3/12/2009

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)
 PRESENTATION OUTLINE

• 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

2
 INTRODUCTION

ƒ Up to mid 2008, the mining industry both in Indonesia and globally

experienced significantly high performance.
ƒ For Indonesia, PricewaterhouseCoopers reported that in the last
there year EBITDA Margin, Net Profit Margin, Return on Capital
Employed, Return on Shareholders fund, and Net Debt to Equity
Ratio were above the sector global average.
ƒ The mining industry continues to be an important contributor
to the Indonesian economic.
ƒ The industry also continue to make significant contributions to the
Indonesian GDP and Export, as well as to Regional and Community
Development.
ƒ Since September 2008, the price of all mining products has been
decreasing significantly and reduced the profitability of mining
companies for the year 2008.
ƒ The year of 2009, will be very hard for mining companies.
3
HOW MUCH COAL RESERVES CAN
BE FOUND IN INDONESIAN ?

4
 DISTRIBUTION OF INDONESIAN COAL
MAP RESERVES (IN PERCENTAGES)

34 %
8%
3%

39 % 16 %

Distribution of Coal Reserve Potential

The biggest reserves are located in 3 provinces, in South Sumatra (39 %), East Kalimantan (34%), and
South Kalimantan (16%).

Source : Center for Geology, Geology Agency 2006

5
 INDONESIAN COAL MAP RESOURCES AND
RESERVES (BILLION TONS)

40.47 b.t
52.53 b.t
7.15 b.t
0.23 b.t 0.002 b.t
SUMATRA 11.55 b.t 0.15 b.t

0.01 b.t

Resources: 93.40 billion tons b.t : billion tons Reserves : 18.70 billion tons

Source: Geological Resources Centre (+ Joint Study with NEDO) – 2007

March 2009, it was reported become 104.7 Billion ton Resources 6
 COAL RESOURCES AND RESERVES DISTRIBUTION
BY REGION (M.TONS) 2007

NANGROE ACEH DARUSALAM CENTRAL KALIMANTAN EAST KALIMANTAN PAPUA

RESOURCES = 450.15 RESOURCES = 1,399.21 RESOURCES = 19,567.79 RESOURCES = 138.30
MINEABLE = n.a. MINEABLE = 48.59 MINEABLE = 2,410.33 MINEABLE = n.a.

RIAU WEST KALIMANTAN

RESOURCES = 2,057.22 RESOURCES = 527.52
MINEABLE = 15.15 MINEABLE = n.a

SOUTH SUMATRA
RESOURCES = 22,240.40
MINEABLE = 2,653.98

WEST SUMATRA BENGKULU SOUTH KALIMANTAN SOUTH SULAWESI

RESOURCES = 719.09 RESOURCES = 198.37 RESOURCES = 8,674.56 RESOURCES = 132.01
MINEABLE = 36.07 MINEABLE = 21.12 MINEABLE = 1,787.32 MINEABLE = 0.06

7
WHAT IS INDONESIAN COAL
QUALITY ?

8
 INDONESIA COAL QUALITY BASED ON
THE SPECIFIC ENERGY (KCAL/KG)

Very High Quality (>7100 kcal/kg)

High Quality
13% 1%
(6100-7100 kcal/kg) Low Quality
(< 5100 kcal/kg)
24%

62%
Medium Quality (5100-6100 kcal/kg)

9
´ How many coal mining iN Indonesian
today ?

´ Whatis production, Export and

domestic sales levels ?

10
 COAL MINING PLAYERS GROUP (2007)

Contribute 4,0% of
STATED OWNED (PTBA)
*) National Coal
Production

INDONESIA’S COAL CONTRACT OF Contribute 80,1% of

COAL PLAYER WORK National Coal
(CCOW HOLDER) Production
GROUP **)

MINING Contribute 15,9% of

AUTHORIZATION National Coal
(MA HOLDER) Production
***)

*) 1 Company in Production
**) 36 Companies in Production
44 Companies in Exploration, Feasibility Study and Construction
***) 129 Companies in Production 11
 PRODUCTION, EXPORT AND DOMESTIC SALES
(HISTORICAL DATA ,1996 - 2008) (Million Tons)
Government Version

250 233.62
215
200 193.55

153.2 158.6 160.27

150 144.94
132.4
114.3 110.79
102.5
100 91.5 85.3
93.76
72.2 75.6 73.4
60.6 63.4 79.14
48.8 53.946.7 53.9 57.2 62.5
50 35.3 40.9
45.54
35.74 37.1 41.3
27.3 29.2
10.9 13.2 15.4 19 22.1
0
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Export Domestic Production

Source : - Directorate of Mineral and Coal Enterprise – “Indonesia Mineral and Coal Statistic 2005”
- APBI-ICMA 12
WHAT IS GOVERNMENT OF
INDONESIA PLAN FOR COAL ?

13
 EXISTING/THE CHANGING FACE OF
INDONESIAN ENERGY MIX (2006 – 2025)

PRESIDENTIAL DECREE NO. 5 TAHUN 2006

CONSERNING NATIONAL ENERGY POLICY
Geothermal 1.4% Coal Liquefaction
2%

Renewable Energy
Coal 5%
33%

Geothermal
5%
Gas
Oil
30%
20%

Renewable 3.4%
2006
2025
ƒ Increased usage of low rank coals for domestic use, coal
liquefaction and upgrading brown coal (‘UBC’) will be key
factors in increasing domestic coal usage. 14
WHAT IS LONG RUN PREDICTION
FOR PRODUCTION, EXPORT AND
DOMESTIC UTILIZATION OF COAL
?

15
 PRODUCTION, EXPORT AND DOMESTIC SALES (FUTURE
ESTIMATION, 2005 – 2025) (Million Tons)
APBI-ICMA Version

450 421
400
364
350 326

300
244 260
250 233.62 236
215
193
200 169 170
184
153.4 145 158.6 160.27 153 150
150 175
180
110.8
100
50 79.14 75 90
62.5
41.4 48
0
2005 2006 2007 2008 2009 2010 2015 2020 2025

Export Domestic Production

Source: APBI-ICMA 2009. 16
´ Haveyou heard of Indonesian new
mineral and coal law ?

´ Is
it favorable or Unfavorable for
investment ?

17
´ Thereare 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
 The Essence Of The New Law
ƒ The law replaces the mineral and coal mining law No. 11/1967. However,
the mineral and coal mining law will rely heavily on many still to issued
government regulation for its implementations .
ƒ New Contract of Work (CoW) and Coal Contract of Work (CCoW) systems
will no longer be available. But all existing contracts will be respected.
ƒ All investor (both foreign and local) will be treated equally. Both investors
will be able to apply for a form of mining license (IUP or IUPK) .
¾ An IUP is requires for exploration, development and production stage.
¾ An IUPK is applicable for State Reserves Areas (SRA)
ƒ Existing Mining Companies should process raw minerals in domestic
processing and smelting facilities within five years after the law entry into
force.

19
 The Essence of the new law(continued)

ƒ All investment (both foreign and Indonesia) must now be

carried out pursuant to an “IUP” or “IUP Khusus”/IUPK”.
ƒ An IUP is applicable for general mining.

ƒ An IUPK is applicable for any mineral or coal in The State

Resources Areas (SRA)

ƒ State Reserves Areas (SRA’s) are to be determined by the

Central Government with approval from parliament.
ƒ Stated Owned Companies are to be prioritized for the
development of SRA’s.

20
 MINING AREAS

Metallic – Mineral : Maximum 100.000 Ha – Exploration Stage

Maximum 25.000 Ha – Production Stage

Non Metallic Mineral : Maximum 25.000 Ha – Exploration Stage

Maximum 5.000 Ha – Production Stage

Sand & Stone Aggregates : Maximum 5.000 Ha – Exploration Stage

Maximum 1.000 Ha – Production Stage

Maximum 50.000 Ha – Exploration Stage

Coal : Maximum 15.000 Ha – Production Stage

Individuals 1 Ha
IPR : Group 5 Ha
Cooperation 10 Ha
21
 MINING TERMS

IUP :
EXPLORATION STAGE :
Coal and Gemstone → 7 years
Metallic Mineral → 8 years
Non Metallic Mineral → 3 years
Stone Aggregate → 3 years

EXPLOITATION STAGE:
Coal, Metallic Minerals → 20 years (can be prolonged 2 x @10 years)
Non Metallic Minerals → 10 years (can be prolonged 2 x @ 5 years)
Stone Aggregate → 5 years (can be prolonged 2 x @ 5 years)

22
 MINING TERMS (CONTINUED)

IUPK : EXPLORATION STAGE :

Coal → 7 years
Metallic Minerals → 8 years

PRODUCTION STAGE:
Coal, Metallic Minerals → 20 years
can be prolonged
2 terms @10 years

23
 WILL NEW MINING LAW BE FRIENDLY TO NEW
INVESTORS ?
ƒ The answer will be left to the implementing Derivatives
Regulations (Government Regulation).
ƒ No more of CoW/CCoW in the future will be the main factor in
declining of grass root investment.
ƒ Well regarded Lex specialist concept embedded in some
CoW’s/CCoW’s will be no more used in the IUP Concept,
accordingly the new law may provide only low level of certainty.
ƒ The idea to re-sizing of the mining become another
disincentives factor.
ƒ The obligation to invest in domestic infrastructure of mineral
processing and smelting makes mining sector less attractive for
low and middle class investors, but give more economic Impact
to the country.
24
 WHAT IS GOOD IN THE NEW MINING LAW COMPARE TO
THE OLD ONE ?

ƒ 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.
ƒ Exploration Licensing (IUP) must be issued through a
tender process, rather than direct appointment, so it’s
means more transparent system compare to old one.
ƒ Hard Sanction for :
¾ Illegal miner
¾ Government official whom did misconduct and
mismanage in giving licensing.

25
 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, mine closing and Post Mining
Activity
• Added value of mineral processing obligation

26
 DOMESTIC MARKET OBLIGATION
´ By having DMO on place, How Foreign Country can rely on
Indonesian Coal for their Full Supply.
´ We are now discussing with Government to treat upgrading entity
as Industrial entity, 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 . This kind of
investment to market the product elsewhere
 CLOSING REMARKS

• Coal production growth in Indonesian will continue through the year

2009.
Slowing demand from the international market may be offset by the
increasing demand from the domestic market.
• The natural production level could be much more greater. Only if the
bottle neck in the infrastructure (specially in land transportation
system) can be eradicated.
• The government of Indonesian, 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 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.

28
 THANK YOU

Indonesian Coal Mining Association

Email: apbi-icma@indo.net.id
Menara Kuningan Building, 1th Floor, Suite A
Jl H.R. Rasuna Said Block X-7 Kav.5
Jakarta Selatan 12940 - INDONESIA
Phone/Fax : (62 21) 3001 5935, 3001 59