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NEWS UPDATES 16 October 2009

Indonesia to cap coal shipments to ensure local sufficiency

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Indonesian government plans to cap coal exports at around 150 million tons a year in a bid to guarantee supply for domestic demand, especially for electricity generation, an official was quoted by the Jakarta Post as saying.

"The figure is based on our estimate of the domestic demand for coal," Bambang Setiawan, director general for coal, minerals and geothermal energy at the Energy and Mineral Resources Ministry, told reporters Wednesday.

The export cap will be included in a government regulation on domestic market obligations (DMO).

"We expect the regulation on the DMO to be concluded this year," Bambang said.

According to Bambang, national coal production this year is targeted at 230 million tons. He said that as much as 161.5 tons of this total were for export and the remaining 68.5 tons were for the domestic market.

The Indonesian Coal Producers Association has estimated national coal production will reach 250 million tons this year while the domestic demand will reach 50 million tons.

Bambang said the domestic demand would increase significantly in the upcoming years as power plants from the government's 10,000 megawatt electricity crash program would begin operation in 2011.

He said the coal demand from the power sector in 2011 would be somewhere between 65 million and 70 million tons a year, up from 40 million to 46 million tons this year.

Bambang also announced a government plan to provide incentives for low-calorie coal producers. Bamband said the government plans to reduce the percentage of the so-called coal production fund (DHPB), which basically consist of development fee and royalty paid to the government.

The government requires low-calorie coal producers to pay the DHPB as much as 13.5 percent of their sales revenue. Bambang said the Energy and Mineral Resources Ministry proposed to reduce the DHPB for low-calorie coal producers from 13.5 percent to around 7.5 percent. The reduction will only be taken from the development fee, while the royalty will remain at 3 percent. "This proposal still needs to be discussed further with the Finance Ministry," Bambang said.


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