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Day 2 Tuesday 16 October 2007 Session 6: Coal Supply Outlook

Speech 3 Indonesia
Coal Supply Outlook in Indonesia

Dr. Ir. Sukma Saleh Hasibuan Director Directorate of Mineral, Coal & Geothermal Program Supervision Ministry of Energy and Mineral Resources (MEMR) Indonesia

DR. Ir. SUKMA SALEH HASIBUAN, ME
Place of Birth: Tanjung Balai, North Sumatera, Indonesia Date of Birth: April, 7th, 1951 Nationality: Indonesia Institution: Directorate of Mineral, Coal and Geothermal Program Supervision, Directorate General of Mineral,Coal and Geothermal The ministry of Energy and Mineral Resources,Indonesia Position: Director Office Address:Jl. Prof. Dr. Soepomo SH No. 10, Jakarta Selatan, Indonesia e-mail : sukma@esdm.go.id PROFESSIONAL EXPERIENCES: 2007 – now :Director of Mineral, Coal and Geothermal Program Supervision, Ministry of Energy and Mineral Resources 2004 – 2007:Head of Center for Energy and Information Energy on Mineral Resources Center, Ministry of Energy and Mineral Resources

DR. Ir. SUKMA SALEH HASIBUAN, ME
2001 – 2004:Secretary of Educational and Training Agency for Energy and Mineral Resources, Ministry of Energy and Mineral Resources 1995 – 2001:Head of Division for Compilation and Reporting Program, Directorate General of Mines, Ministry of Mine and Energy 1993 – 1995:Head of Section for Counseling, Directorate Technique of Mines 1983 – 1993:Head of Section for Mining Effort, Directorate Technique of Mines EDUCATION : 1 Bandung Institute of Technology, Bachelor on Mining Engineering (Graduated 1978) 2 Sendai, Japan of Tohoku University, Master Degree on Engineering (Graduated 1987) 3 Sendai, Japan of Tohoku University, PhD on Engineering (Graduated 1990)

OUTLOOK COAL SUPPLY AND DEMAND IN INDONESIA 2007 Clean Fossil Energy Seminar
Xi’an, China, 15 – 17th October 2007

By Dr. Sukma Saleh Hasibuan

Directorate General of Mineral Coal and Geothermal Ministry of Energy and Mineral Resources The Republic of Indonesia

………Introduction

COAL RESOURCES AND RESERVES
1,58% 7,58% 40,13%

28,37% 4,07% 17,7%

NO 1 2 3 4 5 6

ISLAND JAWA SUMATERA KALIMANTAN SULAWESI MALUKU PAPUA

QUALITY (Calory) (Calory) Low-Medium LowHigh-Very High HighLow-Medium LowHigh-Very High HighLow-Medium LowHigh-Very High HighLow-Medium LowHigh-Very High HighLow Low-Medium LowHigh-Very High High-

CRITERION (gr/cal) gr/cal) < 5100 – 6100 6100 - 7100 < 5100 – 6100 6100 – 7100 < 5100 – 6100 6100 – 7100 < 5100 – 6100 6100 – 7100 < 5100 < 5100 – 6100 6100 – 7100

RESOURCES (Mill. Ton) 19,24 2,97 26.872,5 1.780,66 25.375,69 6.844,44 218,42 14,68 2,13 120,35 30,91 61.273,99

RESERVES (Mill. Ton) 0,00 0,00 2.636,62 134,11 2.769,01 1.219,1 0,06 0,00 0,00 0,00 0,00 6.758,90

Total Resources in 2006

………Introduction

• Situation of Coal in Indonesia :
Coal resources 61. 27 BT, Mine able Reserve 6.7 BT, mostly Low-Rank Coal • • • • Lignite 58.6 % Sub Bituminous 26.6 % Bituminous 24% Anthracite 0.4.

34.7 BT (+ 60 %) Indonesian’s coal potential having Calorific value less than 5,100 Kcal/kg

INTRODUCTION

• Indonesia is the world’s largest exporter of thermal coal. • It is one of the leading exporters of sub-bituminous coal that represents the bulk of Indonesian coal production

Continued

………Introduction

• • •

Oil is still the most important commodity to support the national economic development to meet the energy consumption demand. The level of oil utilization to oil reserve is estimated about 10 years, and Indonesia may become a net-oil importer before 2015. Coal will play very important role for Government of Indonesia to shift the grand strategy of energy utilization and consumption, and the security of energy supply. For the times being, coal sector in Indonesia is still continue to grow. A few years ahead Indonesia coal production will steadily to increase. The coal sector contribution into Indonesian economic recovery will be more significant.

CURRENT COAL DEVELOPMENT
The grand policy and strategy may include Optimizing as follows: - The National Energy Mix; - Energy resources development; - Energy allocation among the various activities; - Energy allocation in order to generate state revenue

…….Current Coal Development

• Indonesian Government has introduced a National Coal Policy (NCP) in the framework of national energy development . • NCP is a guidance for promoting coordination and harmonization in management, exploitation, utilization and development of coal resources within period 2005 -2020. • The NCP Program divided into three period of time : - Short Term Program until the year 2005; - Medium Term program until the year 2010; - Long Term Program until the year 2025.

continued

…….Current Coal Development

• Coal is developed as part of diversification energy policy. • Coal development policy may include how to increase coal production : - to meet ever increasing domestic coal demand on sustainable basis; - to enhance coal competitiveness in the international market; - to develop all coal qualities and add value through both energy and non energy applications; - to ensure the growth of the coal industry consistently with the concept of sustainable development and environmental protection • Export are expected more increase in realization 2007 • About 60% of coal export went to East Asia such as Japan, South Korrea, Taiwan, Hong Kong, less than 10% to ASEAN Countries, and about 15% to Europe, and most of which will continue to go to the Asia-Pasific market. • Indonesia will continue to export of coal in order to increase our country income and also to increase the domestic utilization of coal

…….Current Coal Development

Indonesian Coal Mining Industry Projection
400
280 (M illions Tonnes 320 370

300
193 183 134 49 145 53 198 150 75

225 148

240 150 90 150 130 170 150

220 150

200 100 0

45

2006 ®

2007

2008 Domestic

2009 Export

2010

2015

2020

2025

Production

NOTE; -. Realization production 2006 (32 PKP2B = 162 M ton, KP- PTBA = 9.2 M ton, 130 Regional KP = 22 M ton); -. Production increase in 2006 due to increase of PKP2B production 10 M ton ( PT Adaro Indonesia, PT KPC and PT Indominco Mandiri) and increase of Regional KP production 12 M ton; -. Projection of 2006 based on production of 32 PKP2B+ KP-PTBA = 158 M ton and 34 regional KP = 10 M ton

continued

…….Current Coal Development

COAL DOMESTIC CONSUMPTION 2005-2025
Consumer 2004 ( R) 23.0 2005 2010 2015 2020 2025 Remarks Electricity growth 7% In average 1 ton coal = 6.6. ton cement resulted

1. Electricity

26.2

49.2

74.8

119.2

156.5

2. Cement

5.5

6.5

10.0

11.00

13.0

17.0

3. Metalirgy industry and Pulp peper

1.3

1.5

7.0

10.0

11.0

12.0

4. Small Industries (textile, briect burning roof/llimstone, etc) roof/llimstone,

0.02

1.0

5.0

7.0

9.0

10.0

Direct Use+ briquette

5. UBC 6. Liquefaction Total 29,82

-

35.2

1.7 2.0 74.9

8.5 10.8 122.1

17.0 27.0 196.2

25.5 37.8 258.8

UBC Product for export

continued

…….Current Coal Development

INDONESIAN COAL PROGRAM
1. Convert the diesel-fired power plant, which have 7,753 megawatts (MW) capacity, into coal-fired power plants and build 10,000 MWcapacity new coal-fired plants in year 2009/2010. Total demand of Low Rank Coal for development of power plants in 2010 is approximately 72,3 Million ton, using lignite coal for 17.753 MW electricity. The total demand of coal for electricity in the year 2015 will be app. 90 million ton and 2025 will reach 200 million ton. 2. To achieve securing coal supply, the Government is providing an incentives for low grade coal development, underground mining, marginal reserves, and coal mining development in remote areas in order to encourage investment in such areas.

continued

…….Current Coal Development

Current Situation of Coal Industry :
• Mining Authorization Holder (MA) : 442 Compaies - Production Stage : 169 Companies - General Survey and Exploration Stages : 273 companies • Coal Contract of Work (CCoW): 81 Companies - Production Stage : 35 Companies - General survey, exploration, feasibility and construction stages : 46 Companies

continued

…….Current Coal Development

The Government Mechanism for Resources Management in Regional Authonomy era
• Since 1 January 2001 the authority to manage natural resources has been transferred to Autonomous Regions (Base on the location of Mining Area) • Mineral and coal development in term of “licencing authority” shifted to the regional government. • The central government concentrate on the National Mineral and Coal Policy and give direction fo the implementation of such policy in term of guidance and standard. • The regional government will honour the above policy both for executing the “mining development” as well as for the “local rules” issued. • Coal Contract of Work (CCoW) still managed by central government (Directorate General of Mineral, Coal and Geothermal). • The Central Government continous to give counseling to the autonomous regions concerning various matters regarding the management of mineral resource.
continued

…….Current Coal Development

The Challenges of the Mining Industry in Indonesia
Long Term Contracts; Taxation System and Royalties; Conflict in Regions; Illegal Mining activities; Overlapping with forestry areas; Environment issue; And other certainties in Laws and Regulation throughout Indonesia.
continued

Government’s Effort

…….Current Coal Development

The Government effort to resolve the challenges are :
• Issuing a Ministerial of Energy and Mineral Resources Decree No: 1614/2004 regarding Guidelines on Application Process of Contract of Work (Cow) and Coal Contract of Work (Cow); • Issuing of Law 19/2004 on the amendment of Forestry Law No.41/1991; • Determination of National Coal Policy; • A draft of Amendment of Government Regulation has been also prepared to settle fiscal problem; • Finalization discussion for the Draft of Mineral and Coal Mining Law as replacement of the Mining Law No. 11/1967.

continued

…….Current Coal Development

THE BASIC PRINCIPLE OF NEW LAW OF MINERAL AND COAL MINING

One type license or mining permit, no more contract applied between mining company and the government; Foreign mining company will be taken contract with the State Owned Mining Company; Simplification of Licensing Permit stages; Exploration and Exploitation; Determination of mining areas through bidding and self reservation; Community development is focused for local people welfare;

continued

CONCLUDING REMARKS
1. The present situation is showing tentative signs that with the government right policy framework and a strong commitment to reform, the coal mining sector will get clarity and certainty to restore investor confidence. 2. The coming Mineral and Coal Mining Law hopely will create a better mining development in Indonesia in terms of: - good investment climate; - clear of authority among Central Government, Provisional Government and District Government; - adopted the “sustainable development” principal - giving the maximum for the people walfare.