THE LOW RANK COAL POLICIES IN INDONESIATHE LOW RANK COAL POLICIES IN INDONESIA

Clean Coal Day 2013 International Symposium “Change for Clean Coal Business & Sustainable Coal Supply – Japan Coal Energy Center (JCOAL)

Tokyo, on September 5 th, 2013

ByGultom Gushka

Deputy Directors Of Coal Business Enterprises – Divisions of Productions d M k ti S i i f C land Marketing Supervisions of Coal

DIRECTORATE GENERAL OF MINERAL AND COALMINISTRY OF ENERGY AND MINERAL RESOURCES

REPUBLIC OF INDONESIAREPUBLIC OF INDONESIA

CONTENTSCO S

I Current ConditionI. Current ConditionII. Coal PolicyIII. Investment OportunityIV Conclusion and RemarkIV. Conclusion and Remark

CURRENT CONDITIONI.

Strategic Issues1. Coal production tend to sharply increase each year. Realization of production in 2012 : 386 M Tonnes and will

close to 400 M Tonnes in 2013, its about 80% still dominated by export. The role of coal is still to get governmentclose to 400 M Tonnes in 2013, its about 80% still dominated by export. The role of coal is still to get governmentrevenue ( in 2013 from Mineral & Coal Rp. 145 Trilyun compare from Oil & Gas Rp. 257 Trilyun) . In the future therole of coal as energy source will be crucial factor. In line with this, the control production will be very important.

2. The domestic demand of electricity tend to increase for chasing the growth of economic 6 % annually, and the coal2. The domestic demand of electricity tend to increase for chasing the growth of economic 6 % annually, and the coalutilisation in national energy mix for replace of oil will be increased to 60 %. In the future the domestic demand oncoal also will be increase, we estimate in 2017 the demand of coal from electricity more than 100 Million Tons. Theexisting demand righ now for electricity (PLN+IPP) in Year 2011: 42 Mtons, in 2012 until Okt 2012 : 41.5 Mtons andin 2013 until June : 25.7 Mtons. The DMO for Year 2014 has stipulated from MEMR No.2901.K/30/MEM/2013, 30-in 2013 until June : 25.7 Mtons. The DMO for Year 2014 has stipulated from MEMR No.2901.K/30/MEM/2013, 307-2013 : 95.5 Mton (25.90 %) from Total Productions of 369 Mtons.

3. Because Lack of Infrastructure especially for coal hauling and port in Indonesia. Some regulations from localgovernment are prohibit to use this facility. The province of South Sumatera has already stipulated in the letter ofgovernment are prohibit to use this facility. The province of South Sumatera has already stipulated in the letter ofGovernor, also Jambi Province. The government strongly accomodate with the investors for build this facilityincluding of utilization of low and medium rank coal to liquifactions,up grading, gassifications, mine mouth powerplant, and also for building a coal hauling, special port for coal (jetty) and special coal hauling road by train ortrucking .t uc g

4. For Coal below 3000 kkal/kg (GAR) is abundant in South Sumatera is priority for Mine Mouth Power Plant with thecoal price is Cost + Margin. Also for coal up to 3000 Kkal/kg if special purpose for Mine Mouth Power Plant a longway of 30 years project and guarantee a supply just only for Mine Mouth Power Plant purposes also facilitate fory y p j g pp y j y p pCost + Margin prices. Righ now the Ministry (MEMR) Degree regarding Mine Mouth Powerplant has already sent tothe Law Bureu in Ministry (MEMR) office, the status was on going process.

5 In term of optimalizations of Government Revenue from royalty (Non Tax Revenue) there have a some actionsp y y ( )which could be done such as : Evaluations of formula base on rank of coal, reconciliations of IUP, productionscontrols, budget & plan of productions annually for IUP/PKP2B, mechanism to collect a royalties before shipmentor selling coal, the previous regulated 1 (one) mounth after selling time etc.

THE DISTRIBUTION OF INDONESIAN COALS

Res. 53 %Res. 47 %

P d    %Prod  10 %

Prod  90 %

TOTAL RESOURCES159 Billion Ton (119.4 B T

Open Pit & 40.3 B T U/GTOTAL RESERVES

32 Billion Ton

Very High ( > 7100 cal/gr ) Medium ( 5100 – 6100 cal/gr )High ( 6100 – 7100 cal/gr ) Low ( < 5100 cal/gr )

Source: Geological Agency, 2012

PERCENTAGE OF LOW TO MEDIUM RANK COAL IN INDONESIA

% 90% 

93% 

COAL EXPORT VS DOMESTIC

LOW GROWTH

OF DOMESTIC

SUPPLY‐ DEMAND “THERMAL COAL” in The World

8

REALIZATION OF COAL PRODUCTION, DOMESTIC, AND EXPORT( 2008 – 2013 )

400 353386 391

Produksi Ekspor Domestik DMO BatubaraExportProduction Domestic DMO

300

400

240 254 275

353

208

273 304 306

nes

100

200 187 198 208

53 56 67 80 82 8564 9 67 3 74 3Mi

llion

to

0

100 53 56 67 80 8264.9 66,3 67.3 74.3M

2008 2009 2010 2011 2012* 2013**

2008 2009 2010 2011 2012* 2013**Production 240 (100%) 254 (100%) 275(100%) 353(100%) 386(100%) 391(100%)Production 240 (100%) 254 (100%) 275(100%) 353(100%) 386(100%) 391(100%)Export 187 (77.9%) 198(78%) 208(75.6%) 273(77.3%) 304(78.8%) 306(78.3%)Domestic 53 (22.1%) 56(22%) 67(24.4%) 80(22.7) 82(21.2%) 85(21.7%)DMO coal 0 (0%) 0(0%) 64,9(23.6%) 66,3(18.8%) 67,3(17.4%) 74,3(19.0%)

Catatan : *) realization year 2012 **) plan year 2013 ***) DMO coal into force in 2010

REALIZATION OF COAL PRODUCTION BASE ON CALORIFIC VALUE (ADB) ( 2011 – 2013 )

Low Rank : ≤ 5100 kkal/kg ADB100 6100 /Medium Rank : > 5100 – 6100 kkal/kg ADB

High Rank > 6100 kkal/kg ADB

2011 TOP TEN INDONESIAN COAL EXPORTS *)

THAILAND  ; 7,391,177.05

PHILIPPINES  ; 6,828,441.66

SPAIN  ; 4,076,829.00 OTHERS; 8,087,641.64

CHINA  ; 50,402,878.28

HONG KONG  ; 10,659,584.37

TAIWAN; 16,517,091.50

MALAYSIA  ; 12,407,211.05

INDIA  ; 30,976,142.98

KOREA, REPUBLIC OF  ; 18,899,506.69

JAPAN  ; 26,073,352.88

, ,

*) Data PKP2B + PT BA

2012 TOP TEN INDONESIAN COAL EXPORTS*)INDONESIAN COAL EXPORTS )

PHILIPPINES  ;  7,129,801.11 

SPAIN  ;  6,207,861.48  THAILAND  ;  5,379,347.35 

OTHERS;  3,642,319.68 

HONG KONG  ;  10,668,729.23 

CHINA  ;  64,152,011.24 

KOREA, REPUBLIC OF  ;  15 949 929 51

MALAYSIA  ;  13,459,354.57 

INDIA  ;  29,113,888.27 

15,949,929.51 

JAPAN  ;  25,738,309.90 

TAIWAN;  16,390,645.18 

*) Data PKP2B + PT BA

KEMENTERIAN

ESDMCOAL PRICE REFERENCES

180.00

Jan ‘13 USD 87.55/tonFeb’13 USD 88.35/tonMar’13 USD 90.09/ton

140.00

160.00Apr’13 USD 88.56/tonMei’13 USD 85.33/tonJun’13 USD 84.87/tonJul’13 USD 81 69/ton

100.00

120.00

(US$

/ton)

HBA

ICI‐1

Jul’13 USD 81.69/tonAgt’13 USD 76.70/ton

60.00

80.00Harga  ICI 1

NEX

GC

PLATTS‐1

20.00

40.00

0.00

Note: ICPR  is decided by following mechanism:1 averaging 4 indexes ( NEX and  GCNC as  a references for international coal price;  ICI 1 dan Platts 1 as 

Note: calculated in 6322 kkal/kg GAR

1. averaging 4 indexes ( NEX and  GCNC as  a references for international coal price;  ICI‐1 dan Platts‐1 as references for Indonesian coal price) to obtain a CPR 

2. On the basis of CPR Calculate coal price marker by certain formula 3. Results of 2 is to calculate other coal base on Calorie,Moisture,Ash & Sulfur content

REALIZATION IN YEARS 2008-2013 OF NON TAX FROM OIL & GAS AND MINERAL & COAL

71,7%

70,5%63,7%

76,5%81,5%

77,6%,

27,7%28,9% 35,8%

22%23,1%

18,5%

Oil & Gas

Mineral & Coal

Note: *) plan 2013

Coal PolicyIII. y

KEMENTERIAN

ESDM POLICY DIRECTION

Implement priority fulfillment of coal for domestic needs p p y

Provide certainty and transparency (Mining Law regulation supporting sanction violations of the provisions etc )supporting, sanction violations of the provisions, etc.) 

Improving supervision on good mining practice POLICY DIRECTION

Increasing investment and state revenues from mining 

Encourage the development of value‐added products (i.e. processing, local content, local expenditure, upgrading brown coal, labor and CSR) 

Maintain environmental sustainability through management and monitoring, including the reclamation and post‐mining) environmental 

KEMENTERIAN

ESDMNATIONAL ENERGY MIX PLANNING(%)

2010 2025Oil

Gas

Coal

New Energy G

Oil49 7

Gas 20,1

Coal24,5

Gas New Energy

Oil25

Gas20 Coal

30

49,7

EBT 5,7

New Energy25

2030 2050

5,7

2030Oil20

Gas 15 Coal

25Oil19,4

Gas 18,8Coal31

2050

9,4

New Energy40

New Energy30,9 Note:

New Energy:(water,  geothermal,  biomass,( , g , ,waste,  biofuel, solar, wind,nuclear)

ELECTRICITY DEMAND AND ELECRIFICATION RATIO

Coal Demand for Power Plant

Source PLN

Priority for Domestic (DMO And Price Coal Policy)

• Coal DMO as an obligatory for all coal mining companies (IUP and PKP2B).• Minister set up policy on coal DMO and price (Indonesia Coal Price Reference/ICPR) coordinate with the y ( )

governor/regent/mayor

DMO 2011 (revision) DMO 2012

Domestic Coal Needs 2011-2013

No Consumen/End User Volume (million ton)

% GCV(kcal/kg)

A PLTU

1. PLNIPP

37,008

61,51 4000‐5200

No Consumen/End User Volume (million ton)

% GCV(kcal/kg)

A PLTU

1. PT PLN & PLTGB‐PLTGBBIPP

57,206

69,70 4000‐52002.3.4.5.

IPPPT Freeport IndonesiaPT Newmont Nusa TenggaraPT Pusaka Jaya Palu Power

8,970,830,470,19

14,911,380,780,32

4000‐52005650‐615052005000

B METALURGI

1. PT Inco 0,14 0,23 5900

2.3.4.5.

IPPPT Freeport IndonesiaPT Newmont Nusa TenggaraPT Pusaka Jaya Palu Power

10,760,830,540,19

13,111,010,660,23

4000‐5200580050005000

B METALURGI

1. PT Inco 0,13 0,16 59002. PT Aneka Tambang 0,20 0,33 ≥ 6000

C Semen 8,86 14,73 4100‐6300D Tesktil dan Produk Tekstil 1,97 3,28 5000‐6500E Pupuk 0,92 1,53 4000‐5000F Pulp 0,60 1,00 4500‐5500

Grand Total 60 15 100

2. PT Aneka Tambang 0,19 0,23596600

C Semen 8,40 10,24 4100‐6300D Tesktil dan Produk Tekstil 1,93 2,35 5000‐6500E Pupuk 1,30 1,58 4000‐5400F Pulp 0,60 0,73 4500‐5500

Grand Total 82 07 100

DMO 2012 (revisi)No Consumen/End User Volume 

(million ton)

% GCV(kcal/kg)

Grand Total 60,15 100 Grand Total 82,07 100

DMO 2013No Consumen/End User Volume 

(million ton)

% GCV(kcal/kg)

A PLTU ton)A PLTU

1.2.3.4.

PLNIPPPT Freeport IndonesiaPT Newmont Nusa Tenggara

37,1815,950,830,54

55,2923,721,230,80

4000‐52004000‐520058005000

A PLTU

1.2.3.4.

PT PLNIPPPT Freeport IndonesiaPT Newmont Nusa Tenggara

49,299,820,830,55

66,3213,211,120,74

4000‐52004000‐5200

58005000

5. PT Pusaka Jaya Palu Power 0,19 0,28 5000B METALURGI

1.2.

PT IncoPT Aneka Tambang

0,140,19

0,210,28

59006600

C Semen 8,40 12,49 4100‐6300D Tesktil dan Produk Tekstil 1 93 2 87 5000 6500

B METALURGI

1.2.3.

PT IncoPT Aneka TambangPT Krakatau Steel

0,200,190,35

0,270,260,47

59006600

C Semen 9,80 13,19 4100‐6300D T ktil d P d k T k til 6 D Tesktil dan Produk Tekstil 1,93 2,87 5000‐6500

E Pupuk 1,30 1,93 4000‐5000F Pulp 0,60 0,89 4500‐5500

Grand Total 67,25 100

D Tesktil dan Produk Tekstil 1,93 2,59 5000‐6500E Pupuk 0,76 1,02 4200F Pulp 0,60 0,81 4500‐5500

Grand Total 74,32 100• DMO is only 20 – 25 % of Total National Production• Quality for domestic market : 4.000 – 6.500 Kkal/Kg GAR

DMO PERFORMANCE

Apr Jun Ags Okt Des Jan Mar Mei Jul Sept Nov Des

2011 2012 67 Milion ton60 Milion ton

Apr Jun Ags Okt Des Jan Mar Mei Jul Sept Nov Des

Kepmen ESDM 2934.K/30/MEM/2012DMO batubara tahun 2013:

74 3 juta ton

Kepmen ESDM 1991.K/30/MEM/2011DMO batubara tahun 2012:

82 07 juta ton 74,3 juta ton82,07 juta ton

Permen ESDM No. 34/2009:DMO mineral dan batubara Kepmen ESDM 909.K/30/MEM/2012

Revisi DMO batubara tahun 2012:Kepmen ESDM 1334.K/30/MEM/2011

Revisi DMO batubara tahun 2011:

RealizationSolution

67,25 juta tonKepmen ESDM 2360.K/30/MEM/2010DMO batubara tahun 2011:

78,9 juta ton

60,15 juta ton42 PKP2B,

1 BUMN, 10 IUP 40 PKP2B,

1 BUMN, 22 IUP

Solution

Enhanced blending Increasing demand domestic: Coordinating with

201374,3 Juta Ton:

45 PKP2B,1 BUMN 28 IUP

facility Mine Mouth Power Plant, gassificationi,coal liquifaction

Mining Office, IUP Obligation for DMO

1 BUMN, 28 IUP

2014 (No.2901.K/30/MEM/201

3) Juta Ton:95 Juta Ton:

48 PKP2B,1 BUMN, 34 IUP

Investment OpportunityIV. pp y

INVESTMENT OPPORTUNITYa) Infrastructure development (especially in Sumatra and Kalimantan)

b) Increase the value of coal : gasification, liquefaction, coal blending and upgrading, especially for low rank coalespecially for low-rank coal

c) Mine mouth coal development cooperation

d) Development of underground coal mines cooperationd) Development of underground coal mines cooperation

Currently coal development projects included in the activities of MP3EIy p p j

EXISTING AND FUTURE PROJECTS OF MINE-MOUTH PP IN SUMATRAREADY FOR TENDER 2 600 MW

THE WAY FORWARD AND OPPORTUNITY

READY FOR TENDER = 2,600 MWNo Project Name Capacity Status COD

1 B kit A 4 65 MW PLN E i ti 19871 Bukit Asam 4 x 65 MW PLN, Existing 1987

2 Ombilin 2 x 100 MW PLN, Existing 1996

3 Simpang Belimbing 2 x 113.5 MW IPP, Existing 2011‐2012

4 Sumsel 5 2 x 150 MW IPP, PPA 2015‐2016

5 Sumsel 6 2 x 300 MW Canceled 2016‐2017

6 Sumsel 7 2 x 150 MW IPP, PPA 2015‐2016

7 Sumsel 8 2 x 600 MW IPP, PPA 2016‐2017

8 Riau 2 x 300 MW IPP, Negotiation 2016‐20178 Riau 2 x 300 MW IPP, Negotiation 2016 2017

9 Banjarsari 2 x 110 MW IPP, Construction 2014

10 Keban Agung 2 x 120 MW IPP, PPA 2015

11 Jambi 2 x 400 MW PPP, Pre‐FS 2018‐2019

12 Sumsel 9 2 x 600 MW PPP, Auction 2017

13 Sumsel 10 1 x 600 MW PPP, Auction 201813 Sumsel 10 1 x 600 MW PPP, Auction 2018

Total 6,747 MW

POLICY STRATEGY OF COAL

HIGH RANKHIGH RANK (BIT, SUB.BIT) EXPORT

COAL RESOURCES

MEDIUM RANK (SUB.BIT)

DOMESTICUSESOU C S ( )

UPGRADING

LOW RANK (LIGNITE)

MMPPGASIFICATIONLIQUEFACTION

( )LIQUEFACTIONPOWER PLANTINDUSTRYMMPP – Mine Mouth Power Plant

The Regulations for Added Value of Coal

Article 102 UU No.4 2009IUP and IUPK shall increase the added value of mineral resources and /or coal in the implementation of mining process, processing and refining,or coal in the implementation of mining process, processing and refining,and utilization of minerals and coal.

Article 103 (1) IUP and IUPK OP required to process and refine theresults of mining products in the domestic

Article 104 (1) IUP and IUPK OP as intended by article 103 may extendcooperation with entities, cooperatives or sole proprietorship alreadyobtain a Mining Permit or Special Permitobtain a Mining Permit or Special Permit

Government Regulation No.23/2010 Article 36 Where IUP OP do not gperform activities of hauling and/or processing, this activities may beperform by other parties that hold : IUP OP Special for trading or IUP OPSpecial for processing or IUP OPSpecial for processing or IUP OP.

Article 93 (1) PP No.23/2010The Mining Licence IUP OP of Mineral & Coal shall undertakeThe Mining Licence IUP OP of Mineral & Coal shall undertakeprocessing & refining/smelting to increase added value either directly orcooperation with other companies, IUP OP or IUP OP Special forProcessing Processing Coal including Of : Coal Crushing WashingProcessing. Processing Coal including Of : Coal Crushing, Washing,Blending, Up Grading, Briquetting, Coal Liquifaction, Coal Gasificationand Coal Water Mixture (CWM).Article 94 PP No.23/2010

(1) IUP OP or IUP OPK shall undertake processing to increase addedvalue to coal they produce, either directly or in cooperation with othervalue to coal they produce, either directly or in cooperation with othercompanies, IUP OP or IUP OP Special for Processing

(2) Companies as intended by section (1) shall have obtained IUP OPS i l f P iSpecial for Processing

(3) IUP OP Special for Processing as intended by section (1) & (2) shall begranted by Ministry, Governors, Regents/Mayors in line of the authority.g y y g y y

Ministry Decree No.34/2009 regarding DMOMinistry Decree No. 17/2010 regarding Price Regulation

The Progress Of Development Low Rank Coal Technology in Indonesia

Coal Centre in Palimanan with facilities : Bio Briquette, Pilot Plant : ActivedCarbon, UBC, Foundry Coke, Gasification, CWM, Cyclone, Gassifikasi (1 MW)

The Demonstration Plant JCF/JGC Coal Fuel with capacity 1000 t/year, coalliquifaction technology with feeding 2500 – 3000 k cal/kg to produce 4000 –4500 k cal/kg slurry. For comparison 1 kl MFO equal with 2 kl JCF. MFO PriceRp.3.5 Million/kl and JCF Rp.1.5 Million/kl. If The demand forMFO in Indonesialet say 2.5 Million kl. The cost will be Rp.8.75 T, If It is substitute with JCF 5Million kl/year the cost only Rp.7.5 T. The Effisiensi will be Rp.1.25 T/year.

Binderless Coal Briquetting Technology (White Energy, Australia) for ComercialPlant capacity 5 million tons/year, and 4 other plant soon be built. The locationof project in Tabang – East Kalimantan

Coal Upgrading Briquette Technology PT Bhakti Energi Persada Coal Upgrading Briquette Project PT Pesona Katulistiwa Nusantara Coal Upgrading Plant PT Pendopo Energi Batubara Coal Upgrading Plant PT Pendopo Energi Batubara Coal Upgrading & Coal Gasification Plant PT Delma Mining

CorporationNusantara

Sumatera SNG Project,DH Energy developed a Low Rank Coal to Gas,capacity 150MMSCFd (Feed Coal 5 million ton/yearly FS since 2011 and offcapacity 150MMSCFd (Feed Coal 5 million ton/yearly, FS since 2011 and offtaker PLN

Coal to Etanol Project in Kalimantan with Celanese (USA) Partner andSanggaran Mega Makmur (SMM), This project to produce 400.000 t/tahunwhich is needs 2 million ton coal as a feeding, project status MOU withPertamina.

Arrtu Mega Energi (AME), will built refining and processing DME(Dimethyl Ether) from Coal in Cilegon

M h l Ol fi j b il l / l h l dMethanol – Olefin project, to built natural gas/coal – methanol andNatural gas/ Coal – Methanol – Olefin integrated plant in Indonesia, MEXEnergy under Yanchang Group. Feed Stock about 12 million tons @ 5000cal/kg.

Coal Blending FacilityCoal Drying by IHI TigarCoal Drying by IHI – TigarEtc..

CLOSING REMARKSCLOSING REMARKS

There are some strategic issues that need to be covered in the develop of coal g putilisation for domestic , for instance: priority to increase domestic needs, added value of coal especially low and medium rank coal in Indonesia

Government at present execute a number of efforts to solve these issues for instant guarantee of DMO for coal and Price Regulation of Coal (HBA/HPB).Government still process of revision of Directorat General RegulationGovernment still process of revision of Directorat General Regulation 515.K/32/DJB/2011 regarding Indonesian Price Reference Coal (IPRC/HBA),Surveyor, Coal Price for reject coal and also Ministry Regulation regarding Mine Mouth Power Plantregarding Mine Mouth Power Plant

The foreign investment is one of the crucial factors for developing mining industry. There is a need to increase international cooperation to develop the

h l f ili i f L R k C l f D i N d il i ltechnology of utilitation of Low Rank Coal for Domestic Needs until comersial stages for the benefit of coal as a energy source for replacement of oil & gas energy.

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