|Oene Marseille||Emir Nurmansyah|
Indonesia is located in one of the most seismically active zones in the world, the so-called Pacific Ring of Fire. The country has approximately 130 active volcanoes. Due to this high volcanic geology, Indonesia's geothermal potential is large; some estimate that it holds 40% of the world's potential geothermal resources.
Under the new law, the central government will have the sole authority to issue licences to use geothermal resources for energy generation. The Minister of Energy and Mineral Resources will assume this licensing responsibility, which will be granted through a work areas auction process.
The relevant licence would be called a geothermal business licence (Izin Panas Bumi), valid for a maximum 37-year period. The licence can be extended for an additional 20-year period.
If the work area is located within a forestry area, the licence holder will be required to secure additional permits from the Minister of Forestry.
The Minister of Forestry's licences include the borrow-to-use permit (for use in a production or protected forest area) and the forestry utilisation permit (in a conservation forest).
The new law also provides for the use of geothermal resources for tourism, agribusiness, and other business activities. Depending upon the location of the resources, provincial and local governments may exercise jurisdiction.
Oene J Marseille and Emir Nurmansyah
© 2021 Euromoney Institutional Investor PLC. For help please see our FAQs.