Indonesian Coal production may reach 320 mt this year

Indonesian coal miners expect to produce as much as 320 million tons of coal this year, an increase of nearly 7 percent from the 300 million tons extracted last year.

Bob Kamandanu, chairman on Indonesian Coal Mining Association (APBI) said that the rise in production would be partly due to rising demand from India and China“The coal market is very bullish at the moment. Demand is rising everywhere, especially in China and India,” Bob said.

He estimated the coal demand in the international market would continue to increase for at least the next five years, and that the surging demand would encourage the miners to boost their production.

“They will move on with exploration and exploitation. They will also seek for ‘unorganic’ growth through acquisition,” he said.
Bob added that as much as 59 million tons coal had been produced as of February this year.

“Therefore, the figure of 320 million is very much achievable,” he said.

Indonesian coal production stood at 238 million tons in 2008. Of the 320 million tons estimated to be produced this year, Bob said the producers were required to allocate as much as 30 percent of their production for the domestic market to comply with the domestic market obligations (DMO) imposed by the government.
Bob said the percentage of production allocated to DMO was too high and would result in a glut in the domestic market.

“With a DMO of 30 percent, the coal supply for domestic market will reach around 90 million tons this year, while the actual domestic consumption is only at about 60 million tones. This means there is an oversupply by about 30 million tons,” Bob said.

The domestic demand for coal is increasing as state power firm PT PLN begins to begin operations at several new coal-fired power plants. The domestic coal demand rose to 56 million tonnes in 2009 from 41 million tons in 2004.

Coal and other mining commodities have been important sources for the state budget. The sector contributed as much as Rp 15 trillion in non-tax revenues last year and is expected to contribute the same amount this year.

Director general for minerals, coal and geothermal Bambang Setiawan said the government was preparing the sector to adopt the Extractive Industries Transparency Initiative (EITI), a global initiative obliging oil, gas, and mining companies to reveal what they pay and, as for the government, to disclose what they receive.
“This will reduce pressure on the mining industry, because the public can see directly what the companies have done and make fair judgment afterward,” he said.

Bob said companies would prefer the required information compiled by the initiative to be published through the government instead of through the companies. EITI requires both the companies to publish what they have paid to the government and the government to disclose their revenue from the companies. The dual publication is expected to create transparency in the industry.

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