on implementation of countermeasures for preservation of the environment and public hazards. According to central government policy, local government has right to act for preservation of the environment based on paragraph 3 article 18 of Act of the Republic of Indonesia concerning environmental management, and BLH of each province enforces the environmental issues. Authority concerned and provinces, which has jurisdiction over project, are capacitated enforcement of environmental impact assessment. They organize the committee of environmental impact assessment for prescreening and examinating AMDAL report. General committee of environmental impact assessment is organized for enforcing the environmental impact assessment of the project, which has not only one authority concerned. BEPEDAL administrates coordination of environmental impact assessment study. To reflect the article 16 of Act of the Republic of Indonesia concerning environmental management, the Government Regulation No. 29 of 1986 regarding the Environmental Impact Assessment was promulgated. Considering the results of many developments, regulation regarding Environmental Impact Assessment Government Regulation No. 51 of 1993 was enacted. In Indonesia Environmental Impact Assessment is called as Analysis Mengenai Dampak Lingkungan (hereafter AMDAL). AMDAL is categorized three according to the intensity and extent of the proposed development. AMDAL KegiatanTerpadu/Multisektoral: the significant impacts of a proposed integrated business or activity on the environment, where that business or activity is located in a single ecosystem type and also involves more than one authorized government agency. AMDAL Kawasa: the significant impacts of a proposed integrated business or activity located in a single ecosystem type, which are under the authority of a single authorized government agency. AMDAL Regional: the significant impacts of a proposed integrated business or activities located in a single ecosystem type in a development planning area as defined 124

147 by the regional spatial plan, which involve more than one authorized government agency as part of the decision-making process. The significant impacts are fundamental changes to the environment which result from a proposed business or activity, impact significance is determined by 6 parameters (number of affected people, aerial extent, duration, intensity, number of other affected environmental components, cumulative nature, reversibility / irreversibility) in decree concerning guidelines for the determination of significant impacts decree No. Kep-056 of Types of business and activity that may cause the significant impacts on the environment are specified 14 kinds sectors. The details of activity and its scale were once announced by decree concerning types of business or activities required preparing an environmental impact assessment, decree No. Kep-11/Menlh/3/1994, the kind and scale of the business and activities were revised by decree of sate minister for environment on types of business or activities required to prepare an environmental impact assessment, decree No. 11 of Environmental Impact Statements called as Analysis Dampak Lingkungan (hereafter ANDAL) and it is a detailed and in-depth research study on the significant impacts of a proposed business or activity. And also the management plan and monitoring plan shall be prepared in order to manage and monitor the significant impacts of proposed business and activity. Environmental Management Plan --- called as RKL (Rencana Pengelolaan Lingkungan Hidup) in Indonesia Environmental Monitoring Plan --- called as RPL (Rencana Pemantauan Lingkungan Hidup) in Indonesia In accordance with stipulation under Governmental law No. 27 of 1999 regarding EIA, to which any business or activity which not obligated to prepare the EIA, then to those business or activity should prepare but Environmental Management Effort (UKL: Upaya Pengelolaan Lingkungan) and Environmental Monitoring Effort (UPL: Upaya Pemantauan Lingkungan), decree of minister of environment regarding General Guidance to implement the UKL and the UPL decree No. 86 of 2002 was announced. (2) Objects for EIA Environmental conditions and impacts in the objected area of the geothermal power project, whose capacity is more than 55 MW, should be checked by application of AMDAL. In 125

148 Chapter 4 Evaluation of Environmental and Social Impacts geothermal power projects in and around the following legally protected areas, it lies under an obligation to prepare AMDAL, even if its capacity is less than 55 MW. Forest protection areas Peat areas Water catchment s areas Coastal edges River edges Areas surrounding lakes and reservoirs Areas surrounding springs Nature conservation areas (including nature reserves, wildlife reserves, tourism forests, genetic protection areas, and wildlife refuges) Marine and freshwater conservation areas (including marine waters, fresh water bodies, coastal areas, estuaries, coral reefs and atolls which have special features such as high diversity or a unique ecosystem) Coastal mangrove areas National parks Recreation parks Nature parks Cultural reserve and scientific research areas (including karsts areas, areas with special cultural features, archaeological sites or sites with high historical value) Areas susceptible to nature hazards The planned power plant and transmission line scales in the present project are as shown in Table Power plant capacity is larger than that stipulated in the Decree of the Minister of Environment No. 11 (2006) thus fall under the category requiring an AMDAL, but transmission line is smaller than that thus not requiring an AMDAL. 126

149 Table 4-17 Power Plant Plans and Installed Capacity Subject to AMDAL Geothermal field Planned capacity Installed capacity subject to submission of AMDAL Hululais Power Plant 2x 55 MW Transmission Line 150kV 55 MW > 150kV (Source: Prepared by SNC study team) 4.5 Items to be Carried out by the Beneficiary Nation (Implementing Agency and Other Related Agencies) for Project Realization PT. PGE has been conducted the AMDAL for up-stream project. The title of the ANDAL is Construction of Geothermal Field and Geothermal Power Plant Hululais by PT. Pertamina Geothermal Energy in District of South and Central Lebong, Regency of Lebong, Province of Bengkulu which is approved by AMDAL Assessment Commission of Lebong Regency No.660.1/012/BLHKP/2008, dated 18 October PT. PLN reports that the AMDAL have already been starting for the down-stream project and the transmission line. The AMDAL for the down-stream project and the transmission line will be finished by May However, the weather observation such as wind speed and wind direction at the project site needs to conduct at least one year because the weather data will be used for not only the conceptual design of the power plant but also concentration prediction of hydrogen sulfide by the power plant operation. Involvement of stakeholders and disclosure of information are of importance in terms of the environmental and social considerations concerning the yen loan projects. Information needs to be disclosed and explanation be made to the residents at stages when the project plans have been made, in the middle of preparing ANDAL, and when they are completed. For the up-stream of Hululais geothermal power development project, explanations to the residents were made during the process of preparing the ANDAL. Thus it is considered that PT. PLN as the project implementing agency for the down-stream aware of the importance of disclosure of information. 127

150 Chapter 5 Financial and Economic Evaluation Chapter 5 Financial and Economic Evaluation 5.1 Project Cost Estimation In accordance with the National Power Expansion Program of BAPPENAS, the Hululais Geothermal Power is to be developed separately by both PT. PGE and PT. PLN; PT. PGE will undertake development of the upstream (resource development and steam supply to PT. PLN) and PT. PLN will undertake development of the downstream (power generation purchasing steam from PT. PGE). BAPPENAS determined that both the agencies are to use the Japanese ODA finance from JICA. The cost is first divided into two portions: PT. PGE and PT. PLN portions. The base cost of both the portions were estimated with 2010 prices and the price contingencies were estimated using escalation rates for Indonesia specified by JICA. Five (5) percent of physical contingencies were also considered. The project will be implemented using respective consultant for PT. PGE and PT. PLN Cost Composition The project cost is estimated with the following compositions; PT. PGE Undertaking PT. PGE Advance Works Land Acquisition Access Road and Civil Works Advance Drilling Cost West Tests Administration cost for the advance works PT. PGE Upstream Works (Steam Supply Facilities) Land Acquisition Access Road and Civil Works Drilling Cost FCRS (Fluid Collection and Reinjection System) PT. PGE Administration Cost Consulting Fee Contingencies PT. PLN Undertaking PT. PLN Power Plant Facilities Land Acquisition Geothermal Power Plant PT. PLN Associated Transmission System 150 kv Transmission Line 128

151 Substation Expansion works PT. PLN Administration Cost Consulting Fee Contingencies Besides, the cost estimate was made taking into account the following mile stones in the project implementation schedule shown in Fig PT. PGE advance works (3 exploratory well drilling started in 2010, construction of well pad and access roads, and administration cost for AMDAL and other permissions, etc.) Project L/A: March 2012 Consulting Works: Selection of a consultant in 2011 and start of the services from December 2011 EPC contractor selection: From July 2012 to March 2013 Power plant construction: 38 months from No. 1 Unit commissioning at the end of 2015 and delivery 3 months after. No. 2 Unit commissioning 3 months after the No. 1 Unit. The Economic and financial evaluation: Assumed that the project would start selling the electricity from the beginning of 2016 for 30-year economic life Currency and Exchange Rate The cost is estimated divided into Foreign and Local currencies but expressed in US dollars. Those escalation rates for calculation of the price contingencies are those specified by JICA for 2010 goods and services for Indonesia. Table 5-1 Exchange Rates and Escalation Rates Exchange Rate Escalation Rate 1US$ 90.9 Yen 1US$ 9,017 IDR DC 7.90% FC 1.80% (Source: JICA data) 129

152 Chapter 5 Financial and Economic Evaluation Project Cost Estimate Table 5-2 Summary of Cost Estimate PGE Project: Upstream Works including Advance Works Unit: Million US$ Price FC Ratio LC Ratio FC LC Total Ratio 1 PGE Advance Works 1.1 Land Acquisition % 100% Access Road/Civil Works % 100% Advance Well Drilling Cost % 30% Well Testing % 30% PGE Administration Cost % 100% Subtotal % 2 PGE Project Up Stream Works 2.1 Land Acquisition % 100% Access Road/Civil Works % 100% Well drilling % 30% Well Testing % 30% FCRS % 44% Subtotal Total PGE Project Cost % 4 PGE Administration Cost % 100% % 5 Consulting Fee % 25% % 6 Contingencies 7.1 Price Contingency (FC:1.8%, LC:7.9%) 25% 75% Physical Contingency 57% 43% Subtotal % 7 Grand Total % Grand Total (Million Yen) 10,068 7,625 17,693 8 Implementation 9.1 PGE Equity 47% 53% % 9.2 JICA Project Loan, 85% 58% 42% % 9.3 JICA Consultant Loan, 100% 70% 30% % Total 57% 43% % 9 IDC+Commitment Charge, PGE

153 PLN Project: Power Plant and T/L Unit: Million US$ Price FC Ratio LC Ratio FC LC Total Ratio 1 PLN Down Stream Works 1.1 Power Plant % 30% Land Acquisition % 100% Subtotal % 2 PLN Transmission Line & SS kv T/L (HL1&2 to Pekalongan SS) % 26% KV Switchgear Expansion % 15% Subtotal % 3 Total PLN Project Cost % 4 PLN Administration Cost (3%) 0% 100% % 5 Consulting Fee 75% 25% % 6 Contingencies 5.1 Price Contingency (FC:1.8%, LC:7.9%) 31% 69% Physical Contingency 63% 37% Subtotal % 7 Grand Total % Grand Total (Million Yen) 13,499 8,064 21,562 8 Implementation 7.1 PLN Equity 52% 48% % 7.2 JICA Project Loan, 85% 64% 36% % 7.3 JICA Consultant Loan, 100% % Total 63% 37% % 9 IDC+Commitment Charge, PLN Grand Total (PGE +PLN) Grand Total (Million Yen) 23,567 15,688 39,255 (Source: Prepared by SNC study team) Finance Procurement Plan Both PT. PGE and PT. PLN will implement the project using the Japanese Government s ODA Loan which upper limit is 85% of the total project cost. The remaining 15% will be procured by the respective executing agency. The consulting cost is provided 100% from JICA. The terms and conditions of JICA Yen Loan and executing agencies rate of return are as follows: Table 5-3 Finance Procurement Conditions Project Yen Loan Consultant Yen PT. PGE Equity PT. PLN Equity Annual 0.3% 0.01% 14.48% 12.00% Interest/ROR Grace Period 10 years 10 years NA NA Repayment 40 years 40 years NA NA (Source: JICA data and SNC study team) 131

154 Chapter 5 Financial and Economic Evaluation Other terms and conditions of the Yen Loan are as follows; General untied A Commitment fee of 0.1% will be levied on the undisbursed amount of the loans 120 days after the signing of the L/A. The consultant will be procured according to the Guidelines for Employment of Consultants, and the project will be procured according to the Guidelines for Procurement under Japanese ODA Loans with optimized procurement to accommodate local procurement specified as Indonesian national policy. 5.2 Results of Preliminary Analysis of Finance and Economy Financial Analysis (1) Methodology PT. PGE gets benefits by selling produced steam to PT. PLN and PT. PLN get benefits by selling electricity generated with the purchased steam. The study team was informed that PGE and PLN have already concluded the Steam Supply Agreement (SSA) for this project at a unit cost of 4.3 cent/kwh. PT. PLN as state electricity utility, has to sell the generated power at a standardized price of about 7.5 cent/kwh approved by the government. The selling price of geothermal IPPs was extensively discussed and recently, the MEMR issued the guideline upper selling price of geothermal power at 8.7 cent/kwh in due consideration of higher upfront investment for geothermal power development. Taking into these circumstances, the Study Team calculated the Levelized Energy Cost of steam and electricity for this project; namely, the levelized unit electricity price and electricity price per kwh discounted with 12%, a discount rate used for power project in Indonesia, for 30 years operation will be calculated. Using those levelized steam and electricity unit costs, the Financial Internal Rate of Return (FIRR) will be calculated and compared with the opportunity cost of capital (WACC: Weighted Average Cost of Capital) to check financial viability of the project The FIRR will be calculated respectively for PT. PGE s upstream and PT. PLN s downstream undertakings. (2) Finance Procurement and Opportunity Cost The financial procurement, disbursement schedule and WACC of PT. PGE and PT. PLN undertaking are shown in Tables 5-4 and

155 Table 5-4 Financing and WACC of PT. PGE Upstream Undertaking Million US$ No. Year Proj Loan Consul L Equity TOTAL Ratio % % % % % % % Total % Equiv. Yen (Mill Y) 14, ,792 17,693 Ratio 79.8% 4.4% 15.8% 100% LOAN TERM Proj Loan Commit Consul L Equity Interest % 0.30% 0.10% 0.01% 14.48% Grace P. Year days 10 0 Repayment Year WACC 2.61% (Source: Prepared by SNC study team) Table 5-5 Financing and WACC of PT. PLN Downstream Undertaking Million US$ No. Year Proj Loan Consul L Equity TOTAL Ratio % % % % % % % Total % Equiv. Yen (Mill Y) 16,704 1,218 3,641 21,562 Ratio 77.5% 5.6% 16.9% 100% 133

156 Chapter 5 Financial and Economic Evaluation LOAN TERM Proj Loan Commit Consul L Equity Interest % 0.30% 0.10% 0.01% 12.00% Grace P. Year days 10 0 Repayment Year WACC 2.34% (Source: Prepared by SNC study team) Though JICA specified that the repayment period will be 40 years including a grace period of 10 years, the study adopts the repayment period of 30 years including the grace period of 10 years in consideration of the project life of 30 years. (3) Tax and Depreciation In accordance with th accounting practice specified by the Ministry of Finance, the corporate tax of the geothermal power undertaking is 34% (while other power business than the geothermal is 32%). The depreciation method is a straight line without residual value. The economic life of the well, power facilities and transmission line is 10 years, 30 years and 40 years, respectively. (4) Operating Conditions of Geothermal Power Plant The project operating conditions are assumed as follows; Installed Capacity: 55 MW x 2 Station Power Ratio: 5.5% Capacity Factor: 90% Production Wells: 10 wells at commissioning and 8 wells for make up Reinjection Wells: 7 wells at commissioning and 5 wells for make up O&M for Steam Supply Facilities: 3.37 Million $/year O&M for Power Generating Facilities: 5.07 Million $/year Transmission Losses: 0.7% Annual Generation: GWh Energy at Transmission End: GWh (Source: Prepared by SNC study team) 134

157 (5) Steam Selling Price and Power Selling Price The steam price is 4.3 cent/kwh as agreed in SSA between PT. PGE and PT. PLN. For a period of the economic life of 30 years, the investment for steam supply facilities including make-up wells during 30 years operation and for power plant construction are converted into the initial annual present value with the discount rate of 12% and calculated for the unit steam price per kwh (theoretical price). Table 5-6 Levelized Energy Costs at Variable Discount Rates Levelized Energy Cost (US$) Discount Rate Electric Price/kWh at PP Electric Price/kWh at SS 12.00% % % % % % % % % % % % % % % (Source: Prepared by SNC study team) 135

158 US Dollor Chapter 5 Financial and Economic Evaluation Fig. 5-1 Levelized Energy Cost at Variable Discount Rates Levelized Energy Cost 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% LEC Sale LEC Gen End (Source: Prepared by SNC study team) The unit steam selling rate per kwh from PT. PGE is 4.3 cent/kwh. The value approximates to that the one agreed for 55 MW x 2 Ulubelu geothermal power development. The generating cost of PT. PLN at the power plant becomes 7.7 cent/kwh and at substation, it s 8.8 cent/kwh. (6) FIRR Calculation The FIRR calculations of PT. PGE s steam supply undertaking and PT. PLN s geothermal power undertaking resulted as follows; Table 5-7 FIRR Calculation Results Base Unit Rate WACC FIRR PT. PGE Steam 3.7 cent/kwh 2.61% < 10.71% Supply PT. PLN Generation 8.9 cent/kwh 2.34% < 8.09% (Source: Prepared by SNC study team) The calculated FIRR values of both the undertakings show two times higher than the respective WACC. That proves that both the undertakings will be financially sound in terms of cash flow after repayment of all the loan debts. The FIRR calculation, repayment schedule and cash flow of PT. PGE steam supply undertaking 136

159 FIRR are shown in Tables 5-8, 5-9 and 5-10 and those of PT. PLN power generation undertaking in Tables 5-11, 5-12 and (7) Sensitivity of FIRR The sensitivities of FIRR to steam selling price and electricity selling price are tested as shown in the following tables: Fig. 5-2 FIRR Sensitivity of PT. PGE Steam Supply Undertaking to Steam Selling Rate PGE FIRR: Sensitivity to Steam Rate 20.0% 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% Steam Rate, cent/kwh (Source: Prepared by SNC study team) 137

160 FIRR Chapter 5 Financial and Economic Evaluation Fig. 5-3 FIRR Sensitivity of PT. PLN Power Generation Undertaking to Power Selling Rate Sensitivity to Power Rate 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% Power Rate, cent/kwh (Source: Prepared by SNC study team) As both the undertakings could procure the soft loans of JICA with a low interest rate and a long repayment and grace period, the WACC becomes remarkably lower. So both the undertaking could achieve the FIRRs of more than two times of the WACCs. Even if the actual power selling rate of PT. PLN at 7.5 cent/kwh should be applied instead of the theoretical selling rate of LEC at 8.8 cent, the PT. PLN could secure the FIRR at a 4% mark. Therefore, the BC ratio of both the undertaking could secure more than 1. Once both the undertakings could procure the favorable JICA finances, the project is judged financially feasible. 138

161 Table 5-8 PT. PGE: FIRR Calculation model: Hulu Lais Geothermal No. 1 and No. 2 PGE [MM $] REVENUE CASH FLOW SALES INVESTMENT COSTS OUTPUT NET INCOME NET INCOME No. of INITIAL INV. GWH SALE (w /o IDC) DEPRECIATION No. YEAR MW Supplem. SUPPLM. TOTAL TOTAL OPER SUP. WELL TOTAL NET Tax [After Tax] FREE Wells INVEST. INVEST. REVENUE COST DEPN. EXPENSES INCOME CASH FLOW Total Total Fm Loan Equity Total Ini Well Others [2+3] [6+7+8] [5-9] [10-11] [ ] M$/well] [GWh] [ [ 34% ] Total 26, Steam Price 3.72 ( /kwh) Equity FIRR 24.12% WACC of Project: 2.70% Project F.I.R.R. 9.06% (Source: Prepared by SNC study team) 139

162 Chapter 5 Financial and Economic Evaluation Table 5-9 PT. PGE: Repayment Schedule Loan Total Repayent No Year Loan Equity Total Principal Interest During Construction Interest Hulu Lais Geothermal No. 1 and No. 2 Repay-ment Outstand-ing Balance Total Note: IDC include 0.1% of commitment charge (Source: Prepared by SNC study team) 140

163 Table 5-10 PT. PGE: Cash Flow Cash Inflow Cash Outflow Balance Cash Flow from Operating Activities Depreciation Initial Equity Additional Repayment Per Borrow ing No. Year EBIT Interest Tax Profit Initial Inv. Add'nal Inv. Total Investment Equity Investment Capital Total Year Accumulate (w /o IDC) [ 34% ] [2-3-4] [ ] [ ] [8-12] (Source: Prepared by SNC study team) Table 5-11 PT. PLN: FIRR Calculation model: PLN: Hulu Geothermal Power Project [MM $] INVESTMENT COSTS OUTPUT Generation Sale REVENUE NET INCOME NET INCOME CASH FLOW INITIAL INV. (w /o IDC) No. YEAR MW GWH Gen GWH Sale TOTAL TOTAL Steam O&M Dep TOTAL NET Tax [After Tax] FREE Total Total INVEST. REVENUE Purchase EXPENSES INCOME CASH FLOW Total Fm Loan Equity [6+7+8] [5-9] [10-11] [ ] [GWh] [ 34% ] Total 26, , , , Purchase ( /kwh) Equity FIRR 30.13% Steam Electricity Sale ( /kwh) Project F.I.R.R. 8.09% WACC of Project: 2.34% (Source: Prepared by SNC study team) 141

164 Chapter 5 Financial and Economic Evaluation Table 5-12 PT. PLN: Repayment Schedule Loan Total Repayent No Year Loan Equity Total Principal Interest During Construction Interest PLN: Hulu Geothermal Pow er Project Repay-ment Outstand-ing Balance Total Note: IDC include 0.1% of commitment charge (Source: Prepared by SNC study team) 142

165 Table 5-13 PT. PLN: Cash Flow PLN: Hulu Geothermal Power Project [MM $] Cash Inflow Depreciatio Cash Outflow] Balance Borrow ing Equity Cash Flow from Operating Activities n Initial Repayment Per No. Year (w /o IDC) EBIT Interest Tax Profit Initial Inv. Total Investment Equity Capital Total Year Accumulate [ 34% ] [2-3-4] [ ] [ ] [8-12] (Source: Prepared by SNC study team) Economic Analysis (1) Methodology The economic viability of the project as a whole was evaluated by a economic internal rate of return method. Selecting the alternative power project which may be able to supply the benefit (electric power) to the society equal to the project, the study team calculates the EIRR which equalizes the cost and benefit for a period of economic life. The cost here is the sum of those costs of steam supply and power generation facilities as well as those operation and maintenance costs which includes the makeup wells and the benefit is the costs of the alternative. The evaluation is made by comparison between the obtained EIRR and the discount rate of 12% which is applied for the power projects in Indonesia. (2) Alternative Project As an alternative to the project which could supply the equal generated power to the society, 70 MW x 2 coal-fired thermal was selected and compared with the following operating conditions: 143

166 Chapter 5 Financial and Economic Evaluation Unit Capacity*1 70 MW No. of Unit 2 Economic Life 30 years Capacity Factor* % Station Power Ratio 7.5% Energy at PP outlet GWh (Equal to the Project) Thermal Efficiency 35% Fuel Coal Calorific Value*2 5,100 kcal/kg Unit Construction Cost 1,000 US$/kW 2) Coal Fuel Unit Cost* $/ton Fixed O&M cost 50.0 $/kw/yr Variable O&M Cost 0.67 $/kwh (Source: Prepared by SNC study team) Note: 1): Equalized with the power generation at plant outlet (3) EIRR Calculation 2): Source: PT. PLN s RUPTL 2010 As compared between the costs of the project and alternative, the project EIRR (with and without transmission line) was calculated as shown in the following. The calculation details are shown in Tables 5-14 and Total Project EIRR (With T/L) 14.67% Total Project EIRR (Without T/L) 15.31% Both the cases of with and without transmission line exceeded the hurdle rate of 12% and the project economic viability over the alternative is justified, and the project is economically a right selection to pursue. (4) Sensitivity of EIRR EIRR sensitivities of a With T/L case to the alternative project cost and coal unit price were tested as shown in the following figures. If the base cost of 1,000 US$/kW should down to 700 $/kw or the coal unit cost be down to 55 $/ton, the economic advantage of the project will be impaired. 144

167 EIRR 70% 73% 75% 78% 80% 83% 85% 88% 90% 93% 95% 98% 100% 103% 105% 108% 110% 113% 115% EIRR Fig. 5-4 EIRR Sensitivity to Alternative Project Cost Sensitivity to Alternative Project Cost 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% Project Cost in % (Source: Prepared by SNC study team) Fig. 5-5 EIRR Sensitivity to Coal Cost 25.0% Sensitivity to Coal Price 20.0% 15.0% 10.0% 5.0% 0.0% Coal $/ton (Source: Prepared by SNC study team) 145

168 Chapter 5 Financial and Economic Evaluation Table 5-14 Project EIRR (With T/L) Year Year % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % , , , , (Source: Prepared by SNC study team) Table 5-15 Project EIRR (Without T/L) Year Year Model: [Geo with TL and SS] EIRR = 14.67% PROJECT ALTERNATIVE : [Coal-fired] Annual Supple. Alt. Annual Fuel Cost Project Capacity Capacity Efficiency Consump. Balance Fuel Capacity Salable Drilling Total Cost Project Capacity Salable (Fuel O&M Cost Total Cost Cost Cost Factor O&M Cost Factor Energy Cost Cost Energy Save) MM$ MW % GWh MM$ MM$ MM$ MM$ MW % GWh % Mil. Kg MM$ MM$ MM$ MM$ Model: [Geo without LL & SS] EIRR = 15.31% PROJECT ALTERNATIVE : [Coal-fired] Annual Supple. Alt. Annual Fuel Cost Project Capacity Capacity Efficiency Consump. Balance Fuel Capacity Salable Drilling Total Cost Project Capacity Salable (Fuel O&M Cost Total Cost Cost Cost Factor O&M Cost Factor Energy Cost Cost Energy Save) MM$ MW % GWh MM$ MM$ MM$ MM$ MW % GWh % Mil. Kg MM$ MM$ MM$ MM$ % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % , , , , (Source: Prepared by SNC study team) 146

169 5.2.3 Evaluation This project is one of the national projects enlisted in the Second Crash Program issued from the President of the Republic and considered as a very significant power expansion project for the South Sumatra area heavily suffering power shortage. In addition, the Project is to generate power making use of indigenous energy source as well as saving the coal fossil energy which may be allocated for export to earn foreign exchange. The Project is focused as environmentally friendly project. As summarized in the following table, the project shows financially, economically and environmentally feasible and worth to pursue. (It is noted, however, that several parameters used in this economic and financial evaluation should be clarified and confirmed after well tests and geochemical analysis of the wells which PT. PGE is drilling at the site.) Table 5-16 Summary of Economic and Financial Evaluation Project 55 MW x 2 Hululais Geothermal Power Project Undertaking Geothermal Steam Supply Geothermal Generation Executing Agency PT. PGE PT. PLN Cost 17,693 MYen( M$) 21,562 MYen( M$) Total Project Cost 39,255 MYen ( M$) Power Generation GWh/year Coal Fuel Saving 424 Million kg, M$ Annual CO 2 Emission Saving 608,889 t-co 2 /year Steam/Power Rate 4.3 cent/kwh 8.8 cent/kwh Opportunity Cost: FIRR (WACC) 10.71% (2.61%) 8.09% (2.34%) Discount Rate : EIRR 14.67% Cash Flow NPV@12% M$ M$ Financial BC Economic BC Ratio@12% 1.14 (Source: Prepared by SNC study team) 147

170 Chapter 6 Planned Project Schedule Chapter 6 Planned Project Schedule Fig. 6-1 shows overall project schedule from effectiveness date of JICA s ES Loan Agreement up to the completion of the project. The consultant will first be selected, and then procurement for drilling of production/reinjection wells, construction of fluid collection and reinjection system (PT. PGE part) and construction of geothermal power plant and transmission line (PT. PLN part) will be done in parallel. Commencement of commercial operation will be right after the completion of the project. Self-funding PT. PGE needs 14 months for the exploratory well drilling etc. PT. PLN needs 23 months for environmental impact assessment etc. And these works will be done parallel with loan project. Selection of Consultant For faster implementation of the project, the consultant should be selected as early as possible. Nine (9) months for selection of the consultant, and 40 months for PT. PGE and 66 months for PT. PLN for service period are assumed. Pre-Construction Stage After selection of consultant, seven (7) months for PT. PGE and 23 months for PT. PLN is assumed to cover basic design, preparation of bid documents, pre-qualification, bidding, bid evaluation, and contracting. Construction Stage No.1 Drilling of Production/Reinjection Wells (PT. PGE) 23 months for mobilization, drilling production/reinjection wells and testing No.2 Fluid Collection and Reinjection System (PT. PGE) 24 months for design, manufacturing, transportation, construction, and commissioning No.3 Construction of Geothermal Power Plant (PT. PLN) 38 months for design, manufacturing, transportation, construction, and commissioning No.4 Construction of Transmission line (PT. PLN) 22 months for design, manufacturing, transportation, construction, and commissioning Completion of Project and Commencement of Commercial Operation Sixty-two (62) months from effectiveness date of JICA's ES Loan Agreement to commencement of commercial operation of unit two (2). 148

171 Fig. 6-1 Project Schedule (Source: Prepared by SNC study team) Alternative development schedule of down-stream was made in case of the steam received by the end of 2014 for the reference based on the PT. PLN request (Fig. 6-2). Pre-construction stage PT. PLN needs 23 months for environmental impact assessment etc. These works will be done parallel with loan project. 149

172 Chapter 6 Planned Project Schedule Selection of Consultant For faster implementation of the project, the consultant should be selected as early as possible. Eight (8) months for selection of the consultant and 56 months for service period are assumed. Procurement Stage After selection of consultant, 14 months is assumed to cover basic design, preparation of bid documents, pre-qualification, bidding, bid evaluation, and contracting. Construction Stage No.1 Construction of Geothermal Power Plant 30 months for design, manufacturing, transportation, construction, and commissioning No.2 Construction of Transmission line 21 months for design, manufacturing, transportation, construction, and commissioning Completion of Project and Commencement of Commercial Operation Forty-eight (48) months from effectiveness date of JICA's ES Loan Agreement to commencement of commercial operation of unit two (2). 150

173 Fig. 6-2 Project Schedule of Down-Stream (Steam Receiving 2014) (Source: Prepared by SNC study team) 151

174 Chapter 7 Organization Implementing the Project Chapter 7 Implementing Organizations 7.1 Project Implementation Organization Outline of PT. PGE The implementation body of this Project is composed of PT. PGE and PT. PLN (Persero). PT. PGE and PT. PLN will undertake the steam field development/steam supply, and power plant construction/operation/maintenance (including transmission/distribution lines), respectively. Organization, experience etc. of PT. PGE in geothermal power development/ operation in Indonesia are introduced as follows. PT. PGE is a subsidiary company of PT. Pertamina (Persero), which is Indonesian government-owned oil company, and executing organization of the geothermal development projects in PT. Pertamina s Working Areas. PT. PGE was established in 2006 mandated by the Government to develop 15 Geothermal Working Areas in Indonesia. A new era for geothermal energy was started with the inauguration of the Kamojang Geothermal Field on January 29, 1983 and was followed by the operation of Unit-1 Geothermal Power Plant (30MW) on February 7, 1983, and 2 years later, 2 units were in operation with a capacity of 55 MW, respectively. On Sumatra Island, Mono-block (2MW) in Sibayak-Brastagi was in operation for the first time as the first Power Plant and the first Geothermal Power Plant with a capacity of 20 MW was in operation in Lahendong region in August Now, PT. PGE is operating Kamojang-Unit 4 as total project, supplying steam Lahendong Units 1-4 and developing steam field to supply steam to Ulubelu Units 1 and 2. A few years later, PT. PGE will start Lumut Balai geothermal development of Units 1 and 2 form steam field development and power plants construction as total project of ODA Yen Loan. PT. PGE has many engineers and geoscientists who is experienced in geothermal power development, and is supported by PT. Pertamina financially and physically. PT. PGE consists of groups of Planning & Development, Operation, Finance and Supporting Service Management as shown in Fig engineers and scientist are working as PT. PGE s staffs and 558 engineers are supporting the PT. PGE s geothermal projects by outsourcing (2009). PT. PGE intends to develop geothermal resources and operate geothermal power plants in not only Hululais but also other PT. Pertamina s Working Areas with enhancement of technical capacity. As described above, it is judged that PT. PGE has experience and capacity enough to conduct the geothermal power development project in Hululais. 152

175 Fig. 7-1 PT. PGE Organization Structure (Source: PGE data) 153

176 Chapter 7 Organization Implementing the Project Outline of PT. PLN (Persero) PT. PLN is Indonesian government-owned electric power company. PT. PLN is responsible for supply of electricity in Indonesia. PT. PLN was established in 1950 as a national corporation and diverted to a government -owned company in 1994 according to the Government Regulations. The organization structure of PT. PLN is shown in Fig.7-2. Outline of PT. PLN is shown in Table 7-2. Installed capacity, sales, operational revenue and total employees in 2006 are 24,936 MW, 112,609 GWh, 104,726 Billion IDR and 47,155 peoples respectively. Number of the employees, which are working and will work for geothermal power project in the Hululais field, is not revealed at present. However, PT. PLN is believed to have a capacity to construct, operate and maintain geothermal power plants in Hululais as the geothermal power projects in Kamojang, Salak and Lahendong could be carried out successfully. 154

177 Fig. 7-2 PT. PLN Organization Structure President Director Dahlan Iskan Head of Internal Audit Unit Director of Primary Energy Director of HR and General Affairs Director of Planning and Technology Director of Strategic Procurement Director of Java- Bali Operations Director of West Indonesia Operations Director of East Indonesia Operations Director of Business and Risk Management Director of Finance Paiman Nur Pamuji Eddy D. Emingpraja Nasri Sebayang Bagiyo Riawan I.G.A. Ngurah Adnyana M. Harry Jaya Pahlawan Vickner Sinaga Murtaqi Syamsuddin Setio Anggoro Dewo Corporate Secretary Head of Coal Division Head of Organisation Development Division Head of Corporate Strategic Planning Division Head of Procurement Planning Division Head of Java-Bali Power Generation Division Head of West Indonesia Power Generation Division Head of East Indonesia Power Generation Division Head of Commerce Division Head of Corporate Finance Division I.B.G. Mardawa P. Misbachul Munir Iwan Bachtiar Made Ro Sakya Doday Hertanto Paingot M Nasser Iskandar Sapto Triono W. Benny Marbun Yusuf Hamdani Head of Gas and Oil Fuel Division Head of HR Development System Division Head of System Planning Division Head of Strategic Procurement Division Head of Java-Bali Transmission Division Head of West Indonesia Transmission Division Head of East Indonesia Transmission Division Head of Business and Electricity Transaction Division Head of Budget Monitoring Planning Division Head of Corporate Delivery Unit Prawoko Dadang Daryono Joko Prasetio Tonny Tondajoyo Ramli Hutasuhut Yanuar Hakim Susanto Wibowo Binarto B M. Hudiono Head of HR and Skill Development Division Head of Engineering and Technology Division Head of IPP Procurement Division Head of Java-Bali Distribution and Customer Services Division Roikhan Bowo Setiadji Monstar Panjaitan Haryanto WS Head of General Affairs and Management for Head Office Division Eddy Sukmoro Head of New and Renewable Energy Division Moch. Sofyan Head of Java-Bali Construction and IPP Division Henky H Basudewo Head of West Indonesia Distribution and Customer Services Division Karel Sampe Pajung Head of West Indonesia Construction and IPP Division Head of East Indonesia Distribution and Customer Services Division Head of Risk Management Division Head of Accounting Tax and Insurance Division Syarifuddin Ibrahim Amir Rosyidin Beni Hermawan Head of East Indonesia Construction and IPP Division Head of Treasury Division Eko A Sudartanto Widodo Mulyono Tjutju Kumia S. Head of Management Information System Division Rully Fasri Harry Hartoyo Head of Corporate Legal Services Unit Budi Kristanto GM of PLN Power Generation Business Unit GM of PLN Region Business Unit GM of PLN Main Project Business Unit GM of PLN Education and Training Center Director of Subsidiary GM of Transmission and Center for Load Dispatching Business Unit GM of PLN Distribution Business Unit GM of Supporting Services Business Unit GM of Electricity Research and Development Director of Joint Ventures (Source: PT. PLN data) 155

178 Chapter 7 Organization Implementing the Project Table 7-1 Outline of PT. PLN (Source :PT. PLN Statistics 2006) 156