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Indonesia committed to exporting coal, says energy minister

Coal is expected to account for 30% of Indonesia’s total energy mix by the year 2025, Energy Minister Purnomo Yusgiantoro, said on Monday.

The energy ministry is also considering an arrangement whereby coal producers in Indonesia would pay their royalties in coal instead of cash in order to secure fuel supplies for domestic power plants. “We will maintain the current level of production for high-grade coal to fulfill export demand. This will sustain our terms of trade and increase revenues for our government budget,” Yusgiantoro said at the Coaltrans conference in Bali. “But it will be a great challenge for us to balance domestic demand against export demand for coal,” he added.

Yusgiantoro’s comments may help to reduce concerns about Indonesia’s coal exports. Domestic coal demand is expected to jump in the next two years, leading to industry concerns that Indonesia could cut coal exports in order to ensure adequate supplies for its power stations. Domestic coal demand is expected to reach at least 90 million tons a year by 2010, up 80% from 50 million tons a year currently, as Indonesia is building 10,000 megawatts of new coal-fired plants, Yusgiantoro said.

Analysts have said that most of Indonesia’s coal demand would be for low-quality coal, which is also highly sought after by Indian and Chinese buyers. Yusgiantoro said the country’s move to use more coal comes amid surging oil prices and dwindling reserves. At current production and consumption rates, its coal reserves are expected to last about 130 years, while oil and gas would last just 20 and 60 years respectively, Yusgiantoro said.

Separately, a senior official at the energy ministry said the government was considering asking coal producers to pay royalties using coal stocks instead of cash. The coal could be used by state power company PLN. “The government is thinking of helping PT PLN by asking (for) coal supplies instead of cash,” said Simon Sembiring, director general of mineral, coal and geothermal at the energy ministry, speaking at the conference. “We can then sell part (of) this coal to PLN at a lower price, that’s the idea,” he said, adding that PLN would then be able to sell electricity at cheaper prices.

Under the current scheme, the government owns 13.5% of miners’ total coal supplies. Miners have to return proceeds from the sale of these coal supplies back to the government. (The Edge Daily/Reuters, Malayzia)