INDUSTRY insiders say that coal production in Indonesia is set to grow in 2014 beyond the 421 million tonnes produced last year, despite the Government downsizing its coal production target to below 400 million tonnes. The Indonesian Coal Mining Association expects 2014 production to reach 450 million tonnes.

The Indonesian Ministry of Energy and Mineral Resources in January said it had changed its coal production outlook in an attempt to conserve the resource. It has asked coal mining companies to cap production at 397 million tonnes and has allocated 73 million tonnes for the domestic market this year. The department also revealed plans to tighten supervision of the country’s coal and mineral sector to achieve better accuracy in the reporting of production data.

PT Apple Coal’s chief development officer Ben Lawson says coal production will definitely grow in Indonesia in 2014. “As a miner who has been through the boom years, 2008 to 2011, even 2012, if you invest in infrastructure and you’ve got a plan to go with that infrastructure and your bank wants you to stick with that plan to pay back that infrastructure for your shareholders, or whatever the case may be, you have to increase production. You have to pay those loans back, and you have a mining plan to go with those loans, so it’s kind of forced attrition, coal miners have to increase production.”

Indonesian Coal Mining Association deputy chairman Herman Kasih echoed these sentiments when he told The Jakarta Post in December: “Coal miners are targeting high production. There’s growing demand in the global market, including from Japan which will increase coal purchases after it shuts down its nuclear generated power.”

PT Bumi Resources, Indonesia’s largest coal producer and majority shareholder of PT Kaltim Prima Coal and PT Arutmin Indonesia, expects its production to grow 15% from last year, with an estimated output of 97.8 million tonnes. Adaro Energy, Indonesia’s second largest producer, expects production to grow 11% from last year, with an estimated output of 56 million tonnes. PT Berau Coal expects production to grow almost 12% from last year, with an estimated output of 25.7 million tonnes and PT Bukit Asam expects production to grow approximately 22%.

At a Coal Club Indonesia networking event last September Ben Lawson indicated that India and China – currently Indonesia’s largest coal export destinations and two of the world’s largest and fastest growing economies – will annually need a combined 350-plus million tonnes. He said the other rapidly expanding Asian economies of Thailand, Malaysia, Vietnam, Taiwan and South Korea would require a combined amount of around 100 million tonnes over the next five years.

“Japan, traditionally one of Indonesia’s largest coal markets, has closed all but two of its 54 nuclear power plants and will see a large increase in coal requirements to cover the shortfall,” he said.  “Although we haven’t seen a massive increase, this could potentially equate to an increase of coal imports of around 60 million tonnes.”

On the domestic front, Ben Lawson says Indonesia has seen an exponential increase in coal demand in the last five years hand-in-hand with a massive increase in new coal-fired power production from State-owned electricity utility PLN. “A major increase has been, and will continue to be seen as PLN along with State-owned petrochemical and plantation companies, and the majority of Indonesia’s private sector conglomerates, require large increases in coal supplies to feed coal-fired power plants built, or planned, to replace extremely costly diesel-fired power plants.”

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