Geothermal Exploration and Production in Developing Countries: Two-Step Contracts to Attract Foreign Investment
- Key words
- Economics; Indonesia; Agreements; Power Sales Agreements; Production Contract; Pricing; Risk; Joint Operation Contract; Arent-Fox-Kintner-Plotkin & Kahn
- Location
- Indonesia
- Conference
- Geothermal Resources Council Transactions
- Year
- 1984
- Session
- Economics; Business administration; Risk management
- Language
- English
Abstract
The combination of an operation contract and an energy sales contract represents an innovative legal framework by which developing countries may attract foreign capital for geothermal exploration. Since geothermal energy cannot be exported, investors will face the inherent uncertainty of identifying a local market for electric power generated from geothermal. That uncertainty is magnified in developing countries where electric energy demand may be uncertain and transmission facilities unavailable. Contractual arrangements which address this problem by providing foreign investors at the outset with a guaranteed market, at a pre-determined pricing formula, may be useful model for fashioning exploration and production proposals.
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