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INDONESIAN COAL MINING POLICY

KEYNOTE 21st COALTRANS ASIA CONFERENCE 2015


NUSA DUA BALI, June 8TH, 2015

BAMBANG GATOT ARIYONO


DIRECTOR GENERAL

DIRECTORATE GENERAL OF MINERAL AND COAL


MINISTRY OF ENERGY AND MINERAL RESOURCES
OUTLINE
I. BACKGROUND
II. COAL RESOURCES, RESERVE AND QUALITY 2010 2014
III. PRODUCTION, DMO, EXPORT AND WORLD COAL PRICE 2010-2015
IV. COAL PRODUCTION CONTROL
V. MINERAL AND COAL INVESTMENT
VI. LABOR AND COMDEV
VII. COAL PRICES REFERENCE/(HBA) VS 4 INDEX
VIII. THE STATE REVENUE OF SUB SECTOR MINERBA
IX. LETTER OF CREDIT
X. CLOSING REMARKS
1. BACKGROUND

1. Refering to the Constitution, coal right is held by the state and the coal
is utilised for the most of the peoples prosperity. It also implies that the
state must increase the value of the coal in order more benefit is gained
by the people.
2. The new Mining Law No. 4/2009 mandates the Government should
manage the resources through conserving, prioritization of domestic coal
demand and increasing value added of mineral and coal for the purpose
of creating sustainable economic development.
3. There are some issues regarding coal mining for this forum such as:
production controll, value added, mine mouth power plant and state
revenue.
2. INDONESIAN COAL RESOURCES, RESERVE AND QUALITY 2010 - 2014

The growth of yearly national coal resources are approx. 5% and reserves are
approx. 12%. This growth mainly influenced by the increase in world coal prices
Only 23% of resource can be modified to reserve, it is mainly influenced by land
acquisition problem, lack of infrastructure and scarcity of LRC utilization in mine
mouth.
There is an information of thick deep seated coal (> 25 m thickness).
Indonesian coal greatest potential is mid rank ( 4800-5800 cal/ g GAR) and
followed by low-rank ( <4800 cal/ g GAR).
3. INDONESIAN PRODUCTION, DMO, EXPORT AND WORLD COAL PRICE 2010-2015

Coal production growht about 14% per annum. World coal price (demand) affecting Indonesian
coal production and export.
Domestic coal demand growth very slow when compared to export (4% per annum).
Quality for domestic market : 4.000 6.500 Kcal/Kg GAR
Coal export about 75-80% of total coal production, coal export for 2014 growth 3,5% of 2013.
Production until April 2015 about 130 million ton or decrease 21% compared to April 2014 (164
million ton).
4. COAL PRODUCTION CONTROL (2015 2019)
Coal Production, Domestic and Export (NMTDP) Based on the National Mid-Term Development
450
400 Plan of 2015-2019 (Presidential Decree No. 2 of
Million Ton

350
300
250
2015:
200
150
100
Production Plan in 2015 amounted to 425
50
0 million tons and decreased to 400 million
2015 2016 2017 2018 2019
Produksi
tons in 2019.
425 419 413 406 400
(Juta Ton)
Domestik
Domestic percentage of the National Coal
102 111 121 131 240
(Juta Ton) Production in 2015 amounted to 24% and
Ekspor
(Juta Ton)
323 308 292 275 160 increased to 60% in 2019

Coal Production, Domestic and Export (ESDM Strategic Plan)


Based MEMR Year Strategic Plan 2015-2019:
450
400 Production Plan in 2015 amounted to 425
350
million tons and increased to 442 million tons
Million Ton

300
250
200 in 2019
150
100
50 Domestic percentage of the National Coal
0
2015 2016 2017 2018 2019 Production in 2015 amounted to 21.7% and
Produksi 425 429.3 433.5 437.9 442.3
increased to 45% in 2019
Domestik (Juta Ton) 92.31 114.59 118.51 139.47 202.12
Ekspor (Juta Ton) 332.69 314.71 314.99 298.43 240.18
5. MINERAL AND COAL INVESTMENT
7.429,87
8,000.00
7,000.00
6,000.00 4.801,2 5.126,2

4.373,6 4.463,4
5,000.00
Million US$

4,000.00 2.949,0

3,000.00
2,000.00
1,000.00
-
2009 2010 2011 2012 2013 2014*)
Smelter 763.60 1,187.10 1,179.10 1,289.10 1,190.10
Jasa Pertambangan 624.00 904.82 986.67 1,000.00 1,717.02 4,615.43
IUP BUMN 37.36 38.30 104.00 179.30 73.89 199.77
PKP2B 769.87 764.40 958.09 966.47 625.25 875.35
KK 754.18 1,479.00 1,235.54 1,366.30 1,520.00 1,739.32

Investment in MINERBA annually increased by an average 27%, which in Ccow


by 6% and mining services grew by 59%, it is influenced by the increase in
demand and price of coal. Most Ccow use services of mining contractor.

7
6. LABOR AND COMDEV

Expatriate only 0.3% of Ccow and Main Contractor Labor.


Ccow and Main Contractor Labor only 9.6% of Mining Sector Labor (data from Statistic Of Indonesia).

Realization largest Comdev costs in


2012 and decreased in 2013.
We suspect Comdev costs are affected
by the company's financial condition as
a result of the price of coal.
7. COAL PRICES REFERENCE/(HBA) VS 4 INDEX

HBA = 25% ICI 6500 + 25% Platts 5900 + 25% NEX 6322 + 25% GC 6322
Since 2011 Coal Prices continued to decline this was due to the oversupply in the
Asia Pacific market is mainly due to exports of Indonesia and Australia, while coal
consumer uptake slowed mainly to Tiongkok.
8. THE STATE REVENUE OF SUB SECTOR MINERBA
NON TAX REVENUE BY ACCOUNT
Average increase in total
non-tax revenues by 18%
per year.
Growth of non-tax
revenues 15% coal and
mineral 23% of sales.
Coal contributes an
average of 84% of non-tax
revenues.
NON TAX REVENUE BY COMODITY State revenues (tax and
non-tax) from the mining
sector in 2013 amounted
to 145.1 Trillion dollars
(9.7% of the budget).
9. LETTER OF CREDIT
Objective: The effective implementation of export policies, optimization and accuracy
of foreign exchange earnings from exports, export certainty, etc.

Basic Legislation:
1. Minister Of Trade Regulation No. 04 / M-DAG / PER / 1/2015 (January 5, 2015)
regarding Terms of Use L/C for the Export of Certain Goods.
Export of mineral and coal must use the method of payment L/C;
Through the national Foreign Exchange Bank;
L/C payment documents examined by surveyors.
2. Minister Of Trade Regulation No. 26 / M-DAG / PER / 3/2015 (March 30, 2015)
regarding Implementation of the Special Conditions of Use L/C for the Export of
Certain Goods.
In the case of exporters have not been able to use the method of payment L/C,
the exporter may apply suspension to the Minister of Trade after getting a
recommendation from technical ministries.
3. Circular of the DG of Mineral and Coal No. 03.E / 30 / DJB / 2015 regarding On
Requirements For Getting Technical Considerations Suspension of Payment
ways L/C.
Requirements Copies of ET-Mining Products of the Ministry of Trade;
Sales contracts that have set the mode of payment other than L/C
The ability of exporters to adjust the payment method using L/C
Status Request Suspension of Payment L/C (May 11, 2015):
Recommendations: 24 application; Rejection: 15 application; Evaluation
process : 9 application. Summary: 48 application.
4. Letter of the MEMR to the Minister of Trade Number: 2924/30 / MEM.B / 2015 (20
April 2015) regarding Application Exception To The Terms Of Use L/C for Mineral
and Coal Exports.
There has been no response from the Ministry of Trade
10. CLOSING REMARK

1. Need to do a strategic move to increase its reserves of existing coal


resources;
2. Prioritized coal as an energy source for national power generation and
industry;
3. Efforts to increase utilization of low rank with utilization around the mine
site through increased added value and utilization of coal for MMPP;
4. The subsector mineral and coal has play important role as national
economic backbone (investment and state revenue);
5. Decline of coal prices affect slowing exploration spend, slowing reserve
growth, decline in the state revenues and decline of Comdev
expenditures.
www.minerba.esdm.go.id
ATTACMENT
2008-2013 HIGHLIGHT INDONESIAN COAL EXPORTS
Sources: Statistic Of Indonesia

TOP TEN DESTINATION (% ton)

TOP TEN FOB VALUE (Billion US$)

Main destination of coal export are to Asia Pacific where largest to Tiongkok, India, Japan, South
Korea, etc.
Largest value FOB Vessel of coal export are to Tiongkok, India, Japan, South Korea, Taiwan, etc.
The sales price of coal is the largest average sales to Japan, Italy, Taiwan, Philippines, Malaysia, etc.