27 Oct 2020

Indonesia to Develop Downstream Coal Sector

27 Oct 2020  by Ajay Modi   
Indonesia should reduce coal exports and focus on adding value by boosting the downstream coal sector to help cut raw material imports by domestic industries such as steel and petrochemicals while creating jobs, Indonesian President Joko Widodo said.

Indonesia exported a record 456.4mn t of coal in 2019, up by 6.4pc from 2018, while production reached 616mn t last year, higher by 10.6pc on the year. Jakarta has set a production target of 550mn t of coal this year and plans to export 435mn t. Indonesia mainly uses coal as a generation fuel and is the world's largest thermal coal exporter.

But the country needs to shift from exporting raw materials such as coal to become capable of processing raw materials into semi-finished or finished goods, Widodo said, stressing the need to develop the downstream sector in terms of coal liquefaction and gasification. A roadmap to optimise the use of domestic coal using environmentally friendly technology needs to be accelerated, he said.

Indonesia's energy ministry (ESDM) has been firming up plans for the development of the nascent downstream coal industry following recent changes to the country's mining law. Indonesia's 2020 mining law stipulates that the ESDM must come up with a five-year industry development roadmap for the downstream coal sector within the next two years.

The industry and government can work on areas of priority such as the coal gasification programme and developing dimethyl ether plants. Dimethyl ether can be used as a substitute for LPG and as such has the potential to reduce the country's LPG imports.

A recent Indonesian government law waived royalty fees that are paid by coal producers that invest in the downstream industry. Coal producers holding PKP2B and IUP mining permits currently pay 13.5pc in royalties. The reduction is aimed at attracting coal producers to invest in the emerging downstream coal sector with the aim of raising the value of Indonesian coal, particularly lower-calorific value material that is usually used for blending purposes and sold at lower prices relative to other coal grades.

Coal gasification is still in its infancy in Indonesia. State-owned coal producer Bukit Asam is the only mining firm that has made concrete commitments to develop a coal gasification facility after signing an agreement earlier this year with state-owned oil firm Pertamina to supply methanol produced from coal.

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