REPUBLIKA.CO.ID, JAKARTA -- Director General for Renewable Energy and Energy Conservation Rida Mulyana said under the new geothermal law geothermal producing areas will receive production bonus.

"In line with the new law on geothermal,producing areas will have production bonus instead of participation interest," Rida said here on Friday.

The size of the production bonus will be determined with a government regulation as the implementation of the geothermal law, he said.

"We hope to issue the law regulation on the production bonus by the end of this year," he said.

He said the geothermal law does not regulate participating interest as is used in the oil and gas sector.

"The reason is that the regions are often in difficulty in paying the capital as required in the participating interest concept.

"As a result the regional administrations would seek cooperation with the private sector, and that is not in line with the spirit of the law," he said.

Under the new geothermal law, the regions will receive bonus in cash, without paying participation capital, he said, adding the regions will share no risk of losses.

The production bonus is not part of production share which is cut from the state non tax revenue consisting of permanent fee and production fee.

Geothermal production shares are 20 percent for the central government and 80 percent for the producing province.

The 80 percent share of the province is divided further with 16 percent for the provincial administration, 32 percent for the producing regency or city and 32 percent for other regencies and cities in the province.

Under the new geothermal law, the producing regions also will receive income from direct utilization of geothermal in the form of non electric activities.

The new geothermal law was approved by the House of Representatives in a plenary session last Tuesday replacing the law No. 27 of 2003.

The government hopes that the new law would boost development of geothermal power in the country, which has the world largest geothermal reserves.

Earlier, the Indonesian geothermal association (API) said the new law will attract more investment to the sector of renewable energy in Indonesia.

"Previously we were hampered by regulations. The new law gives us big hope in the geothermal sector," Abadi Poernomo, the API chairman said here on Wednesday.

Abadi said among the factors that caused difficulty in developing geothermal reserves in the country is the fact that nearly 50 percent of geothermal reserves are found in protected forest areas.

Mining and other commercial business operations are not allowed in protected forest ares.

He said only 1,341 megawatts of 29,000 megawatts of potential geothermal power in reserves in the country , have been utilized.

He predicted that in 2020, investment in geothermal sector would increase the country's total geothermal power generating capacity to 2,000 MW.

He said the law would encourage investors to resume plan to build geothermal power plants in 35 locations .

Many investors stopped or delayed implementation of their projects on disagreement such as in prices.

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