Bukit Asam and Australia’s Ignite build conversion plant for low-rank coal

JAKARTA (TheInsiderstories) - Indonesian state-own coal producer PT Tambang Batubara Bukit Asam Tbk (IDX: PTBA) and Australian company Ignite Resources Pty Ltd. have inked deal to build a conversion plant for high added value product “called Advance Lignite Demonstration Program” (ALDP).

ALDP is a commercial scale reactor module of Ignite patented Catalytic Hydrothermal Reactor (Cat-HTR) technology, which economically convert low-value lignite into high-value synthetic crude oil (syncrude) and a metallurgical-type coal product (upgrade coal) used in steel production or low emission power generation.

The plant is located in in Tanjung Enim, Nort Sumatera and is expecting will start to operate in 2017. Finance Director of PTBA Achmad Sudarto said, the initial investment for the project is around $50 million out of total investment $84 million in three years.

“The acquisition has been completed. We buy the technology not the assets worth $30 million. With this purchasing, we have license to develop or build the plant in Indonesia. The new technology has the ability to convert low-rank coal to become high calorie and good synthetic oil,” Achmad said.

PTBA and Ignite have signed the deal on May 27^th.

Recently all coal producers in the world have suffered due to the lower prices and need to enter the new business to boost their performances. Achmad said, after the deal, later on 50 percent of PTBA’s output will become PCI and good synthetic oil with average price $80 per ton.

Len Humphpreys, chief executive of Ignite Energy Ltd., said the investment by PTBA will contribute to national security of Indonesia and Australia. Ignite has coal reserves of up to 16.4 billion metric tons of coal and is trying to leverage the processing of coal into crude oil with capacity from 1 million metric ton of coal to 8 million metric ton of coal.

“We are looking forward to work together to establish and grow and export market for these new higher value products,” Le said in a statement.

Power plant projects

PTBA also diversified its business into power plant projects with total investment $2.1 billion until 2019. Recently, PTBA has won tender of coaled-gas fired for SUMSEL 8 with capacity 2×620 megawatts (MW) and plans to start the construction end of the year. PTBA owns 45 percent interest in the project.

PTBA is also eyeing SUMSEL 9 and 10 and several power plants project in Java Island part of 35,000 MW project. This year, PTBA has finished the development of 2×110 MW in Tanjung Enim and started to develop 2×600 MW in South Sumater in 2016.

“Now we have a number of existing projects, namely 2×100 MW, 2×600 MW, 2×600 MW, with combined capacity of 2,600 MW. If we won the SUMSEL 9 and 10, we will have additional 1,800 MW plant project,” he said.

The existing projects will consume approximately 5.5 million metric tons of coal per year and SUMSEL 9 and 10 will need up to 8 million metric tons of coal. He added that until 2020 PTBA has secured a minimum of 15 million tons of domestic contracts for 25 to 30 years period.

Achmad said the other project that PTBA plans to develop is drilling hull in the existing forerunner which could produce 20 million metric crude oil per day by 2018. The project needs investment of around $20 million.

“This small investment is part of the cost recovery program. Our partner is investing and we handle operational costs,” Achmad stated.

After booking net profit of Rp797 billion in first half of 2015, PTBA is optimist in second semester the profit will be growing better because the coal prices going stronger. Achmad said the company expects to sell above 20 million metric tons of coal this year with average selling price around $58 per metric ton compared to last year and all have contracted, domestic portion 51 percent.

Achmad added that the main export market of PTBA has moved from China to other markets, namely Bangladesh, Taiwan, Srilanka and India only for selling products in spot market. (*)