H.E. SIDHARTO REZA SURYODIPURO AMBASSADOR OF INDONESIA TO INDIA
Talks on pertinent coal issues According to recent reports, Coal reference price in Indonesia has fallen, making local market more attractive. Also, the domestic demand in the Indonesian power sector has been boosted. Can this change your country’s focus in coal export? While Indonesia continues to be a significant player in the global mining industry, with substantial production and export of thermal coal, it is also a rising coal consumer and became the world’s 6th largest thermal coal consumer in 2018, with consumption of approximately 107.6 million tons (IEA, 2019). In October 2014, when President Joko Widodo took office for the first time, a new target to electrify the nation was set. First and foremost to support the projected growth for power demand of 7.8% per year until 2022, the Government of Indonesia announced a target to develop 35GW of new capacity. Consequently, the rise in domestic coal demand will absorb a much higher share of national production than in the past and may limit the availability of Indonesia’s coal for the export market. The government therefore has to finely balance between domestic consumption and exports. In 2019, Indonesia’s coal export to Japan and S. Korea have edged lower. Export to China has also showed lowered growth rate as compared to previous years
due to China’s restriction on coal import. If the current scenario prevails, will Indonesia increase its focus on India as its most prominent coal export market? Indonesian thermal coal export growth has slowed in 2019 but continued to account for most of the overall rise in global supply. The slow export growth is in part also due to the increase of domestic coal consumption for electricity production. In the Mid-Term Development
Plan (RPJMN) 2015-2019, annual coal production is set to be 400 million tons in 2019, 60% of which is consumed domestically. Coal companies are obliged to supply a certain percentage of their production to domestic buyers, known as Domestic Market Obligation (DMO). As the mining industry continues to be an important contributor to the economy,
6 | CCAI Monthly Newsletter January 2020
Indonesia is committed to expanding its coal industry, not only through trade but also by increasing its coal downstream processing capabilities. Indonesia opens its door to all friendly nations to support coal downstreaming process in Indonesia. This opportunity is wide open for India with its vast experience and expertise in coal downstreaming. Indonesia provided more than 61 percent of India’s thermal coal imports. What new initiative is the Indonesian government planning to take to further bolster the bilateral coal trade? Coal holds a large but shrinking share as an energy source, accounting for 27% of global primary energy consumption. Due to the non-renewable nature of coal resources, Indonesia needs a new strategy of using coal, including working on gasification technology to raise the efficiency of coal-fired power plants, even as it develops solar, geothermal and other renewable resources. The government’s focus is also on strengthening Indonesia’s coal downstream processing capabilities. One example is the making of Dimethyl Ether (DME) or coal-processed compounds into gas. DME has the potential to be a substitute for LPG. Besides being beneficial for coal entrepreneurs to maximize the potential of lowcalorie coal which is not sold in the market, DME can also help to reduce LPG imports dependence. The government welcomes the participation of foreign investors, including India to support this development of coal downstream processing. As the process will require business transformation, the government is introducing various incentives, including tax and royalty payment reduction up to 0%.
