Photo: Special

JAKARTA (TheInsiderStories) – Indonesia’ ministry of energy and mineral resources agreed to increase the production quota for 34 coal companies proposed in the middle of this year, officials said Tuesday (08/27), from an initial target of 489.73 million tons to 600 million tons in 2019.

“All are approved, but the amount is still considered. Similar to the achievement of last year’s production, if the maximum is over 600 million tons,” said director general of mineral and coal Bambang Gatot Ariyono.

Ariyono guaranteed that even though the application for production increase was approved, the coal production quota until the end of this year would not exceed 600 million tons. Earlier this year, the energy ministry targeted coal production this year to reach 489.73 million tons. Until August 21, production had reached 67.76 percent of the target or 331.83 million tons.

Last year, coal production realization reached 557 million tons. The production volume was reached after the ministry increased the production quota of 100 million tons in the fourth quarter.

The production volume in 2018 is the biggest in the last five years. Consequently, coal production from 2014 to 2017 was recorded at 458 million tons, 461 million tons, 456 million tons and 461 million tons.

Meanwhile, the potential increase in production this year has caused concern among business operators. Because the increase in production quota could be a sentiment that suppresses coal prices.

So the thirty-four coal mining companies have submitted their work program and budget revisions to the ministry to apply for process production quota increases.

The ministry’s coal supervisory and business director, Muhammad Hendrasto, said that the ministry has accepted work programs and budget revisions from coal miners in July. The ministry, he adds, only the revisions from companies that had obtained mining licenses from the central government, while provincial governments would evaluate the revised work programs and budgets of companies for which they had issued licenses.

The ministry will decide on the size of production quotas for each province, he said, adding that several requirements had been set as references to assess the work program and budget revisions.

“One of the requirements is reports on their domestic market obligations and their working performance until the second quarter. If they didn’t report it then we will not approve their work program and budget revisions,” he ended.

Meanwhile, the ministry has set the country’s coal price reference for August at US$72.67 a ton, a slight increase from $71.92 a ton the previous month. It said the increase in August was influenced by the global energy market which was relatively improving. In addition, coal and demand from China and Korea also increased. Also, the disruption of coal supply from mines in Australia caused the Global Coal and Newcastle indices to strengthen in July.

Based on energy ministry data, coal production is prioritized to guarantee the fulfillment of domestic primary energy needs. But the realization of domestic coal utilization in 2018 is only 115 million tons or 21 percent. This is below the domestic market obligation (DMO) target which is pegged at 25 percent, even though the number of utilization is up compared to 2017 which was only 97 million tons. The government has also set a price for a DMO of $70 valid until the end of 2019 and still continues to look at developments in global coal prices.

Written by Lexy Nantu, Email: lexy@theinsiderstories.com