Indonesia and coal

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Since the early 1990's Indonesian coal mining in Indonesia has grown dramatically. The World Coal Institute estimates that in 2008 Indonesia mined 246 million tonnes of coal with just over 200 millions tonnes of this exported. 2008 coal exports comprised 173 million tonnes of steam coal and 30 million tonnes of coking coal. In 2009, Indonesia was the world's second largest coal exporter behind Australia and is a major supplier to Asian countries.[1]

According to the 2010 BP Statistical Energy Survey, Indonesia had 2009 coal reserves of 4.3 billion tons. Almost a quarter (22%) of its production is exported to international markets.[2] There are a number of companies eyeing coal reserves in Indonesia, including BHP Billiton, China Investment Corp, Coal India, Reliance Power, and the Shenhua Group, among others.[3]

In December 2010, Indonesia's government said it forecasts coal output to increase by 19 percent in 2011.[4] Zacks investment research estimates that more than 90% of the estimated 3.5 billion metric ton coal demand growth in Asia is expected to come from Indonesia in the next 20 years.[5]

Coal Reserves

According to the 2010 BP Statistical Energy Survey, Indonesia had 2009 coal reserves of 4328 million tons, or 0.52% of the world total.[2] In January 2005 Rubianto Indrayuda, the Deputy Director on Coal Mining Services at the Indonesian Ministry of Energy and Mineral Resources stated in a presentation to a APEC Clean Fossil Energy Technical and Policy Seminar that 49% of the country's coal resources were classified as being low quality (<5100 cal/gram), 26% as being of medium quality ((5100-6100 cal/gr) and 24% as high quality (6100-7100 cal/gr). He stated that there were 12,466 million tonnes of measured reserves, 20,533 of indicated reserves and 24,314 million tonnes of inferred reserves.[6]

Coal Exports

In April 2011, Coal Age reported that Indonesian coal miners expect to dig up 340 million metric tons (mt) of coal in 2011, an increase of 23% from 275 million mt in 2010. Of the planned 340 million mt of coal produced in 2011, the association estimates 20% of it—around 70 million mt—will be allocated to domestic market demand, while the remaining 80% will be exported, primarily to Japan, China and South Korea, which are estimated to remain the largest importers of Indonesia’s coal.[7]

ABARE, an Australian government economic modelling and statistics agency, stated that in 2009, Indonesia exported approximately 200 million tonnes of thermal coal with the recovery in Asian economies likely to "support an increase in exports to around 210 million tonnes". ABARE estimates that in the period to 2015, Indonesia thermal coal exports could increase to approximately 250 million tonnes.[8]

In a 2005 presentation, Rubianto Indrayuda from the Ministry of Energy and Mineral Resources estimated that Indonesian coal exports would be approximately 124 million tonnes in 2010 and peak at 128 million tonnes in 2015.[6] That exports were far far higher within a few years. ABARE stated that "key expansion projects supporting increased exports include Bumi Resources’ plan to expand its KPC and Arutmin mines from 53 million tonnes in 2009 to 111 million tonnes by 2013 and PT Adaro Energy’s plan to increase its mine capacity to 80 million tonnes by 2014."[8]

In an earlier review on the global coal trade, ABARE analyst Alan Copeland noted that thermal coal exports from Indonesia were estimated to have grown by approximately 33% in 2004, 2005 and 2006: "The growth in Indonesia’s exports reflects the ability of its coal industry to respond to the rapid growth in Asian demand for thermal coal, supported by unconstrained transport and port capacity. A significant proportion of coal transport in Indonesia is water based, which allows for coal to be transported along rivers via barges to the open sea for loading on to larger vessels."[9] The first 11 months saw Indonesia's coal exports for power stations rose to 283.7 million tonnes, reported by the trade ministry of Indonesia. [10]

There has also been a rise in illegal mining. In September 2005, the Washington Post reported on coal-laden trucks -- which are notionally banned from public roads -- going all-night from "from scores of often-illegal mines" on their way to a local port.[11]

In June 2006 ABARE listed the main destinations for Indonesian thermal coal as being[12]:

  • Japan (approximately 25%);
  • Chinese Taipei (17%)
  • India (15%); and
  • the Republic of Korea (13%).

Copeland notes that India imports Indonesian low-ash coal for blending with its higher-ash content domestic coals.[9] Chairman of Indonesian Coal Mining Association predicted India's coal imports will rise from 40 millions tonnes to 70 million tonnes, most likely to surpass Japan as Indonesia's biggest coal export customer by 2011.[13]

In 2008, nearly one million tons of Indonesian coal was burned at the Bridgeport Harbor power plant in Bridgeport, Connecticut.[14]

It was reported in September 2011 that a ban was to be issued on the export of low-quality coal from Indonesia. Investment bank Dahlman, Rose & Company reported that Indonesia's Energy and Mineral Resources Ministry drafted a decree, which would halt the export of coal with a heating content below 5,700 kcal/kg, or roughly 10,300 Btu/lb.[15] Indonesia's Energy Ministry denied the report and said that the ban was only in the discussion stage and no implementation date had been set.[16]

Exports to China

Between 2000 and 2007, Indonesian coal deliveries to China increased by 157%. In August 2010, China's sovereign wealth fund, China Investment Corporation (CIC) announced that, in order to "secure more resources in Southeast Asia and benefit from increasing trade in the region" it would "plough" US$2 billion into coal, electricity and port projects in Indonesia. No time limit was given for fulfilling these objectives, but CIC said it was interested specifically in three Indonesian state firms: the coal mine company PT Tambang Batubara Bukit Asam; the state electricity company, PLN; and port operator, Pelindo.[17]

Coal terminals

For a map of coal terminals in Indonesia, see here or the bottom of this page.

Domestic Coal Consumption

The Indonesian government sees its role as encouraging and providing for a rapid expansion in the domestic consumption of coal. In a 2005 presentation, a government official projected that total domestic coal consumption would grow from 30.6 million tonnes in 2003 to 95.6 million tonnes in 2020. The largest component of the rapid projected growth was in coal-fired power generation with consumption projected to grow from 22.9 million tonnes in 2003 to 72 million tonnes in 2020.[6]

However, while the government was keen to promote the exploitation of the country's coal resources, there were substantial challenges. Some of these, Rubianto Indrayuda stated, were that most of the coal is "classified as low rank coal which requires specific treatments for its utilization" and that most of the coal deposits were in areas remote from existing infrastructure. He also flagged that there were other problems too such as "weak" law enforcement resulting in illegal coal mining, conflicting roles between national and regional governments. He also stated that the "regulation classifying mining waste as hazardous material" was a major problem."[6]

National Coal Policy

Sixty percent of Indonesia's total electricity demand is met by burning coal. Since 2000 the Indonesian government, faced with at least a short to medium-term decline in domestic oil and gas production, has adopted a policy of attempting to diversify its domestic energy sources. In January 2004 the Indonesian government announced its National Coal Policy which aims to boost the development of coal-fired power stations and dramatically increase coal exports. This policy co-incided with Indonesia becoming a net oil importer.

While approximately 8% of Indonesia's electricity is generated from hydropower, further developments are likely to be limited due to the high capital costs, limited infrastructure and environmental and social concerns. While the country currently has no operating nuclear power stations, in March 2008 the State Minister for Research and Technology, Kusmayanto Kadiman, optimistically proclaimed that the government would build four 1,2000 megawatt nuclear power stations in the next 17 years.[18] It is proposed that the first of the plants would be operational by 2016/2017.[19] However, with strong local opposition to nuclear power, it is uncertain how far the proposals will progress.

Domestic Coal-Fired Power Stations

Between 1993 and 2003 there has been a 78% growth in domestic power generation capacity. (See Indonesia and coal/Installed electrical generating capacity). According to the WCI just over 48% of the capacity is from coal-fired power stations. In 2004 31 million tonnes of coal was used in power generation with a further 10 million tonnes for direct use by industry.[20]

The rapid increase in coal-fired generating capacity is set to continue. The Indonesian Government has stated its intention to extend access to electricity from approximately 65% (2006 figures) to 93 per cent by 2025. ABARE noted in early 2010 that "meet this target, 57 gigawatts of electricity generating capacity is planned to be built over this period."

PT Perusahaan Listrik Negara (PLN), the state-owned electricity utility, has proposed plans to add an additional 10,000 megawatts of coal-fired capacity by 2011 as phase one of reaching the government's target.[21] It also plans a further 10,000 megawatts, beginning in 2011, as phase two of the electrification project.[8]

However, the U.S. government's Energy Information Administration is sceptical that the proposals, which seek private sector involvement, will come to much. "However," the EIA wrote in a review of Indonesia's energy generation sector, "foreign investors have largely avoided the Indonesian power sector in recent years due to the poor financial condition of PT PLN and the uncertain regulatory climate in the electricity sector."[22] However, one driver of increased domestic coal consumption will be plans by PLN to convert a number of oil-fired power stations to coal-fired.[23]

The most recent power stations that have come online are:

Other coal-fired power stations in operation are:

Coal-fired power stations financed by international public investment institutions

Coal-fired power stations financed by international public investment institutions include:[24]

Proposed New Coal-Fired Power Stations

For a sortable table of proposed coal-fired power stations in Indonesia, see Proposed coal plants in Indonesia

Major Indonesian Coal Companies

The U.S. Geological Survey lists major Indonesian coal mining companies as including[25]

The World Coal Institute also includes Indominco Mandiri in its list of major producers.[1]

Citizens Groups Tracking Mining in Indonesia

Citizen Action

July 2012: Greenpeace protests Indonesia plan for coal mine

On July 5, 2012 it was reported that Greenpeace activists dressed in black and masked, protested in the Indonesia capital of Jakarta to protest the government's plans to build the region’s largest coal power plant.

Greenpeace activists argued that the coal plant in Java’s Batang district would “pollute coastal waters and threaten the livelihoods of more than 10,000 fishermen as well as farmers on nearby lands.”[26]

Overseas investment in Indonesian mines

UK's Vallar buys Indonesian coal companies

In November 2010, investment company Vallar combined with 25 percent of Indonesian coal producer PT Bumi Resources and 75 percent of PT Berau Coal Energy. Vallar founder Nathaniel Rothschild said the $3 billion takeover will make Vallar the biggest exporter of coal to China.[27]

Peabody buys coal from Indonesian mines

In December 2010, coal producer Peabody Energy signed a deal to receive coal from PT Supra Bara Energi (SBE) in Indonesia. The coal from SBE's mine in East Kalimantan will be exported to customers located in the Asian Pacific Rim through Peabody's COALTRADE international Singapore trading hub. Over the next five years, Peabody plans to supply several million tons of coal from SBE's Indonesian mine.[5]

In February 2011, Peabody Energy said it had reached an agreement to source two million tons of coal for export from Indonesia's PT Cahaya Energi Mandiri. The financial terms of the deal were not disclosed. The coal will be secured over two years from a mine in East Kalimantan. Peabody has secured three term deals in recent months that account for 5.5 million tons of Indonesian coal.[28]

India's MIEL buys mine in Sumatra

In March 2011, it was reported that India's Monnet Ispat and Energy (MIEL) plans to acquire PT Sarwa Sembada Karya Bumi’s thermal coal mine in Sumatra, Indonesia, for $24 million. The mine is 25,000 hectares in the East Asian nation’s Jambi province, and is thought to be one of the largest thermal coal deposits in the world. According to coal ministry estimates, the coal deficit being faced by Indian power utilities is expected to double to 104 mega tons (MT) in the next fiscal year. MIEL's wholly-owned subsidiary Monnet Global (MGL) said it has so far explored about 1,500 hectares of the total lease area and was able to establish 65 million tonnes of coal reserves. MIEL is currently working on a 1,700 MW thermal power plant in Orissa and plans to put up one more plant of 1,300 MW capacity in Gujarat or Tamil Nadu. Orissa is expected to take another 3 years to go online.[29]

PHI Group

East Kalimantan

On February 2, 2012, energy company PHI Group announced it had signed a Letter of Intent with Indonesian company PT. MSP to acquire approximately 100 million metric tonnes of coal resources, together with the operation and production license, located in an area of 9,900 hectares in East Kalimantan, Indonesia. According to the signed Letter of Intent, PT. MSP and PHI Group will enter a definitive agreement to fix the price, terms and conditions of the transaction by March 2012.[30]

Rokan Hulu

According to a Letter of Intent, PHI Group will acquire an estimated mineable coal reserve of 10,000,000 metric tons located in an area of approximately 2,670 hectares in Rokan Hulu, Riau Province, Indonesia from PT Bindakar. Both parties expect to enter into a definitive agreement to fix the price, terms and conditions of the transaction by December 2011.[31]

West Sumatra and South Kalimantan

In April 2011, PHI Energy - a minority owned subsidiary of PHI Group - said it had signed an asset purchase agreement to acquire coal mine assets from PT Dian Anugrah Pratama (DAP), an Indonesian corporation with headquarters in Jakarta. PHI Energy Corporation will acquire an estimated mineable coal reserve of 10,000,000 metric tons located in an area of approximately 423 hectares, at Kecamatan Kapur IX, Kabupaten Lima Puluh Kota, Propinsi Sumatera Barat, Indonesia, from DAP.[32]

On May 31, 2011, PHI Energy announced it had closed the coal asset purchase agreement with PT DAP. PHI Energy issued promissory notes for US $3,000,000 and 47 million shares of common stock of the company, valued at $1.00 per share, in exchange for total estimated mineable coal reserves of 33,000,000 metric tons located in West Sumatra, Kampar and South Kalimantan, Indonesia.[33]

PHI Group decided to enter a joint operation agreement with PT HBP, an South Kalimantan company, on an existing coal mine located in Jombang, Satui, Tanah Bumbu, South Kalimantan Province, Indonesia. The coal mine has approximately 5,500,000 metric tonnes of mineable coal deposits. The terms and conditions are expected to be finalized in January 2012.[34]

Coal Mines

Existing coal mines

Proposed coal mines

Coal-bed methane blocks

In November 2010, Indonesia said it will offer 12 coalbed methane blocks to investors in January 2011 as part of the country's efforts to reduce reliance on oil- based energy, according to director general of oil and gas at the Ministry of Energy and Mineral Resources Evita Legowo. She said in a seminar that five blocks will be offered via direct tender, and the remaining seven via regular tender. The five blocks are the Sinjunjung Blok in West Sumatra, Kutai Barat Block and Kutai Timur Block in East Kalimantan, and the Kapuas I and Kapuas II blocks in Central Kalimantan. The seven blocks are Kampar I, Kampar II, Pelalawan I and Pelalawan II in Riau, and Melak-Mendung I, Melak-Mendung II and Melak-Mendung III in East Kalimantan.[35]

Futures market

In December 2010, Intercontinental Exchange said it will introduce a European contract for coal from Indonesia, the IHS McCloskey Indonesian Sub-Bituminous contract, which will begin trading in early 2011. The company is the second-largest U.S. futures market.[36]

Articles and Resources

Sources

  1. 1.0 1.1 World Coal Institute, "Coal Statistics", World Coal Institute, accessed April 2010.
  2. 2.0 2.1 "Coal Mining in Indonesia: Overview" MBendi, accessed November 2010.
  3. "Dark Materials: the consequences of clinging to coal" Mines and Communities, August 29, 2010.
  4. "UPDATE 1-Indonesia sees higher 2011 coal, tin output, fall in copper" Reuters, Dec. 8, 2010
  5. 5.0 5.1 "Peabody's New Coal Backup" Zacks Investment Research, Dec. 21, 2010.
  6. 6.0 6.1 6.2 6.3 Rubianto Indrayuda (Deputy Director on Coal Mining Services, Directorate General of Geology and Mineral Resources, Ministry of Energy and Mineral Resources, "Indonesia's Coal Policy toward 2020: prospect and implementation", Presented at APEC Clean Fossil Energy Technical and Policy Seminar, Cebu City, Philippines, 26-29 January 2005.
  7. "Indonesian Coal Production Expected to Increase 23% in 2011" Coal Age, April 29, 2011.
  8. 8.0 8.1 8.2 Rebecca Petchey, Michael Lampard and Alan Copeland, Thermal coal", Australian commodities, ABARE, Volume 17 number 1, March quarter 2010, page 156.
  9. 9.0 9.1 Alan Copeland, "Thermal Coal", Australian Commodities, ABARE, September Quarter 2007.
  10. Eko Listiyorini, "Indonesia's November Coal Ecports Rise 6.1%, Trade Ministry Says", Bloomberg, accessed 18 January 2012.
  11. Alan Sipress, "Indonesia's Illegal Coal Mines Feed China: Demand Transforms Island Nation's Lightly Regulated South Kalimantan Province", Washington Post, September 21, 2005; Page D06.
  12. ABARE, "Energy:Thermal coal", Australian Commodities, June quarter 2006.
  13. Forest, Dave, "The Rush for Coal: Are Price Increases Coming", OilPrice, accessed 18 January 2012.
  14. "New England power plants that use coal and where the coal comes from", "Appalachian Voices", accessed March 30, 2009.
  15. "Indonesian coal export ban could benefit SA producers" Mining Weekly, September 7, 2011.
  16. "Indonesia govt says no low-rank coal export ban soon" Reuters, September 9, 2011.
  17. "Dark Materials: the consequences of clinging to coal" Mines and Communities, Aug. 30, 2010.
  18. Neil Hickey, "A Nuclear Indonesia?", Energy Tribune, May 19, 2008.
  19. Andrew Symon, "Nuclear Power in Southeast Asia: Implications for Australia and Non-Proliferation", Lowy Institute for International Policy, April 2008.
  20. World Coal Institute, "Indonesia", World Coal Institute website, accessed June 2008.
  21. Leony Aurora, "Listrik to Borrow $1.1 Billion for New Power Plants", Bloomberg, June 2, 2008.
  22. Energy Information Administration, "Electricity", Energy Information Administration website, undated, accessed June 2008.
  23. Alan Copeland, "Thermal Coal", Australian Commodities, ABARE, September Quarter 2007.
  24. "Coal Fired Plants Financed by International Public Investment Institutions since 1994", Appendix A in Foreclosing the Future: Coal, Climate and International Public Finance: Investment in coal-fired power plants hinders the fight against global warming, Environmental Defense, April 2009.
  25. U.S. Geological Survey, Indonesia - 2006, Table 2, page 11.9.
  26. Greenpeace protests Indonesia plan for coal mine" Bikya Masr Staff, July 5 2012.
  27. Jesse Riseborough and Simon Casey, "Rothschild Plays Strongest Suit in $3 Billion Deal for Global Coal Company" Bloomberg, Dec. 1, 2010.
  28. "Peabody Energy inks deal for 2M tons of coal" Bloomberg, Feb. 25, 2011.
  29. "Monnet buys Indonesian coal mine for $24 million" Wall Street Journal, March 21, 2011.
  30. "PHI Group to Acquire One Hundred Million Metric Tonnes of Coal Resources in East Kalimantan, Indonesia" Marketwire, Feb. 2, 2012.
  31. "Rokan Hulu" PHI group website, accessed February 2012.
  32. "PHI Energy Corp Acquires Indonesian Coal Assets" PR Newswire, April 21, 2011.
  33. "PHI Energy Completes Purchase of Indonesian Coal Assets" MarketWire, May 31, 2011.
  34. PR Newswire United Business Media, "PHI Group to Enter Joint Operation Agreement with Indonesian Producing Coal Mine", MarketWatch, accessed 18 January 2012.
  35. "Indonesian Official: To Offer 12 Coal-Bed Methane Blocks In January" Nasdaq, Nov. 30, 2010.
  36. Alistair Holloway, "ICE to Introduce Indonesian Coal Contract in Europe" Bloomberg, Dec. 10, 2010.

Maps

Coal terminals in Indonesia

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Related SourceWatch articles

External resources

Reports and Presentations

Archive of articles

  • Down To Earth, "Coal", Down to Earth website, accessed March 2010. (This is a link to an online archive of reports and articles by Down to Earth. Most of the material relates to coal projects in Indonesia.)

Photos of Mines

External Articles