Grabbing The Most From Increased Productions

Grabbing The Most From Increased Productions
February 04, 2010 | 09:15 GMT(+7)

Reporting: Abraham Lagaligo, majalahtambang.com

Coal will still be the primadonna of the mining sector in year 2010. China and India will be the main export destinations. Movemement of coal price, however, is predicted to be at a standstill.

Under the burning sun, three men were seen busy tightening the screws of a huge prop installation to sustain a heavy machine just beside an idle large conveyor belt. They did not seem to care of the thick coal dust that came from around their location. Loud machinery sounds had accompanied the workers' activities that day.
The above was an illustration of the goings-on durbbing ing the first tryout of a coal pier at Asam-Asam, Tanah Laut regency, South Kalimantan, mid September 2009. Currently, the pier which belongs to PT. Arutmin Indonesia is fully operational, ready to support the company's plan to increase its annual coal production to 30 million tons in the year 2010. Two other piers are in preparation, namely Kintap pier at Tanah Laut regency and Satui pier at Tanah Bumbu regency.
If everything goes according to the company's plans, PT. Arutmin Indonesia will own a total of four coal piers in the region. Another one is located at Kotabaru regency, namely the North Pulau Laut Coal Terminal which were already built for some times now. The four piers will serve PT. Arutmin's intention to supply coal to the country's first phase of a 10,000 megawatt electricity generation project.
In an interview with TAMBANG Magazine, the company's CEO Faisal Firdaus said that one-third of the company's per year coal production increase will be devoted to the electricity generation mega-project. All through the year 2009, the company had successfully increased its coal production to 20.5 million tons, a 25 percent raise from its production figure in 2008, which is recorded at 15,7 million tons. A large chunk of it was obtained from the Satui coal mine, the company's most important production facility across the region.
The Asam-Asam coal mine is designed to be the company's prime production resource to support the 10,000 MW electricity generation project, as the coal obtained from here is of low calories, very suitable for the country's power plants. Geared with the first generation of Coal Mining Contract of Works (PKP2B in its Indonesian abbreviation) obtained in 1981, PT. Arutmin Indonesia has owned the exploitation rights at five working areas across South Kalimantan.
The coal potential of the South Kalimantan pro-vince has invited other companies to take similar measures. Other major companies noted to be actively involved in mining projects there are among other PT. Berau Coal, PT. Kideco Jaya Agung, PT. Adaro Energy, and PT. Kaltim Prima Coal (KPC). Interviewed by our reporters, PT. Berau Coal's CEO Bob Kamandanu had optimistically expected that his company could pro-duce as much as 30 million tons of coal in 2014 – 2015 (see table 1).
Bambang Gatot Aryono, Director for Coal and Mineral Production of the Energy and Mineral Resources Ministry (the ESDM ministry), stated that a national coal production increase would mainly be supported by newly operated coal mines. Apart of that, new mines are still in construction phase as part of a scheme to support the production increase in 2010.
“The biggest production capacity increase is being planned by KPC, which could achieve 70 million tons per year,” he told our reporters in a 31 December 2010 interview. According to TAMBANG Magazine's own data, KPC's per year production could reach 70 million tons as early as 2012. Meanwhile, PT. Adaro Energy is said to prepare for an impressive increase to up to 80 million tons per year in 2014 from its current production capacity levels at 42 to 45 million tons per year.
Newcomers in the coal mining sector are also being involved in the activities. PT. Titan Mining Energy, for instance, had targeted a production increase of up to 37 percent from its current level. The company's Chief of Mining Operations, Roza P. Putra revealed that his company's production in 2008 – 2009 is recorded between 500,000 to 800,000 tons per year. “We are in the midst of constructing some infrastructures to support the production increase in 2010 of up to 100,000 tons in the first semester and another 100,000 in the second,” he told our reporters in an interview in Jakarta on 20 December 2009.

The Hungry Importers
At the event of “Coffee Morning” with stakeholders in the energy and mineral sectors in Jakarta, 31 December 2009, Bambang Setiawan, Director General for Mineral, Coal and Geothermal of the ESDM ministry stated that the national coal production in 2010 is predicted at 250 million tons. From that amount, 75 million tons will be obligatorily dedicated for domestic energy requirements. The rest could then be sold abroad.
The Indonesian Coal Mining Association (APBI in its Indonesian abbreviation) had even placed a much higher figure than the government's prediction. Supriatna Suhala, APBI's Executive Director put up a forecast that the Indonesian coal production could reach 2070 to 2080 million tons in 2010. APBI's General Chairman Bob Kamandanu was even more optimistic in his prediction, when he said that production could reach 290 million tons in 2010. To support his estimation, he mentioned that the 2009 production had exceeded 260 million tons, while the government had targeted a total production of only 230 million tons, 68 million tons of which dedicated for domestic consumptions.
According to Supriatna Suhala, the production increase would mainly be supported by the improved economy of three major coal export destinations, namely Taiwan, Korea and Japan. Meanwhile, two other countries whose economies were not too affected by the recent crisis, namely India and China, would still demand a substantial supply.
At present, development of a number of power plants to be included in India's crash program of 50,000 MW are already concluded. Supply of coal for the plants, however, is scarce. The country's demand for Indonesian coal could therefore soar in the near future. “India could be real hungry for our coal,” said Mr. Suhala. Russia, according to him, could also be in search of a constant coal supplier. China, meanwhile, could with-hold its demand as the country could already fulfill its domestic needs from its own reserve, albeit at a bigger figure compared to India.
Presenting his analysis in an “Oil and Gas Mining Seminar” in Jakarta, 2 December 2009, Pardomuan Sihombing of PT. Paramitra ALFA stated that the domestic consumption of coal in Indonesia are divided for the energy sector, industries and household requirements. Meanwhile, coal export in 2010 would mainly be grabbed by Japan, India, Korea, Taiwan and Hongkong.
His view was supported by Bob Kamandanu who mentioned that Indonesian exported coal would mainly be used for power plants especially at three countries aggressively developing energy infrastructures, namely India, China and Japan. He also pointed out that China might be the most potential market for the Indo-nesian coal, as the country itself had just experienced a plunging export from 40 million tons to a mere 20 million tons, ultimately due to soaring domestic requirements. This could open up an opportunity for a much larger export to China.
Being the nearest producer aside of Australia, Mr. Kamandanu stated that the Indonesian coal producers should grab the golden opportunity. He also said that Australia possesses an abundance of high quality coal and that the country could also increase its production to up to 30 percent in 2010. The concern in exporting coal to China, added Mr. Kamandanu, usually takes form in the most appropriate selling price as the Chi-nese would mostly come with a rather unimposing bargain.

Unimpressive Domestic Demand
Domestic consumption in year 2010 would still be dominated by the requirements of the state electricity company (PLN in its Indonesian abbreviation), mainly for existing power plants, as well as for the first phase 10,000 MW electricity generation mega-project. Unfortunately, there are facts that the implementation of such a crash-program has always been delayed, resulting in a protracted utilization of the already accessible coal supply for domestic needs.
Arutmin's CEO Faisal Firdaus informed TAMBANG Magazine that even in 2010, he has doubted that parts of his company's increased production dedicated for domestic requirements could aptly be utilized by domestic buyers and users. “The conclusion of the 10,000 MW mega-project has always been delayed. We however would still fulfill our commitments (for domestic demand) until one to two years ahead,” he told our reporters.
Other coal producers have put similar opinions on the obligatory supply of coal for domestic requirements. Their main concern is on the fact that delayed purchase coal could also mean a delayed income, which in the end would affect their overall operational activities.