ITB Professor’s Forum: The Coal Industry Development in Indonesia

Figure 1. Pandu Patria Sjahrir (Head of Indonesian Coal Mining Association) and Prof. Irwandy Arif were presented their perspectives about the coal industry development

Coal is one of the commodities that affects Indonesia’s non-tax revenue. At the same time, Indonesia is one of the countries who committed to decreasing their carbon emission by signing the Paris agreement in 2016. Therefore, the coal industry development in Indonesia becomes an interesting topic to be discussed. On March 29, 2019, Bandung Institute of Technology Professor’s forum hosted Indonesia’s coal development discussion in Bandung.  This forum invited Prof. Irwandy Arif (Lecturer) and Pandu Patria Sjahrir (Head of Indonesian Coal Mining Association) to share their thoughts.

In the first session, Prof. Irwandy Arif mentioned that Indonesia’s coal reserve approximately around 37 billion ton. However, on the corporate level, there were a few companies that owned a massive reserve. This commodity was mostly obligated for the domestic market (70%) especially for a power plant, and the rest was exported to other countries. As the industry developed, there were some problems which boiled down on an unstable political environment and social issues. These problems must be solved by the government and the company to achieve stability. In the future, the coal demand would stay on top due to steam power plant development in 25 countries and most of them were in Asia. Also, the development of “clean coal” by Carbon Capture Storage and Carbon Capture Utilization Storage as well as Dimethyl Ether (DME) in Indonesia were essential as the technology adds the value for coal and assists in reducing carbon emission.

In the second session, Pandu Patria Sjahrir mentioned that the electrical consumption per capita of Indonesia (0,8 MWh/capita) is lower than Thailand (2,5 MWh/capita) and Vietnam (1,4 MWh/capita) even though infrastructure and economic situation among these countries were not contrasted. Coal investment offered a better solution for the lack of consumption needed an improvement. Related to the coal industry development in Indonesia, he highlighted the ceiling price for the coal with low calories (used as a power plant source) was much lower compared to the market price. Therefore, the other countries who interested in our coal resist to buy unless the price was similar to Indonesia local price.

Furthermore, coal industries were overshadowed by regulation to secure domestic supply amounting 25% of coal production. This requirement became an issue for certain coal miners whose products were unfit with domestic needs. As a result, some coal miners bought DMO Credits from other coal miners that had been exceeded in settling their DMO. However, considering actual domestic market adsorption was only 95% of the initial target, which means the penalty will be applied.

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