Indonesia Miner 2023 Conference and Exhibition. Day 3 Coal + energy

The Indonesian Miner 3rd annual conference was held in Jakarta from 6 to 8th June 2023, attended by more than 800 people, with most of the presentations held in English. Day 1 theme was minerals (gold etc), day 2 was nickel & battery metals, with day 3 on coal and energy transition. There were some 40 booths promoting supplier and consultants support for the exploration and mining industry. Mr Bern Lawson, vice chairman of the Djakarta Mining Club undertook the moderator’s role for most of the 3 days. ?

This article has been prepared from personal notes, wherein it should not be used for commercial decisions. I apologize for any omissions or errors.?

Prof Irwandy Arif, special advisor to the minister- mineral and coal governance acceleration ministry energy and mineral resources presented “Government’s masterplan on the future coal in Indonesia for energy transition”. Indonesia’s net zero emission policy stems from its Paris climate change commitment to reduce its energy sector GHG emissions by 358- 446 million ton of CO2 by 2030. This is to be undertaken through the development of renewable energy, energy efficiency & conservation along with application of clean energy technology. A road map out to 2060 has been designed to meet these commitments. This roadmap includes a retirement plan for coal fired power plants with a marked impact starting 2046, and the development of a nation-wide super power grid. Indonesia’s coal resources are 110.07 billion ton, and reserves are 36.28 billion ton with most coal in the 5,100 – 6,100 and the <5,100 Kal/g categories. Coal production in 2022 was 206 mil ton for domestic use, plus 481 mill ton export. A business-as-usual case would see coal production at 720 mill tpa till 2060, though a net zero plan would see coal output reduction starting 2030, and to decline to 327 million ton for 2060. There are a number of well recognized challenges to the government plan for several coal downstream industries.?Discussion indicated that the government is looking abroad for new investors to develop its coal downstream projects, particularly the DME plant. The development of carbon certificates for carbon trading is being discussed with the minister of finance, the IDX and others. The NEZ induced coal power plant closure will be linked to the reliability to provide power, the just Transition and other factors.

Andrew Jones, editor-solid fuels Asia, Argus Media presented “Asia- Pacific thermal coal market dynamics”. In the march – April 2023 period, Indonesia’s coal production and exports increased, while other coal exporters remained stable or declined. China’s largest coal importer is Indonesia, followed by Russia and Australia. Other coal buyers’ figures were shown for India, North Asia, Asean and EU. The markets keep a close watch of future coal demand as reflected in China’s post covid recovery, and global recession concerns. Discussions indicated Japanese coal buyers seek to diversify their sources of coal. The remainder of 2023 looks like most inventories and supply are strong, implying less price volatility. Agus continue to recognize coal production and export tonnage vary between different sources of information.

F. Hary Kristiono, chief operational officer PT. Medco Energi Mining International presented “Indonesian coal production 2023”. The key production drivers are; 1. Queuing for approval of work plan & budget, 2. Increase in domestic demand mainly from smelters, 3. increased government fees & taxes, 4. Heavy equipment & spare parts availability, 5. Increased Strip Ratio (SR) and longer Overburden (OB) haulage, 6. Rain (particularly last few years), and 7. Export market dynamics. Future market influences include the global energy transition and the Indonesian coal mining road map for domestic demand. Note that Indonesian low CV coal will dominate seaborne trade if small miners get a decent profit. Discussion indicated broad industry concern for a new government policy that exporters must place 30% of sales in a government bank for 3 months. Medco cautious to jump into green energy initiatives without knowing the impact on the viability of the company. Industry is concerned that the DMO policy contains elements that are disadvantageous to low CV coal producers.

Alfonsius Budi Ariawan, principal and mining sector lead- Indonesian DSS+ presented “Operationalising sustainability strategy for maximum impact”. A systematic approach to energy transition is required in all aspects of business. Analysis involves finding links between selected sustainability goals and operational levels and managements “will” to change. Discussion from Industry suggested that some China smelter companies are slow to transfer technical and business knowledge to Indonesians.

Lilik Unggul Raharjo, the Indonesian Cement Association (ASI) presented “Domestic coal demand trend”. Indonesia has 16 cement companies with a production capacity of 118.9 million tonnes. Domestic cement consumption (2022) is 63 million ton and exports of 9.0 million ton, resulting in a 54.3% utilisation. National cement growth is expected at 2-4% in 2023. Coal price increased 100% up to 2020, but has stabilized in 2023. Clinker production in 2022 was 54.67 million tonne and is expected to grow slowly to 69.2 million ton by 2030. The cement industry requires 88.68% of its energy needs (power, heat, chemical reaction) from coal. Alternative fuels (mostly biomass and black liquor waste product) are being examined to reduce GHG emissions. Discussion indicated some high sulphur coals can be accepted. The evolution of a “green cement” product would need the development of a new Standard National Indonesia (SNI). The principal source of CO2 is from the conversion of limestone to lime.

Liana Bratasida, chairman Indonesian pulp and paper association presented “Domestic coal demand trend”. There are 111 industries in the pulp and paper industry – 4 pulp, 71m paper, 6 pulp integrated and 30 not in operation. Production in 2021 was 10.49 mill ton pulp and 13.55 million ton of paper with direct employment of 80,423 and indirect of 1,100,000 people. The export value in 2021 was $3.69 billion. Paper consumption per person in Indonesia is expected to rise from 34 to 58 kg/capita to in 2030.Numerous excellent slides analysing energy use and demand for different paper products. Discussion included A) Aspects of the paper recycling industry are struggling in Indonesia. B) The consumption of cardboard for courier packaging is increasing while paper for schools is diminishing.

Tony Saputra, chief executive officer PT. RMK Energy Tbk presented “Coal logistics outlook”. RMK has developed a private dedicated coal rail & road network to transport coal from the South Sumatra coal fields at Muara Enim and Lahat to the eastern river ports of Simpang and Kramasan. This involves modern train loading stations (5 train sets / day) and unloading stations (16 train sets / day) intergrated with a 8 km haulage road and 3 line barge loaders each capable of loading 15,000 tpd. The tariff is in the range of Rp 670 – 720/ton/km. Discussion indicated that PT. Bukit Assam is a large customer. Discussion indicated the trains do not haul freight / commodities on the return trip inland, though PT. Kreta Api Indonesia (KAI) hauls freight on their line to Bukit Asam.

Gerardo Ricchiuto, sales manager ITM presented “Technology session”. ITM is a world class undercarriage & undercarriage components manufacturer. They supply to Original Equipment Manufacturers (OEM) for the mining, agriculture, civil engineering and industrial sectors. Their clients include Hitachi, Komatsu, Libherr, CAT. Therse products include sensors for predictive maintenance, along with temperature & wear sensors.

Setiadi Wicaksono, vice president downstream PT. Bukit Asam Tbk presented “the challenges of coal downstream projects in Indonesia”. The presentation summarized Indoneisia’s coal resources and reserves by province. The PTBA vision is to develop a chemical business based on coal feedstock, and has prepared an industrial park near Tanjung Enim. The challenges in coal downstream projects include 1. Finding an investor, 2. Encouraging further government incentives, 3. Selecting / developing a suitable gasification technology, and 4. Managing carbon emissions. Discussion indicated their industrial park has full AMDAL approvals, including use & discharge of water. There are 200- 300 coal downstream plants in China, though these are thought to be strategic rather than commercial plants.

Hendra Sinadia, executive director, Indonesian Coal Mining association (APBI- ICMA) presented “coal in transition- Where are we heading?” Hendra provides a quick recap of Indonesia’s coal industry and associated government net zero plans. Challenges for the energy transition include; Investment cash flow as impacted by - price volatility, increasing costs & fees, domestic market obligation, pressure for coal down streaming, carbon tax, export procedures and further funding. Discussion indicated coal mining will surely continue for 10 – 20 years. It appears that companies will need to self-fund the coal transition programs, and banks and finance bodies will not, wherein government support for such companies is to be reviewed. Under the NZP the proportion of DMO coal will increase from present 25% to 50% or more wherein the profit from exported coal may not be sufficient to justify the sustainable production of DMO coal at a fixed price – the answer lies in that the special DMO price is not sustainable. There is a short window of opportunity for industry to lobby on the proposed policy of 30% export sales deposit for 3 months.

Hendri Yulius Wijaya, senior manager of risk assurance (PwC Indonesia) presented “managing a just transition in the energy sector”. National Determined Contribution (NDC) targets by 2060 have recently enhanced emission reduction to 2030 and achieve net zero by 2060. The energy sector target is 12.5% without international assistance, and 15.55% with international assistance. Indonesia’s energy transition is subject to ensuring the plan is “Just for everyone”. In particular the coal and coal power industry workforce would be retrained and enable ongoing meaningful employment and career development. Provincial royalties and income lost from the end of coal would be replaced with new industries and their local taxes. The impact of not undertaking a just transition would see unemployment, increased poverty, increased inequality, and a less sustainable economy. There needs to be a local, provincial, national clear plan for a JUST TRANSITION in parallel to the net zero plan.

Anindita Satria Surya, vice president of energy transition & climate change PT. PLN (Persero) presented “Implementation framework for clean energy transition”. PLN has a generating capacity of 69+ GW, some 84 million customers to power 270 million lives all with $25 billion in revenues. PLN estimates it would need more than $700 billion investment to reach net zero by 2060. To date PLN has secured a MIGA green loan of $500 mill, SREAP finance of $600 million, world Bank loan of $610 million, syndicates green facility of $750 million and working on other initiatives. PLN is open for domestic and international collaboration and other support for Indonesia’s energy transition program. PLN has 8 lighthouse initiatives including; retire coal fired plants, pilot hydrogen and ammonia co firing, more renewables, carbon cap and trade, biomass, CCUS, smart grid, expand EV’s. PLN is preparing to sell Renewable Energy Credits (REC) related to 3 geothermal and 1 hydropower plants. Discussion suggested option to retrofit some coal fired power plants with alternative fuels. Nuclear is the best long-term way forward.?