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INDONESIAN COAL INDUSTRY OUTLOOK
Presented at Indonesian – Japan Coal Policy Dialogue and Coal Seminar Tokyo, March 26th - 27th, 2009
By Jeffrey Mulyono Chairman of Indonesian Coal Mining Association (APBI-ICMA)
• • • • • • • • INTRODUCTION How much Coal Reserves can be found in Indonesian ? What is Indonesian Coal Quality ? What is production, export and domestic sales levels ? What is Government of Indonesian plan for coal ? What is long run prediction for production, export and domestic utilization of coal ? Indonesian new mineral and coal low, is it favorable or unfavorable for investment ? Closing Remarks
INTRODUCTION Up to mid 2008. as well as to Regional and Community Development. Net Profit Margin. The mining industry continues to be an important contributor to the Indonesian economic. and Net Debt to Equity Ratio were above the sector global average. The year of 2009. For Indonesia. the mining industry both in Indonesia and globally experienced significantly high performance. the price of all mining products has been decreasing significantly and reduced the profitability of mining companies for the year 2008. The industry also continue to make significant contributions to the Indonesian GDP and Export. Return on Shareholders fund. 3 . PricewaterhouseCoopers reported that in the last there year EBITDA Margin. Since September 2008. will be very hard for mining companies. Return on Capital Employed.
HOW MUCH COAL RESERVES CAN BE FOUND IN INDONESIAN ? 4 .
East Kalimantan (34%).DISTRIBUTION OF INDONESIAN COAL MAP RESERVES (IN PERCENTAGES) 8% 39 % 34 % 3% 16 % Distribution of Coal Reserve Potential The biggest reserves are located in 3 provinces. in South Sumatra (39 %). and South Kalimantan (16%). Source : Center for Geology. Geology Agency 2006 5 .
47 b.t : billion tons Reserves : 18.t 0.15 b.53 b.t SUMATRA 0.t 52.INDONESIAN COAL MAP RESOURCES AND RESERVES (BILLION TONS) 40.55 b.002 b.23 b.t 0.7 Billion ton Resources 6 . it was reported become 104.01 b.t 0.15 b.t Resources: 93.t 11.70 billion tons Source: Geological Resources Centre (+ Joint Study with NEDO) – 2007 March 2009.t 7.40 billion tons b.
240.59 EAST KALIMANTAN RESOURCES = 19.33 PAPUA RESOURCES = 138.a SOUTH SUMATRA RESOURCES = 22.52 MINEABLE = n.653.a.15 WEST KALIMANTAN RESOURCES = 527. RIAU RESOURCES = 2.567.15 MINEABLE = n.40 MINEABLE = 2.56 MINEABLE = 1.79 MINEABLE = 2.32 SOUTH SULAWESI RESOURCES = 132.674. CENTRAL KALIMANTAN RESOURCES = 1.787.COAL RESOURCES AND RESERVES DISTRIBUTION BY REGION (M.06 7 .21 MINEABLE = 48.22 MINEABLE = 15.98 WEST SUMATRA RESOURCES = 719.a.09 MINEABLE = 36.TONS) 2007 NANGROE ACEH DARUSALAM RESOURCES = 450.057.410.12 SOUTH KALIMANTAN RESOURCES = 8.07 BENGKULU RESOURCES = 198.399.01 MINEABLE = 0.30 MINEABLE = n.37 MINEABLE = 21.
WHAT IS INDONESIAN COAL QUALITY ? 8 .
INDONESIA COAL QUALITY BASED ON THE SPECIFIC ENERGY (KCAL/KG) High Quality (6100-7100 kcal/kg) Very High Quality (>7100 kcal/kg) 13% 1% Low Quality (< 5100 kcal/kg) 24% 62% Medium Quality (5100-6100 kcal/kg) 9 .
Export and domestic sales levels ? 10 .How many coal mining iN Indonesian today ? What is production.
9% of National Coal Production 11 .COAL MINING PLAYERS GROUP (2007) STATED OWNED (PTBA) *) Contribute 4.1% of National Coal Production MINING AUTHORIZATION (MA HOLDER) ***) *) **) 1 Company in Production 36 Companies in Production 44 Companies in Exploration. Feasibility Study and Construction ***) 129 Companies in Production Contribute 15.0% of National Coal Production INDONESIA’S COAL PLAYER GROUP COAL CONTRACT OF WORK (CCOW HOLDER) **) Contribute 80.
94 200 150 132.2 62.2008) (Million Tons) Government Version 250 215 233.5 50 35.54 35.3 27.9 13.4 63.6 73.2 75.74 37.APBI-ICMA .2 15.3 72.55 158.9 57.4 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Export Domestic Production 12 Source : .6 48.1 41.2 144.1 10. EXPORT AND DOMESTIC SALES (HISTORICAL DATA .8 53.PRODUCTION.27 153.7 53.3 29.9 45.4 79.3 40.6 160.14 60.2 19 22.Directorate of Mineral and Coal Enterprise – “Indonesia Mineral and Coal Statistic 2005” .79 102.4 114.3 110.62 193.5 93.946.76 91.5 100 85.1996 .
WHAT IS GOVERNMENT OF INDONESIA PLAN FOR COAL ? 13 .
4% 2006 2025 14 Increased usage of low rank coals for domestic use. 5 TAHUN 2006 CONSERNING NATIONAL ENERGY POLICY Geothermal 1.EXISTING/THE CHANGING FACE OF INDONESIAN ENERGY MIX (2006 – 2025) PRESIDENTIAL DECREE NO. . coal liquefaction and upgrading brown coal (‘UBC’) will be key factors in increasing domestic coal usage.4% Coal Liquefaction 2% Renewable Energy 5% Coal 33% Geothermal 5% Gas 30% Oil 20% Renewable 3.
WHAT IS LONG RUN PREDICTION FOR PRODUCTION. EXPORT AND DOMESTIC UTILIZATION OF COAL ? 15 .
2005 – 2025) (Million Tons) APBI-ICMA Version 450 400 350 300 250 200 153.PRODUCTION.8 193 158. EXPORT AND DOMESTIC SALES (FUTURE ESTIMATION.62 215 160.5 75 2005 2006 2007 2008 2009 2010 2015 2020 2025 Export Source: APBI-ICMA 2009.4 145 150 110. Domestic Production 16 .14 90 180 150 244 260 326 364 421 236 100 50 0 41.27 169 170 184 153 175 79.6 233.4 48 62.
Have you heard of Indonesian new mineral and coal law ? Is it favorable or Unfavorable for investment ? 17 .
There are still many question marks for the new law ? The answers are still to be waited. The new law will rely heavily on many still to be issued government regulations for its implementations 18 .
Both investors will be able to apply for a form of mining license (IUP or IUPK) . New Contract of Work (CoW) and Coal Contract of Work (CCoW) systems will no longer be available. the mineral and coal mining law will rely heavily on many still to issued government regulation for its implementations . 11/1967. development and production stage. An IUP is requires for exploration. All investor (both foreign and local) will be treated equally.The Essence Of The New Law The law replaces the mineral and coal mining law No. However. 19 . But all existing contracts will be respected. An IUPK is applicable for State Reserves Areas (SRA) Existing Mining Companies should process raw minerals in domestic processing and smelting facilities within five years after the law entry into force.
The Essence of the new law(continued) All investment (both foreign and Indonesia) must now be carried out pursuant to an “IUP” or “IUP Khusus”/IUPK”. Stated Owned Companies are to be prioritized for the development of SRA’s. 20 . An IUPK is applicable for any mineral or coal in The State Resources Areas (SRA) State Reserves Areas (SRA’s) are to be determined by the Central Government with approval from parliament. An IUP is applicable for general mining.
000 Ha – Production Stage Maximum 50.000 Ha – Exploration Stage Maximum 1.000 Ha – Production Stage Individuals Group Cooperation 1 Ha 5 Ha 10 Ha 21 Coal IPR : : .000 Ha – Exploration Stage Maximum 5.000 Ha – Production Stage Maximum 5.000 Ha – Exploration Stage Maximum 15.MINING AREAS Metallic – Mineral Non Metallic Mineral Sand & Stone Aggregates : : : Maximum 100.000 Ha – Production Stage Maximum 25.000 Ha – Exploration Stage Maximum 25.
Metallic Minerals Non Metallic Minerals → 20 years (can be prolonged 2 x @10 years) → 10 years (can be prolonged 2 x @ 5 years) Stone Aggregate → 5 years (can be prolonged 2 x @ 5 years) 22 .MINING TERMS IUP : EXPLORATION STAGE : Coal and Gemstone Non Metallic Mineral → 7 years → 3 years Metallic Mineral → 8 years Stone Aggregate → 3 years EXPLOITATION STAGE: Coal.
MINING TERMS (CONTINUED) IUPK : EXPLORATION STAGE : Coal Metallic Minerals PRODUCTION STAGE: Coal. Metallic Minerals → 20 years can be prolonged 2 terms @10 years → 7 years → 8 years 23 .
No more of CoW/CCoW in the future will be the main factor in declining of grass root investment. accordingly the new law may provide only low level of certainty. The idea to re-sizing of the mining become another disincentives factor.WILL NEW MINING LAW BE FRIENDLY TO NEW INVESTORS ? The answer will be left to the implementing Derivatives Regulations (Government Regulation). The obligation to invest in domestic infrastructure of mineral processing and smelting makes mining sector less attractive for low and middle class investors. Well regarded Lex specialist concept embedded in some CoW’s/CCoW’s will be no more used in the IUP Concept. 24 . but give more economic Impact to the country.
Exploration Licensing (IUP) must be issued through a tender process. rather than direct appointment.WHAT IS GOOD IN THE NEW MINING LAW COMPARE TO THE OLD ONE ? The new law treats both foreign and local investors equally (no more discrimination in government treatments). Both foreign and domestic investors will be able to apply for a form of mining license. so it’s means more transparent system compare to old one. Hard Sanction for : Illegal miner Government official whom did misconduct and mismanage in giving licensing. 25 .
mine closing and Post Mining Activity • Added value of mineral processing obligation • • • • • • 26 .GOVERNMENT REGULATIONS Which are still in the kitchen Domestic market obligation Coal pricing index ( basset indexes ) Mining zone Mineral and coal enterprises activity Supervising and controlling mining activity Mining Reclamation.
We are now discussing with Government to treat upgrading entity as Industrial entity. This kind of investment to market the product elsewhere . How Foreign Country can rely on Indonesian Coal for their Full Supply. so it means Raw Coal Supply to this entity is calculate as DMO and consequently the output is free to be traded By then it is attractive enough for Investor to invest .DOMESTIC MARKET OBLIGATION By having DMO on place.
is committed to encourage private sectors to invest in coal mining industry especially in introducing new clean coal technology such as : coal liquefaction and coal gasification. • • • The natural production level could be much more greater. The government of Indonesian is committed to promote the application upgrading brown coal technology by coal industry in order to utilize abundant low rank coal in Indonesia.CLOSING REMARKS • Coal production growth in Indonesian will continue through the year 2009. 28 . Only if the bottle neck in the infrastructure (specially in land transportation system) can be eradicated. The government of Indonesian. Slowing demand from the international market may be offset by the increasing demand from the domestic market.
INDONESIA Phone/Fax : (62 21) 3001 5935. Suite A Jl H.id Menara Kuningan Building.net.5 Jakarta Selatan 12940 . 1th Floor.R.THANK YOU Indonesian Coal Mining Association Email: apbi-icma@indo. Rasuna Said Block X-7 Kav. 3001 59 .
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