SINGAPORE, March 23: Indonesia may boost fuel oil imports to generate power in coming years as it converts diesel-fired turbines in areas where gas-or coal-fired plants are not feasible, a company official said on Friday.

Two years ago, state utility PT Perusahaan Listrik Negara (PLN) embarked on a plan to wean itself off costly diesel and generate more electricity with abundant domestic natural gas and cheaper coal to meet fast-growing demand.

But such plants are not possible everywhere in the large archipelago of about 17,000 islands, PLN director Herman Darnel Ibrahim told Reuters in an interview.

“Most of this additional capacity will be generated by new coal plants that we are building throughout the country. But there will be some instances where it will be difficult to build small-capacity plants in some remote areas,” he said.

“In such cases, we will try to convert the diesel-burning plants there into using the cheaper fuel oil instead. We are also replacing diesel plants with fuel oil where possible as an interim, while the coal plants are being built.” The utility, which supplies most of the country's estimated 26,000 megawatts (MW) of installed capacity, is also looking at buying fuel oil blended with palm oil for power generation this year as it moves to add 10,000 (MW) by 2009.

Of that total, about 40 per cent is to replace oil-fired plants and the rest is to meet new demand, estimated to be growing at 7.1 per cent annually through 2026.

Ibrahim said PLN had yet to buy its first such cargo and would do so if the economics were favourable.

“It's all about economics. We will look for the cheaper option. The main objective is to reduce overall power generation costs, of which oil accounts for over 50 per cent,” said Ibrahim on the sidelines of the Asian Power and Energy Conference.

Indonesia is the world's second-largest palm oil producer after Malaysia.Signs of higher domestic demand have begun to emerge, with state oil firm Pertamina importing about 840,000 barrels of 140-centistoke (cst) fuel oil for the first four months of this year, up from the 2006 monthly average of 700,000 barrels.

Diesel imports, which are for power-generation and vehicle propulsion, were steady at around 6 million barrels over the same period this year, Reuters data show.

The utility targets to cut its total oil consumption to about 8 million kilolitres this year, down from 9.1 million kl in 2006; or accounting for 25 per cent of the electricity it generates, down from 30 per cent last year.

By 2009, PLN hopes oil will generate only about 5 per cent of the country's power, or usage volume of 2 million kl, to be utilised only during peak-load periods.

—Reuters