INDONESIAN COAL INDUSTRY UPDATE

CLEAN COAL DAY INTERNATIONAL SYMPOSIUM

JAPAN , SEPTEMBER 8 - 9, 2014

BobKamandanu
ChairmanAPBIICMA

CURRENT

STATUS

TRENDS OF PRODUCTION, EXPORT, DOMESTIC SALES OF INDONESIAN COAL

AND AVERAGE PRICE OF COAL REFERENCE (HBA) IN INDONESIA
( 2009 2015e )
e = estimation

DESCRIPTION
PRODUCTION(MILLION TONS)
EXPORT(MILLION TONS)
DOMESTICSALES(MILLION TONS)
AVERAGE PRICEOFCOALREFERENCE/HBA
(USD/METRIC TON)

2009
254
198
56

2010
275
210
65

2011
353
287
66

2012
407
340
67

2013
421
349
72

70.70

91.74

118.40

95.48

82.92

2014e
2015e
425.00
429.25
329.45
328.41
95.55
100.84
74.00

78.00

Note :
Production in 2015 is assumed to increase 1% from 2014 due to Coal Production Control Policy by
The Government ( Ministry of Energy and Mineral Resources )
Domestic Coal Consumption in 2015 estimated by PLN & IPP and other industry demand

Source:
MinistryEnergyandMineralResources

TO WHAT COUNTRY INDONESIA COAL EXPORTED ?

e : estimation

COUNTRY

2011

2012

2013

35,364.00
35,518.30
37,711.50
JAPAN
11,868.20
11,984.80
12,964.30
HONGKONG
39,598.20
37,899.10
36,273.30
SOUTH KOREA
27,131.80
29,105.20
29,323.30
TAIWAN
104,143.40
115,702.10
130,393.40
CHINA
13,293.90
14,676.00
14,365.00
THAILAND
10,989.70
11,636.20
14,508.80
PHILIPPINES
17,337.50
16,138.00
17,128.90
MALAYSIA
74,723.20
96,076.00
118,288.50
INDIA
805.40
215.60
1,177.40
USA
2,848.40
154.30
172.20
NETHERLAND
5,080.80
4,082.80
3,016.60
ITALY
3,559.30
5,704.80
4,078.00
SPAIN
6,654.30
5,414.00
5,924.00
OTHERS
353,398.10
384,307.20
424,325.20
TOTAL
Note:Theexportdatain2014and2015estimatedifthereisnocontrolproductionpolicyimplementedby

2014e
39,597.08
13,612.52
34,459.64
30,789.47
136,913.07
12,928.50
15,959.68
17,985.35
124,202.93
1,236.27
180.81
2,714.94
3,670.20
6,220.20
440,470.63

2015e
41,576.93
14,293.14
32,736.65
32,328.94
143,758.72
11,635.65
17,555.65
18,884.61
130,413.07
1,298.08
189.85
2,443.45
3,303.18
6,531.21
456,949.14

IndonesianGovernment,(basedondatafromIndonesia,CentralBerauofStatistics(BPS))
Source : Statistical Yearbook of Indonesia 2014; Indonesia,CentralBerauofStatistics(BPS)

WHAT IS THE DOMESTIC COAL DEMAND FOR POWER GENERATION ?

Source: PLN

WHAT IS CALORIFIC VALUE TREND FOR INDONESIAN COAL ?

WHERE IS INDONESIAN POSITION IN THE FUTURE

GLOBAL MARKET ?

Source : IEA, Southeast Asia Energy Outlook, World Energy Outlook Special Report 2013

2013 THERMAL COAL MARKET

Russia

Europe &

Canada
4MtN.Americas
8Mt
35Mt

100 Mt

Mediteranean

China

S.Korea

220 Mt

230 Mt

102 Mt

Columbia
83 Mt

122 Mt
S. Africa
76 Mt

Thermal coal exports

Thermal coal imports

Taiwan 143 Mt

10Mt

India

Japan

SE.Asia 71 Mt
66 Mt

Indonesia
371 Mt

Australia
182 Mt

ASIAISSTILLTHEMAINPLAYERINWORLDSTHERMALCOALMARKET
Source : Deutsche Bank 2013; other sources

THE COAL PRICE EXPECTATION IN THE MEDIUM TERM

Seaborne trade in 2015 looks still slightly over supplied (supply growth is
expected to exceed demand growth ). Real price recovery will depend heavily in
the worlds economic situation;
Despite slow demand from China and India, the countries still expected to be the
key driver for 2015 coal demand. Potential increase of demand from Japan will
also become the key driver for 2015 coal demand;
Indonesia and Australia will supply Asian Market as usual but more African and
Northern Americas coal will likely to enter Asian Market;
Full price recovery can be expected will happen in early 2015. New coal power
plants will enter the grid in some Asian Countries ( India, Indonesia, Malaysia,
the Philippines, Vietnam, Bangladesh, Pakistan, Srilanka etc ).
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ARE THERE OPPORTUNITIES FOR LOW RANK COAL

DEVELOPMENT IN THE FUTURE ?

Roughly two billion people (close to 30% of worlds population) still have no
access to electricity. The demand in developing countries is growing rapidly;
Compared to other primary energy sources, coal is the most readily available
and provides the lowest cost fuel for power generation;
Coal is the fastest growing fuel for the past decade, and will remain as the
dominant fuel for global electricity;
More and more coalfired plants are designed to use LRC, especially in the
developing countries.
Indonesia has huge LRC deposit mostly situated in South Sumatera and
Jambi province.

10

Million Tons

450
400
350
300
250
200
150
100
50
0

REALIZATION OF INDONESIAN COAL PRODUCTION, EXPORT

AND DOMESTIC SALES BASED ON CALORIFIC VALUE (2011-2013)

34 37

LowRank
Coal

Medium
Rank

2011

251

2012

34

2013

37

27 28

2 7 9

Total
Production

LowRank
Coal

Medium
Rank

94

353

194

223

129

386

27

243

141

421

28

HighRank

LowRank
Coal

73

273

56

21

79

175

102

304

47

28

82

183

106

317

56

33

98

PRODUCTION

Source : Ministry of Energy and Mineral Resources

EXPORT

Medium
Rank

Total
Domestic
Sales

TotalExport

HighRank

HighRank

DOMESTICSALES

Note:
LowRankCoal:5100kkal/kgADB.<4700kkcal/KgGAR
MediumRank:>5100 6100kkal/kgADB..4700 5700kkal/kgGAR
HighRank:>6100kkal/kgADB..5700kkal/kgGAR

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CHALLENGES FACED BY INDONESIAN LOW RANK COAL (LRC) IN

AN EFFORT TO MATCH WITH CLEAN COAL TECHNOLOGY

Improvement in technology in an effort to get a clean coal is needed

especially by utilizing lowcalorie coal that coal reserves are abundant in
Indonesia;
Depressed coal price for the last three years:
need to develop production control mechanism to balance supply vs.
demand;
Developing proper regulatory framework:
coal upgrading, export ban, export duty, increased royalty, divestiture issues;
Infrastructure development to maintain a sustainable coal supply in meeting
longterm demand;
Global issue: air pollution from coal burning remains the single biggest
challenge facing the coal industry.
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PRODUCTION CONTROL ISSUE

The government proposed to lock coal production in 2015 maximum of 425

million ton. The production control will refer to production quotas made on
provincial bases;

The detail implementation of the proposed policy is still being formulized by

the government and yet to be discussed with the industry;

Implementation of this policy requires strong commitment from the

government. This has to be consulted with the parliament and approved by
other relevant institutions including the Ministry of Finance;

Significant discrepancies in coal production & export data between

government agencies due to illegal mining is a low hanging fruit for GOI to
tackle.
13

COAL REGISTERED EXPORT ISSUE

The government requires all exporter of coal (mining owner and trader) to be
registered as Registered Exporter (ET) at the Ministry of Trade (MoT);

The policy will take into effect on October 1st 2014;

Exporters must secure recommendation from the Directorate General of

Mineral and Coal before submitting ET application to the MoT. The process at
the MoT will take maximum of 5 working days provided all requirements
have been completed;

Mining companies now are required to pay for coal royalties payment in
advance before the shipment;

ICMA has been challenging this royalties payment requirement as it is not in

line with provision in coal contract of work (CCoW).
14

SUMMARY

15

SUMMARY
LOW RANK & CLEAN COAL INVESTMENT OPPORTUNITIES :
Coal upgrading at power plants (BOT): Implementing of Clean Coal Technologies to improve

CV, efficiency and reduce gas emissions;

At minemouth power plants, coal upgrading will further reduce transport & handling costs.
ASEAN Power Grid concept can be supplied by MMPP in eastern Sumatra with abundant LRC
reserves. MoU b/w Malaysia & Indonesia was initiated;
Coal gasification/liquefaction: Demand is growing for fuel, chemical, fertilizer and other
industries; supporting infrastructure needed;
In Indonesia, TEKMIRA as governmentowned researcher agency has opened for possible
cooperation with any parties to implement clean coal project.
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SUMMARY
REGULATORY&INFRASTRUCTUREASPECTS :

Indonesia remains the world's largest thermal coal exporter and the LRC portion
is increasing. However, sustainable coal supply depends largely on the appropriate
policy;

Currently no export restriction policy is in place for Indonesian LRC. However,

requirements for obtaining registered exporter (ET) will likely hamper coal export
process;

Export control is a temporary measure to balance coal supply and demand. This effort
requires commitment from producers, as well as government in curbing illegal mining
activities;

The government should reconsider its policy to increase royalti tariff for IUP holder.
17

THANK YOU
The author gratefully acknowledges the sources of slides used in preparing this presentation

Bob Kamandanu
Chairman APBI-ICMA
T : +62 21 3001 5935
F : +62 21 3001 5936
Menara Kuningan Building, 1st Floor - Suite A
Jl. HR. Rasuna Said Block X-7, Kav. 5
Jakarta 12940 INDONESIA
Email: secretariat@apbi-icma.org
Website: www.apbi.icma.org

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APPENDIX

19

UPGRADING COAL IMPLEMENTATION

Source : Tekmira, Ministry of Energy and Mineral Resources

20

Continue

UPGRADING COAL IMPLEMENTATION

Source : Tekmira, Ministry of Energy and Mineral Resources

21

Continue

UPGRADING COAL IMPLEMENTATION

Source : Tekmira, Ministry of Energy and Mineral Resources

22

Continue

UPGRADING COAL IMPLEMENTATION

Source : Tekmira, Ministry of Energy and Mineral Resources

Continue

UPGRADING COAL IMPLEMENTATION

Source : Tekmira, Ministry of Energy and Mineral Resources

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