Title:

Impacts of Different Funding Sources on Long-lead Items Procurement in Indonesia Geothermal Drilling Projects

Authors:

Fikha FININDA, Vicki AGUSTINO, Dorman PURBA, Daniel ADITYATAMA

Key Words:

local content, international bidding, long-lead items, procurement, geothermal, drilling, Indonesia

Conference:

Stanford Geothermal Workshop

Year:

2020

Session:

General

Language:

English

Paper Number:

Fininda

File Size:

994 KB

View File:

Abstract:

Following the Paris Agreement on climate change, Indonesia has committed to reduce its greenhouse gas emissions by 29-41% against the business as usual scenario by 2030. In addition, Indonesia also has been encouraged to boost its national energy security and independence. To accomplish these targets, the Government of Indonesia has embarked on various attempts as emphasized in the National Energy Plan by increasing the use of renewable energy, especially from geothermal energy sources. However, the significant capital costs and risks have caused geothermal projects less attractive and more challenging. The cost of drilling dominates the proportion of the overall project investment cost, including long-lead items such as casing pipes. In the Indonesian geothermal industry, the developers have been encouraged to source the components from local manufacturers to increase the competitiveness between the domestic manufacturing industry and to minimize transportation costs. In contrast, some geothermal developers, which are financed by international funding institutions, are required to do international bidding as required in the procurement guidelines in order to give a wide choice of selection. Therefore, the international bidding requirements necessitate importing finished casing pipes into Indonesia. Inaccurate decisions during procurement processes, especially for casing pipes, could lead to major operational issues and costs in the future. This research aims at getting a deep understanding of how different funding sources can give impacts to long-lead items procurement, especially casing pipes, in geothermal development projects in Indonesia. The paper also investigates the challenges and opportunities that come with the use of local content. The research of local content for long-lead items on Indonesia geothermal drilling procurement has been limited. Thus, the presence of this paper intends to fill the gaps in the field.


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