This content is from: Local Insights

Indonesia: Enhancing volcanic potential

Oene MarseilleEmir Nurmansyah
Indonesia passed a Geothermal Bill into law on August 6 2014. This new law revises Law 27 of 2003 on geothermal activities. Previously, geothermal activities were categorised as 'mining' activities. In this new law, geothermal exploitation is specifically set apart from the definition of mining activities. This development is significant, as mining activities are restricted in several forest areas, including conservation and protected forest areas. With the passage of the new law, geothermal exploitation may be carried out in such forest areas, where most of this energy source is located.

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

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