Home News Indonesia’s Coal Industry Hard to Grow in 2019, says Association

Indonesia’s Coal Industry Hard to Grow in 2019, says Association

Minister of EMR Ignasius Jonan (M) and Vice Chariman KADIN Garibaldi Thohir in Coal Seminar in Jakarta (12/18) - Photo by KADIN

JAKARTA (TheInsiderStories) – Over the past 20 years, the growth of the coal industry has been rapid and it has become one of the main sectors for State revenue. But, in 2019, production and investment in coal sector are predicted hard to grow amid the global uncertainty and unclear policies.

One reason is that there is no clear legal basis regarding the transfer of status of the Coal Mining Concession Contract (CMCC) to a Special Mining Business License, said Chairperson of the Indonesian Coal Mining Association Pandu Sjahrir. He revealed that the unclear regulation on the extension of licenses and status shifts could create uncertainty and make production stagnant next year.

Moreover, in the period 2019 to 2026, there are eight CMCC Generation I contracts that will expire, with many of them including giant companies like PT Kaltim Prima Coal, whose validity period will expire on Dec. 31, 2021. Then, PT Adaro Indonesia which will expire on Oct. 1, 2022, PT Kideco Jaya Agung whose contract is only until March 13, 2023, PT Berau Coal Tbk (IDX: BRAU) whose contract period will expire on April 26, 2025.

There is also PT Arutmin Indonesia whose contract will expire on Nov. 1, 2020, PT Multi Harapan Utama whose contract expired on April 1, 2022, PT Kendilo Coal Indonesia, whose contract is only valid until Sept. 13, 2021, and PT Tanito Harum whose contract will expire on Jan. 14, 2019.

Indonesia, as one of the largest producers and exporters of coal in the world can also benefit from it’s contribution to the economy, which originates from total non-tax state revenues too. Based on the Ministry of Energy and Mineral Resources (MEMR) notes, until mid-December 2018, the acquisition of non tax revenues from the coal and mineral sector amounted to Rp46.6 trillion (US$32.14 billion).

This value has exceeded the target of the non-tax revenues in the 2018 state-budget of Rp32 trillion. The proportion are 70 percent derived from coal, while 30 percent is contributed from the mineral sector.

As we know, around 66 percent of the current power plants in the country are coal-based power plants. Coal supply for domestic power plant needs is expected to increase significantly over the next five years. Total production in 2015 was around 70.8 million tons and in 2020 it is estimated that there will be around 177.5 million tons.

“Our coal potential is still relatively large. We hope that this can be supported by appropriate policies and regulations so that the development and utilization of coal as an energy source can develop in the future,” said vice chairman of Indonesian Chamber of Commerce for Mineral, Coal and Electricity, Boy Garibaldi Thohir, in Jakarta, Tuesday (12/18).

According to him, coal is still the main source of national electricity when compared to other electricity sources such as natural gas and geothermal. The certainty of the electricity supply program and the 35 gigawatts program will encourage the creation of positive multiple effects for economic growth to the regions.

On the other hand, Indonesia also has a strategic geographical position for markets in developing countries such as China and India. Based on International Energy Agency (IEA) data, global coal demand will stagnate until 2022 and these conditions also affect the demand for coal in China which is slowly decreasing.

With the potential of coal energy, Minister of EMR Ignatius Jonan said that the coal and mineral sector could cover the trade balance deficit, mainly from coal commodity exports.

He said that this year there is an additional 100 million tons added to the quota of coal production, raised from the initial production quota of 485 million tons. But until now there has only been an additional production of 22 to 23 million tons.

On the other hand, he asked coal companies not only to do excavation and sales, but also to increase added values. For an example, China is turning coal into jet fuel so it’s cheaper than oil fuel.

However, Coordinating Minister for Maritime Affairs, Luhut Pandjaitan claimed that the national production of oil, natural gas and coal according to the latest data tends slowly declined, while public consumption continues to grow. Therefore the government must also be careful regarding long-term energy needs and security.

US$1: Rp14,500

Written by Daniel Deha, Email: theinsiderstories@gmail.com

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