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NEWS UPDATES Asean Affairs     August 16,  2016  

The economic impact of not exploring for resources

The title was for a seminar and discussion that was held in July, which I did not attend. The headline was accompanied by the following statement:

“There have been no world-class mineral or coal discoveries for decades in Indonesia. The lack of discoveries will have a major impact on the mining industry”.

Indonesia believes it has an abundance of resources, this includes oil, gas, geothermal, minerals (various types), coal/coalbed methane, although it does not know where they are (exactly) and in what volumes exist, they are predictions only.

Uncertainties are a major challenge; predictions are unreliable; behind in reaching stated goals.

These three statements are accredited to Manfred P. Hochstein and Sayogi Sudarman in 2015, both of whom are well known in the geothermal sector of Indonesia and beyond. These statements also apply to the oil and gas and minerals sectors of the resource industry.

Why is this? Reliable exploration is costly, it comes with financial risk, especially with the way that the current regulations are written.

Recently the forth Indonesia International Geothermal conference and exhibition was held with the following theme “Innovative Breakthrough to Achieve 7000 MW Geothermal Development by 2005”.

Why do I mention the theme, because it states “innovative”. Innovative means innovation which in turn means technology. Technology means using different tools that we are not used to using, we have to learn and adapt to new ideas, and there lies a problem, if something has not been taught during our education we are reluctant to adapt to new technology where we think that something may affect our future or undermine the way we do things traditionally, i.e., I might lose my job, I will be replaced.

In my experience this does not happen, in reality, it creates jobs by companies spending less on exploration and more on exploitation.

We doubt certain new technology; we doubt the results, even if this technology is made by our own peers and is well proven in other parts of the world.

We want to know how it works from the inside, but, do we know how our modern day car works. Do we know how the software for the current craze of “Pokemon Go” works? The answer is no for the

vast majority of us, why the double standards?

About 40 percent of the world’s potential geothermal resources are in Indonesia. This is like having a gold mine in your back garden, although Indonesia does have an abundance of gold hidden below the ground waiting to be discovered by environmentally friendly methods, not methods that involve chopping vast swathes of jungle down and upsetting the local community’s.

Lack of investments in new resource exploration has resulted in decreasing levels of oil production during the last two decades as the country’s oil fields mature, although it is believed that many of these mature fields do contain resources that have not been extracted.

If the government does not provide incentives that stimulate investment in the development of the upstream oil sector, this declining trend is not likely to reverse.

The lack of exploration means the lack of knowledge of where and what natural resources it has. The lack of knowing means that investors have no interest in Indonesia, although they know there is potential, but why should they invest into something that carries a huge risk, where the Indonesian government is not exactly friendly to the investors?

The answer is simple, they will not, there is far more low-hanging fruit in other countries that appears on the outside to be difficult to work in, although, in reality, they are not as difficult as Indonesia is.

All of these factors are hurting the economics of the country, Indonesia the potential to be a world-class country, it has world-class people working in the resource industry that is being stifled by bureaucracy and the short-sightedness of many of the bureaucrats in the country.

These people set targets to be met such as in the title of the geothermal conference, but without the tools available to the various institutions these targets cannot and will not be met.

Minds have to be open to change, minds have to be open that this is not just for me, it is for my country. Indonesia claims it is rich in resources. This is a claim, it is not fact. Indonesia must invest in its own country, this means to invest in exploration by innovative methods, methods that take less time and cost less must be used, which can then be confirmed by traditional methods such as seismic and drilling, therefore reducing the exploration risk by as much as 70 percent.

Consistency with policies is also a must. Only two weeks ago, it was stated that it is not Indonesia’s intention to be protective (protectionism), but this is what it has been for the past two or more years. You cannot change direction for long-term investors as often as the wind changes. All resources belong to Indonesia. It belongs to the people, it does not belong to the investors.

The right to a fair compensation for investing is a must as well as the rights of the Indonesian people is a must. Changing of policies in resource contracts cannot change every time a new minister or director general takes office. Consistency has to be a given, it is a must.

Costs of traditional methods of exploration prohibit exploration, innovative exploration methods cost considerably less and when combined make a powerful tool that will help to resolve Indonesia’s economic impact of not exploring for new resources.

Indonesia must know what it has in natural resources in order to entice investors, to do this, the Indonesian government must invest in its own country, establish its own database of reliable data with their own current data (which there is a lot of) of all of the country’s resources both onshore and offshore if they want to avoid being left behind. “Today’s innovative tools are tomorrow’s traditional tools”.

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