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November 11, 2008

Indonesia plans to stock coal for local supply
Indonesia, the world's top exporter of thermal coal, plans to put in place a coal buffer stock to secure supplies for domestic power plants, Reuters quoted the energy minister as saying Monday.

Coal for the buffer stock would be procured by revising a policy so that producers pay royalties using coal supplies, Minister Purnomo Yusgiantoro said.

The policy is expected to affect all coal producers, including companies such as PT Bumi Resources Tbk, Indonesia's largest coal producer and PT Indo Tambangraya Megah, a unit of Thailand's Banpu Plc.

"We are considering developing coal buffer stocks and PLN will be authorised to manage it so that when there's a supply problem, it won't cause a panic," Yusgiantoro said, referring to state electricity firm PT Perusahaan Listrik Negara.

The government has said earlier this year that it was looking at swapping cash royalties for coal stocks to ensure domestic supply.

Under the current scheme, the government gets 13.5 percent of miners' total coal supplies. Miners have to return the proceeds from the sale of this coal back to the government.

"We will be able to apply the buffer stock once the policy on swapping cash royalties into coal supplies is completed," Bambang Setiawan, director general of mining, geothermal and coal at the ministry, said at the same news conference.

The energy minister said Indonesia may be able to get around 30 million tonnes of coal for buffer stocks under the plan.

Disruptions in coal shipments partly due to bad weather caused blackouts in Java and Bali, the two main commercial islands, earlier this year.

Last week, PLN was quoted by the state Antara news agency as saying it planned to import coal from Australia to increase stocks ahead of the rainy season due to higher local prices and dwindling stocks at its four major power plants.

But the firm later denied the plan and said it would focus on seeking supplies from domestic producer.

According to Setiawan, most domestic power plants currently use sub-bituminous coal with low heating value and the new policy should enable the country to have better quality coal by blending different kinds of coal quality.

PLN has said it would need more than 40 million tonnes of coal in 2009 up from about 35 million tonnes this year as three new coal-fired power plants start operating.

Indonesia coal output is expected rising to 240 million tonnes in 2009 from 235 million tonnes this year, according to date from the industry-backed Indonesian Coal Mining Association.

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