Indonesian Coal Miners Plan $70M Investment

Source: Jakarta Globe, Ririn Radiawati Kusuma (7/11/11)

"The government wants the local industry to add value to low-ranked coal."

Jakarta Globe, Ririn Radiawati Kusuma

The government wants the local industry to add value to low-ranked coal, which is typically used to fuel power plants, and turn it into high-grade coal in order to boost revenue. The miners must invest between $70M–$80M to build a facility to raise the quality of their coal, Supriatna Suhala, director executive of the Indonesian Coal Mining Association (APBI), said.

The state will begin to implement a 2009 regulation that will prohibit low-ranked coal to be exported and encourage companies to produce environment-friendly coal products.

High-grade coal has a lower moisture content, is more fuel-efficient and has fewer pollutants than its low-grade counterpart. It typically has 6,100 kilo calories.

In order to increase the quality of the coal, mining companies would have to build a smelter, which is used in the industry to remove coal's water content and increase its calories.

According to Rudi Vann, a researcher from energy consultants Wood Mackenzie, the use of coal upgrading technology such as a smelter increases the caloric content of coal by 24%. The coal's price would increase about 45%.

Indonesia could export as much as 276 million tons of coal this year, most of it low-calorie coal shipped to India and China, APBI said. It forecast that Indonesia can produce as much as 354 million tons this year.

State utility Perusahaan Listrik Negara consumes approximately 50 million tons, which has about 4,200 kilo calories.

Deddy Saleh, director general of foreign trade at the Trade Ministry, said the government will increase the export tax for raw-mining products, including low-calorie coal, in 2014.

The rule will be implemented gradually, giving miners time to build the smelter upgrading factory, Deddy said.

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