INDONESIAN COAL MINING POLICY

DIRECTORATE OF COAL BUSINESS DEVELOPMENT

DIRECTORATE GENERAL OF MINERAL AND COAL

THE 3 RD ANNUAL KALIMANTAN COAL Balik Papan, Novotel Hotel September 2nd, 2014

By : Gultom Guska

OUTLINE

I. STRATEGIC ISSUES/CURRENT

CONDITION

II. NEW REGULATION OF COAL MINING

III. EFFORT FOR MANAGE COAL

EXPORT DATA

IV.CLOSING REMARK

STRATEGIC ISSUES

1. Coal production tend to sharply increase each year. Realization of production

in 2013 : 431 M Tons, its about 80% still dominated by export. The Domestic

consumptions is about 72 M Tons. The role of coal is still gained government

revenue ( in 2013 from Mineral & Coal Rp. 145 Trilyun compare from Oil & Gas

Rp. 257 Trilyun) rather than coal as energy sources. In the future the role of

coal as energy source will be crucial factor. In line with this, the control

production will be very important through the regulations of production control.

2. The domestic demand of electricity tend to increase for supporting the growth

of economic 6 % annually, and the coal utilisation in national energy mix for

replace of oil will be increased to 60 %. In the future the domestic demand on

coal also will be increase, in estimate in 2018 the demand of coal from

electricity 109.1 M Tons. The existing demand righ now for electricity (PLN+IPP)

in Year 2012: 53 M Tons and in 2013: 66 M Ton, in 2014: 77 M Tons. The coal

demand for support 3 GW growth annually is about 15 M Tons – 25 M Tons.

Install capacity of National Electricity 50.655 MW (71 % PLN, IPP 20 %, PPU 4

% and IO non BBM 5 %)

STRATEGIC ISSUES 3. In line with the strategy for maintain emissions and high effisiencies to generate

electricity from Coal, the National Electric Company will develop super critical

technology with effisiencies 35 – 40 % in Cirebon 1 x 660 MW, Paiton 3 : 1 x

815 MW. Year 2017 Ultra Super Critical with effisiencies 43 % will built in

Central Java IPP USC 2 x 1000 MW, Bekasi USC 2 x 600 MW, Indramayu # 2

USC 1000 MW. There are plan to built IGCC 1000 MW.

4. The government strongly accomodate with the investors to develop of utilization

lignite coal to liquefactions,up grading, gasification, mine mouth power plant,

blending facility, and also for building a coal hauling, special port for coal (jetty)

and special coal hauling road by train or trucking and coal terminal for export

and domestic.

5. The scheme of Mine Mouth Power Plant has been given the special coal price

(Cost + Margin). The government has already issuance a regulations to

enhance and faster the develop of Mine Mouth Power Plant : a) Ministry Decree

No.10/2014 regarding Mechanism of Stipulated Coal Pricing for Mine Mouth

Power Plant (April 4 th, Year 2014). b) Regulations of The Director General

Concerning Cost Of Productions for Mine Mouth Power Plant Coal Price

479.K/30/DJB/2014 (30 th Mei, Year 2014).

STRATEGIC ISSUES

6. In term of optimalizations of Government Revenue from royalty (Non Tax Revenue)

there have a some actions which could be done such as : Reconciliations of IUP,

productions controls for budget & plan of productions annually for IUP/PKP2B, collect

pre payment royalties before shiping coal. Implementations of Exporter Recomendation

(ET) and the obiligations of surveyor superintending for listed in Directorate General

Mineral and Coal (Regulations of the Directorate General Concerning Coal Surveyor

(No.481.K/30/DJB/2014, Mei 30 th Year 2014). Base on recomendations and

coordinations intra department with the Commisions of Eradictions Coruptions (KPK).

Very High /Antracit ( > 7100 kal/gr ) Medium / SubBituminus ( 5100 - 6100 kal/g) High /Bituminus ( 6100 - 7100 kal/gr ) Low /Lignite ( < 5100 kal/gr) .

DISTRIBUTION OF INDONESIA COAL

Source: Geological Agency, 2011

TOTAL COAL RESERVE 28.17 BILLION TONS

Lignite (29%) SubBituminus (60%)

Bituminus (11%)

TOTAL COAL RESOURCE 161.34 BILLION TONS

Lignite (20%) SubBituminus (66%)

Bituminus (14%)

Total Lignite: 21.3% Sub-bit: 13.6% Bituminus: 65.1%

INDONESIAN COAL PRODUCTION, EXPORT, DMO AND COAL PRICES

Coal price affecting Indonesian coal production and export

Coal production and export growth by 14 % per year

Domestic coal demand growth by 12 % per year (domestic demand is priority before export)

April ‘13 to April ‘14: production growth by 3%, domestic (dmo+ trader) 27% and export 0.2 %

New regulation will be coal production control to fulfill long-term domestic coal demand

CU

RR

EN

T

CO

ND

ITIO

N

Note: ICPR is decided by following mechanism: 1.averaging 4 indexes ( NEX and GCNC as a references for international coal price; ICI-1 dan Platts-1 as references for Indonesian coal price) to obtain a CPR 2.On the basis of CPR Calculate coal price marker by certain formula 3.Results of 2 is to calculate other coal base on Calorie,Moisture,Ash & Sulfur content

Note: calculated in 6322 kkal/kg GAR

COAL PRICE REFERENCES

0.00

20.00

40.00

60.00

80.00

100.00

120.00

140.00

160.00

180.00

200.00H

arga

(U

S$/t

on

)

HBA

ICI-1

NEX

GC

PLATTS-1

Jun’13 USD 84.87/ton

Jul’13 USD 81.69/ton

Agt’13 USD 76.70/ton

Sep’13 USD 76.89/ton

Okt’13 USD 76,61/ton

Nop’13 USD 78,13/ton

Des’13 USD 80.31/ton

Jan’14 USD 81.90/ton

Feb’14 USD 80.44/ton

Mar’14 USD 77.01/ton

Apr’14 USD 74.81/ton

A such impact : decreasing

revenue, terminations of

employment, cost effisiensi,

decrease of government revenue;

the production target not

achieved, diminishing of

exploration cost, diminishing of

subcont ect---

Mei’14 USD 73.60/ton

Jun’14 USD 73.64/ton

Jul’14 USD 72.45/ton

Agt’14 USD 70.29

Stipulated of Export Recomendation Regulations (Permendag

No.39/M-DAG/PER/7/2014) pospone until Okt 2014;

Directorate General Degree No.714.K/30/DJB/2014,

mechanism of export recommendations for Ccow,IUPOP,IUP

Trader) and Promote of Coal Commodities Bourse,

LAW NO. 4/2009

Article 6 Paragraph 1 K

GR NO. 23/2010 (Feb 1, 2010)

Article 85

Minister Regulation No. 17/2010 (Sept

23, 2010)

Regulation of the Director

General No. 515/2011

concerning Coal Price Formula

March 24, 2011)

Regulation of the

Director General

No.

644/2013 as

amendment to

999.K/2011

Concerning

Adjustment Cost

(March 21, 2013)

Regulation of the

Director General

concerning Coal with

Specific Type and

Purpose

No.480.K/30/DJB/2014

(30 Mei 2014)

Regulation of the

Directorat General

concerning

Concerning Coal

Surveyor

No.481.K/30/DJB/2

014

(30 Mei 2014)

Decision of the Director

General concerning

Monthly Coal Price

HBA HPB Marker &

others

HPB

Coking Coal

Decree of the

Minister No.

0617/2011

Concerning Coal

Price for PLN

(March 3, 2011)

Hard Coking Semi Soft Coking Pulverized Coal Injection

Notes:

PKP2B is regulated in PKP2B Contract Article 12 / 13

Article 11 Paragraph 4 Article 13 Paragraph 4 Article 21 Paragraph 4

Article 12 Paragraph 5

Ministry Decree

No.10/2014 regarding

Mechanism of

Stipulated Coal Pricing

for Mine Mouth Coal

Power Plant

(April 4th,2014)

Article 21 Paragraph 4

COAL PRICING POLICY INSTRUMENT SCHEME

Regulation of the Director

General concerning Cost of

Productions for Mine Mouth

Coal Power Plant Pricing

2014

(30 Mei 2014)

IMPLEMENT PRIORITY FULFILLMENT OF COAL FOR DOMESTIC NEEDS

Sources: Decree of the MEMR DMO Determination

2010 - 2014 DMO is only 20 – 25 % of Total National Production

Quality for domestic market : 4.000 – 6.500 Kal/Kg GAR

2015 – 2055 DMO annual growth 8,3 % base on long term plan of coal power plant demand

about 3 GW/years need 15 – 25 Millon ton /year for coal.

CU

RR

EN

T C

ON

DIT

ION

Low Rank : ≤ 5100 kkal/kg ADB-----------------< 4700 kkal/kg GAR

Medium Rank : > 5100 – 6100 kkal/kg ADB---4700 – 5700 kkal/kg GAR

High Rank > 6100 kkal/kg ADB-------------------≥ 5700 kkal/kg GAR

REALISATIONS OF PRODUCTIONS BASE ON CALORIFIC VALUE

(2011 – 2013)

Coal Consumption for Coal Power Plant (2012-2019

MillionTon)

Produksi dan

PenjualanRealisasi 2011 Realisasi 2012 Realisasi 2013

Produksi 353 386 421

- Kalori Rendah 8 34 37

- Kalori Sedang 251 223 243

- Kalori Tinggi 94 129 141

Ekspor 273 304 317

- Kalori Rendah 6 27 28

- Kalori Sedang 194 175 183

- Kalori Tinggi 73 102 106

Domestik 79 82 98

- Kalori Rendah 2 7 9

- Kalori Sedang 56 47 56

- Kalori Tinggi 21 28 33

Keterangan : Jutaan MT

Tahun 2011 Tahun 2012 Tahun 2013

kalori rendah 2,36% 8,82% 8,82%

kalori sedang 70,97% 57,71% 57,71%

kalori tinggi 26,66% 33,47% 33,47%

Million Ton

(MILLION TON

Decreasing Export

Increasing Domestic Demand

SKENARIO : FIX OF PRODUCTION SINCE YEAR 2015

TAHUN 2015 2020 2025 2030 2035 2040 2045 PRODUKSI 401 401 401 401 401 401 401 DOMESTIK 89 120 163 206 243 286 316 EKSPOR 312 281 238 195 158 115 85

SOLUTIONS FOR LOW RANK COAL

Gas Chemical Feedstock

DIRECT USE Power Plant

Industry

CONVERSION

LIQUEFACTION

GASIFICATION

Liquid

Clean Coal Technology

UPGRADING High Rank Coal

LOW RANK COAL

COKES

ACTIVE CARBON

COAL

CWM

COAL UTILIZATION

Supercritical Ultrasupercritical

IGCC

PROPOSAL OF COAL EXPORT TERMINAL PLAN IN INDONESIA

Kalimantan Timur 1.Teluk Balikpapan 2.Teluk Adang Bay 3.Teluk Berau 4.Teluk Maloy

Kalsel/Kalteng 1.Wilayah Tobaneo/Pulau laut, 2.Wilayah Sungai Danau, 3.Wilayah Batu Licin

Lampung Tarahan

Sumsel Tanjung Api Api

Jambi Sekitar Teluk Jambi

Bengkulu Pelabuhan Bengkulu

Sumatera Barat di Padang

Riau di kawasan Teluk Riau

Aceh di Aceh Selatan.

The New Insentive for Coal

Coal Price = Base coal price + escalation

1. COAL PRICE FOR MINE MOUTH COAL

POWER PLANT

2. COAL FOR SPECIFIC PURPOSED SUCH

AS UP GRADING, GASIFICATION,

LIQUEFACTIONS AND COAL SLURRY

Base coal price COST OF

PRODUCTIONS + 25%

MARGINS

The missing of coal export can occur due to the difference of collecting data system:

Statistic Indonesia uses data export from Customs;

Survey Report is a report submitted by the independent surveyor to the Director General of

Foreign Trade (DGFT);

Data released by the DGMC is submitted by the mining company or local government reports;

Efforts to prevent coal missing are :

1. prevent losses to the state revenue : The Royalties must be paid before

export and complete the export document with proved of royalties

payment document.

2. strengthen coordination among government institution: sampling witness

surveyor, online system data and reporting

3. recommendations of exporter companies from Ministry of Trade cq

Directorate Export base on evaluations and recommendations of

CCOW,IUPOP,IUP Trader from Ministry of Energy cg Directorate

General of Mineral and

throught Coal

EFFORT FOR MANAGE COAL EXPORT DATA BASE

CLOSING REMARK 1. Growth of production and export of coal was heavily influenced by the rise in coal

prices, to ensure long-term supply of domestic coal will be issued regulations

controlling coal production.

2. Government tried to restrict production by 2015 for better coal pricing (guarantee

supply & demand) and reduce of potensial losses in term of royalty and tax as a

source of government revenue, through an implementations of recommendations of

export (ET)

4. New regulation :

a. Ministry Decree No.10 /2014 regarding Mechanism of Stipulated Coal Pricing for Mine Mouth Coal Power Plant

(April 4th,2014)

b. Regulation of the Director General Mineral and Coal concerning Cost of Productions for Mine Mouth Coal Power Plant ‘ Coal

Pricing’ No.479 K/30/DJB/2014 (Mei 30 th 2014)

c. Regulation of the Director General Mineral and Coal concerning Coal with Specific Type and Purpose No.480.K/30/DJB/2014

(Mei 30 th 2014)

d. Regulation of the Director General Mineral and Coal concerning Coal Surveyor No.481.K/30/DJB/2014, (Mei 30th,201

e. Regulations of the Director General Mineral and Coal concernng mechanism of coal export recommendations No.714.K/30/

DJB/2014 ( August 12 nd 2014)

5. Strengthen coordination between government institution(Ministry of Trade, Custom and

Port Official), such as pay a royalties before shiping instructions and restriction on coal

export port also apply a surveyor witness to prevent illegal mining by providing data

on line system.

www.minerba.esdm.go.id