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The Golden Age of RI’s Coal Industry

THE JAKARTA POST/JAKARTA

 

 

Jakarta, 3 May 2012 - Having a substantial part of the remaining global coal reserves and being one of the world’s top coal exporters, Indonesia sees the coal industry as a precious asset. But over-exploitation and exporting could provide for an unpleasant future.

 

Some might see this as a golden age for Indonesia’s coal mining industry. The country is currently the world’s largest thermal coal exporter as most countries in Asia, with their own poor coal reserves, snap up the commodity from Indonesia to fuel their power plants.

 

The surge in coal demand has not only happened in China and India, the two biggest markets for Indonesia, but also within the nation itself. Just like these two important coal-importing countries, Indonesia is now busy developing dozens of coal-fired power plants to meet a growing demand for electricity.

 

Indonesia is now playing a significant role in development of Asia as the new global economic center through its robust economic growth and coal supplies. The country holds up to 108 billion tons of coal resources, in which the coal reserves are estimated at 21 billion tons, located in South Sumatra, East Kalimantan and South Kalimantan.

 

Last year about 248 million tons, or some 78 percent of Indonesian coal production, were exported, according to data from the 109-member Indonesian Coal Mining Association (ICMA). The five largest customers for Indonesian coal were China and India, which each imported 40 million tons, as well as South Korea, Japan and Taiwan.

 

 Data from the association shows that coal production by its member companies in 2011 reached 245.46 million tons, up from 236.28 million tons in 2010. The highest producers in 2011 included PT Adaro Indonesia (47.76 million tons), PT Kaltim Prima Coal (40.32 million tons), PT Kideko Jaya Agung (31.619 million tons), PT Arutmin Indonesia (21.99 million tons) and PT Berau Coal (18.94 million tons). Of the association’s total production in 2011, 31.69 million tons went to the domestic market, which was up by 16 percent from 27.249 million tons in 2010.

 

In the first quarter of this year, coal production in Indonesia reached 90 million tons, of which 67.5 million tons were exported, according to director of coal mining and development at the Energy and Mineral Resources Ministry, Edi Prasodjo. He said the government expected coal production to reach 332 million tons this year, of which 250 million tons would be exported.

 

Many players in the coal sector in Indonesia are enjoying a boom. One of the country’s largest coal miners, PT Adaro Energy, has reported a 12 percent growth in net income to US$122 million in the first quarter of this year. A state-owned firm that is also a publicly-listed coal producer, PT Tambang Batubara Bukit Asam, also announced a 14 percent rise in net profits to Rp 867.35 billion in the first quarter of the year from Rp 760.33 billion in the same period last year.

 

Energy company PT ABM Investama announced that its subsidiary had secured new sales contracts with AVRA Commodities Ltd. for the sale of 935,000 tons of coal graded at 5,500 kilocalories. Meanwhile, the state-run mining company PT Aneka Tambang (Antam) has also expanded its business by entering the coal business. Antam has allocated between US$450 and 500 million for optimization and modernization as well as a coal-power plant development project.

 

The vast exploitation and expansion of coal, however, could have potential negative implication on the economy according to the government. Indonesia is one of the world’s largest coal producers with some 5 percent of the global coal-market share. The life of Indonesian coal reserves, however, is only 18 years, according to data from the London-based World Coal Association.

 

As part of efforts to maintain the coal reserves and protect the environment, the government is mulling imposing a coal-export tax designed to increase state revenues and to ensure enough coal to meet domestic demand. The export tax proposal is in line with Law No. 4/2009 on minerals and coal, which prohibits companies exporting some mining commodities.

 

Major mining companies have said that the new regulations will actually have no impact on their operations as they operate under contracts that are decades old and contain articles and clauses that are difficult to change. The major players in the sector have also predicted that the export tax on coal will not be imposed until the end of this year.

 

“It is unlikely it will be imposed this year,” said a senior manager at a leading coal producer who declined to be named. He said he did not have any idea on the rates of the proposed tax, but an earlier proposal of 25 percent was circulated when the plan was first suggested by the Industry Ministry.

 

With or without an export tax, measures to add value to the nation’s rich natural resources and also preserve the environment will hopefully be achieved.

 

 

I. Christianto, Contributor

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