LOW RANK COAL BUSINESS LOW RANK COAL BUSINESS OPPORTUNITY IN INDONESIAOPPORTUNITY IN INDONESIA

Directorate General of Mineral Coal and GeothermalDirectorate General of Mineral Coal and GeothermalDepartment Energy and Mineral ResourcesDepartment Energy and Mineral Resources

Dr. Simon F. Sembiring

Director General of Mineral Coal and Geothermal

Asia Pacific Symposium on Lower Rank Coal

Bandung, September 6 – 7, 2006

Indonesia Oil SituationConsumption6% /year

Consumption3% /year

Realistic Production

Pessimistic Production

Production Realization

1980 1985 1990 1995 2000 2005 2010 2015 2020

Pessimistic Production Realistic Production High Consumption Exact Consumption

Million barrel

1000

1200

800

600

400

200

0

We need alternative energy !

Toward Energy Mix 202520052005

20252025

Coal Liquefaction2%

Geothermal5%

Biofuel5%

New Energy5%

Natural Gas i30%

Coal33%

Oil20%

Oil52%

Natural Gas29%

New Energy4%

Coal15%

Coal Resources and ReservesCoal Resources and Reserves

4,07%

Resources : 61.3 billion ton Reserves : 6.7 billion ton

28,37%

40,13%

1,58%

7,58%

17,7%

Source: Centre of Geo ResourcesCentre of Geo Resources, 31 December 2005

Indonesia “Energy Mix” and Condition Toward 2025

• Presidential Degree on National Energy Policy endorsed recently, 25 January 2006

• Reduce oil share from 55% (2005) to less than 20% in 2025

• Increase in 2025 in the use of :– Coal from 15.7% to more than 33%– Liquefied Coal to more than 2%– Natural gas from 23% to more than 30% – Geothermal from 1.9% to more than 5%– Biofuel to more than 5%– Other New and Renewable Energy from 0.5% to more than 5%

• Reduce energy consumption intensity by 1% annually • Improve energy infrastructure condition

REGULATION ON NATIONAL COAL REGULATION ON NATIONAL COAL DEVELOPMENTDEVELOPMENT

Decree of Minister No.1128 K/40/MEM/2004 Decree of Minister No.1128 K/40/MEM/2004 regarding National Coal Policy dated 23 June regarding National Coal Policy dated 23 June 20042004President Regulation No 5 Year 2006 regarding President Regulation No 5 Year 2006 regarding National Energy PolicyNational Energy PolicyInstruction of President No.2 Year 2006 Instruction of President No.2 Year 2006 regarding Coal Liquefactionregarding Coal LiquefactionPreparation of Law on Mineral and Coal (under Preparation of Law on Mineral and Coal (under discussion with Parliament) discussion with Parliament)

Indonesian Coal ProgramConvert the dieselConvert the diesel--fired power plants, which have 7,753 megawatts fired power plants, which have 7,753 megawatts (MW) capacity, into coal(MW) capacity, into coal--fired plants and build 10,000 MWfired plants and build 10,000 MW--capacity capacity new coalnew coal--fired plants in year 2010, tfired plants in year 2010, total demand of Low Rank Coal for otal demand of Low Rank Coal for development of power plants is 53.259.000 Ton, calorific value development of power plants is 53.259.000 Ton, calorific value between 4300 between 4300 –– 5000 5000 kCalkCal/kg for 17.753 MW electricity. The total /kg for 17.753 MW electricity. The total demand of coal for electricity, in year 2015 will be 90 million demand of coal for electricity, in year 2015 will be 90 million tons and tons and in 2025 it will reach 200 million tons.in 2025 it will reach 200 million tons.

Utilization of Low Rank Coal :Utilization of Low Rank Coal :Mine mouth plantMine mouth plantCoal Liquefaction Coal Liquefaction Coal Coal GassificationGassificationUp Grade Brown Coal (UBC)Up Grade Brown Coal (UBC)Coal Bed MethaneCoal Bed MethaneEtcEtc

Coal briquette for small and middle industriesCoal briquette for small and middle industries

Development of Integrated Coal Transportation System to link Development of Integrated Coal Transportation System to link between coal mines and terminals, which are located in the southbetween coal mines and terminals, which are located in the southern ern part of Sumatra, and the whole area of Kalimantan.part of Sumatra, and the whole area of Kalimantan.

BASED ON CALORIFIC VALUE (Cal/gram, adb)

[Government Regulation No. 13, Year 2000 and No. 45/ 2004]

Low Calorie : < 5100

Medium Calorie : 5100 – 6100

High Calorie : 6100 - 7100

Very High Calorie : > 710011

Note:• 2009 – 2010: PLN need Sub bituminous Coal Sub bituminous Coal ±± 30 millions (Existing Plant) and 30 millions (Existing Plant) and LignitLignit/Low /Low

Rank Coal (LRC) Rank Coal (LRC) ±± 59 millions (Acceleration Project). 59 millions (Acceleration Project). •• For Electricity, 2015 For Electricity, 2015 –– 2025 growth (22025 growth (2--5)% per year.5)% per year.•• Domestic use, 2010 Domestic use, 2010 –– 2025 growth 32025 growth 3--5% per year5% per year

41

106

150

46

124

169

115 101

216

148

109

257

177

106

283

214

104

318

0

50

100

150

200

250

300

350

2005 2006 2010 2015 2020 2025

Domestic Export Production

Coal Production Growth Coal Production Growth 20052005--20252025

COAL DOMESTIC CONSUMPTION 2005COAL DOMESTIC CONSUMPTION 2005--20252025

20052005 20102010 20152015 20202020 20252025

1. Electricity1. Electricity 31.031.0 85.0 85.0 93.0 93.0 103103 113.0 113.0

2. Cement2. Cement 6.56.5 1010 1111 1313 1717

3. 3. MetalurgyMetalurgy industryindustryand Pulp Paperand Pulp Paper 1.5 1.5 7.07.0 10.0 10.0 11.011.0 12.012.0

4. Small Industries4. Small Industries1.01.0 5.05.0 7.07.0 9.09.0 10.0 10.0

5. UBC5. UBC -- 5.05.0 10.010.0 20.020.0 30.0 30.0

6. Liquefaction6. Liquefaction -- 3.0 3.0 6.0 6.0 11.011.0 2222

TotalTotal 40.040.0 115 115 148148 177177 214214

*) Setelah 2010 pertumbuhan 2 % (Kompilasi data KBN dan PLN, 2006)**) Setelah 2010 pertumbuhan rata-rata 12 % (Kompilasi data KBN dan Assosiasi Semen Indonesia, 2005)

Juta ton

Low Rank Coal Low Rank Coal in Kalimantanin Kalimantan

Arutmin (Mulia, Asam2, Arutmin (Mulia, Asam2, SaronggaSarongga))AdaroAdaroKidekoKideko JayaJaya AgungAgungMeruwaiMeruwai CoalCoalMantiminMantimin CoalCoalDelmaDelma Mining CorpMining CorpBaraBara PramuliaPramulia AbadiAbadiMulti Multi TambangTambang JayaJayaEtc.Etc.Total Resources of Total Resources of 4.,121.68 Mil. 4.,121.68 Mil. TonsTons

20

Source: Centre of Geo ResourcesCentre of Geo Resources, 31 December 2005

LOW RANK COALIN SUMATRA

• PT. BA (Arahan, Banko,

Muara Tiga Besar, Suban Jerji, Banjarsari)

•Pendopo Energy Batubara•Mifa Bersaudara

•Astaka Dodol•Benakat Energy

•Hulubalang Inti Bumi•Trimatra Coal Perkasa

•Etc.

• Total Resources of

9,103.86 Mil Tons21

Source: Centre of Geo ResourcesCentre of Geo Resources, 31 December 2005

Several policies that encourage the program are as follows :

Special incentive for investors using low rank coal;

Encouragement of infrastructure development in the regions that produce low rank coal;

Simplify process of coal mining permit for low rank coal.

Policies

Closing RemarkClosing Remark

Incentive for lowIncentive for low--rank coal must be made clear to have rank coal must be made clear to have certainty, because in the future, the consumption of low certainty, because in the future, the consumption of low rank coal will increased tremendously. rank coal will increased tremendously.

In general, there is no problem about the coal supply for the In general, there is no problem about the coal supply for the energy mix, the greater demand can actually be fulfilled energy mix, the greater demand can actually be fulfilled from national production and existing coal resources.from national production and existing coal resources.

For the time being Indonesia still need big investment to For the time being Indonesia still need big investment to develop the potency on lowdevelop the potency on low--rank Coal and encourages all rank Coal and encourages all private investmentprivate investment