WorldCoalAsiaSpecial www.worldcoal.

com Reprinted from May2009

Indonesian coal
Donald L. Ewart, Jr., and Robert Vaughn, Marston & Marston
Inc., US, review the Indonesian thermal coal industry.
I
Indonesias coal industry continues to prosper
and grow. Even as markets and prices
diminish in the short-term, regional and
domestic coal demands provide a robust
long-term outlook for Indonesian coal
producers.
Seaborne thermal coal trade has grown
from 343 million t in 2000 to almost
555 million t in 2007, with roughly 43% of the
total exports destined for Atlantic Basin
markets and 57% supplied to Pacifc Basin
markets. Major Pacifc Basin thermal seaborne
coal consumers include Japan, Central and
Southeast Asia and India. From 2000 to 2007,
exports to Pacifc thermal coal markets grew
from 193 million t to almost 318 million t
(Figure 1).
More than 95% of world seaborne thermal
coal exports originate from just six countries,
with the remainder being supplied from
about a half dozen other nations. The six
principal thermal coal exporting countries are
Indonesia, Australia, Russia, South Africa,
Colombia and China, while the smaller
exporters include the US, Venezuela, Poland
and Canada.
Indonesia is currently the worlds leading
exporter of thermal coal. In 2007 Indonesian
producers shipped 165 million t, or almost
30% of global seaborne thermal coal supply.
Australia is the second largest thermal coal
exporting country with 2007 shipments
approaching 115 million t (representing a
market share of 20.6%), followed by Russia
with 2007 thermal coal exports of 72 million t
(13% market share), South Africa with
66.2 million t (11.9%), Colombia with
64.6 million t (11.6%), and China with
45.3 million t (8.2%). A summary of 2007
seaborne thermal coal exports by source
country is provided in Table 1.
Indonesian coal
production
International markets have traditionally been
the principal destination for Indonesian
thermal coals, with more than 75% of the
countrys total thermal coal production being
exported in recent years. Major export
markets for Indonesian thermal coals include
Japan, Taiwan, South Korea, Hong Kong,
India, other Southeast Asian countries and
Western Europe. Indonesia currently supplies
more than 30% of the Pacifc Basin Market.
Indonesias thermal coal exports have almost
tripled over the last eight years, increasing
from 56 million t in 2000 to almost 165 million t
in 2007 (Figure 2).
Considering only legal operations,
Indonesia currently produces thermal coals
from more than 40 different mines in East
Kalimantan, South Kalimantan and Sumatra.
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About two-thirds of the countrys export
thermal coal is currently produced from
around two dozen mines in East
Kalimantan with nine mines in South
Kalimantan accounting for most of the
remaining exports. Less than 4% of
Indonesian thermal coal exports
currently originate from the half dozen
exporting Sumatran mines.
Coal production in Indonesia is from
the following: 1) the state-owned
enterprise PT Tambang Batubara Bukit
Asam (PTBA); 2) holders of Coal
Contracts of Work (CCoW) or Coal
Contractors; 3) Mining Authorisation
(or KP) Holders; 4) Cooperative Units
(KUDs). The larger producers dominate
the supply of export coal, with the four
largest suppliers jointly accounting for
more than two-thirds of total
Indonesian thermal coal exports in
2007. A summary of the major
Indonesian thermal coal exporters and
their reported/forecast thermal coal
export levels for 2006, 2007 and 2012 is
provided in Table 2.
There are three generations of
actively producing Coal Contractors in
Indonesia with different ownership,
royalty and tax provisions applying to
each generation.
Currently, there are 17 identifed
major exporters of steam coal (i.e.,
companies with steam coal exports in
excess of 0.5 million tpa) operating in
Indonesia along with several smaller
legitimate suppliers.
The largest export steam coal
producer in Indonesia is Bumi
Resources, which controls two operating
subsidiaries: PT Arutmin Indonesia
(Arutmin) and PT Kaltim Prima Coal
(KPC). Indian power producer, Tata
Power Ltd, recently acquired a 30%
stake in both the Arutmin and KPC
operations.
The Arutmin operations include three
operating coal mines, designated as
Asam-asam, Satui and Senakin,
associated barge-loading facilities for the
respective mines and the North Pulau
Laut coal terminal. The KPC operations
consist of the Bengalon and Pinang coal
mines, barge-loading facilities at the
Bengalon Mine, the Tanjung Bara ship-
and barge-loading terminal serving the
Pinang Mine and various undeveloped
coal resources.
Bumi Resources Satui and Senakin
operations produce higher-heat content
bituminous steam coals almost
exclusively for export markets. The
Pinang and Bengalon operations
produce a range of bituminous steam
coals for both export and domestic
customers, and the Asam-asam Mine
produces low-rank, ultra-low sulphur
coal primarily for domestic markets. In
2007 Bumi Resources mines exported
almost 50 million t of coal to overseas
markets, accounting for almost a third of
total Indonesian steam coal exports.
After Bumi Resources, the next
largest Indonesian export steam coal
producer is PT Adaro Indonesia (Adaro).
Adaro produces mid-heat content, ultra-
low sulphur sub-bituminous coal for
both export and domestic markets from
its Tutupan Mine. With a current
capacity of 40 million tpa, Tutupan is
currently the second largest coal mine in
Indonesia behind Bumi Resources KPC
operation, and controls substantial low-
rank coal resources in South Kalimantan.
Tutupans export steam coal shipments
exceeded 26.5 million t in 2007,
representing more than 16% of the
years total exports (gar) Indonesian
coal.
Banpu Public Co. Ltd (Banpu),
Indonesias third largest export
producer, currently operates three mines
serving export steam coal markets.
Banpus Bontang and Trubaindo
operations produce mid- to high-heat
content bituminous steam coals
exclusively for export markets. The
Jorong operation supplies lower-heat
content, ultra-low sulphur sub-
bituminous coal to both a nearby power
plant and offshore customers. Banpus
mines exported almost 17.5 million t of
steam coal in 2007, which represented an
export market share of 10.6%.
Table 1. Summary of seaborne thermal coal export
2007 Exporting country 2007 steam coal
exports (milliont)
Percentage of 2007
steam coal exports
1 Indonesia 165.0 29.8
2 Australia 114.5 20.6
3 Russia 72.0 13.0
4 South Africa 66.2 11.9
5 Colombia 64.6 11.6
6 China 45.3 8.2
7 US 10.3 1.9
8 Venezuela 8.3 1.5
9 Poland 4.0 0.7
10 Canada 3.7 0.7
11 Other 0.6 0.1
Total 554.5 100
Figure 1. Seaborne thermal coal exports.
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The fourth largest Indonesian steam
coal exporter is PT Kideco Jaya Agung
(Kideco), which operates the Roto
mining complex in southern East
Kalimantan. Kidecos Roto North
mining unit produces a borderline
bituminous coal that is exported
exclusively to South Korean power
generators. The companys Roto South
operation produces a range of sub-
bituminous coals for both export and
domestic markets. Steam coal exports
from the Roto Complex totaled
15.5 million t in 2007, representing an
approximate 9.5% share of the total
Indonesian export market.
The other larger Indonesian steam
coal producers exporting more than
4.5 million tpa in 2007 are PT Berau Coal
(Berau), Straits Resources, PT Tanito
Harum (Tanito) and PT Gunung Bayan
Pratama Coal (GBP).
Berau currently exports bituminous
to sub-bituminous steam coals from
its Binungan, Lati and Sambarata
mines in East Kalimantan.
Straits Resources exports
bituminous steam coal from its
Sebuku Mine, operated by the
companys PT Bahari Cakrawala
u
u
Sebuku subsidiary, located on an
island off the South Kalimantan
coast, and both bituminous and
sub-bituminous steam coals from
its recently acquired Jembayan
operation in East Kalimantan.
Tanito exports bituminous coal
from its mines in the Mahakam
River Region of East Kalimantan.
GBP presently exports higher-
heat content bituminous steam
coal from its Muara Tae Mine
in the western Mahakam River
Region and sub-bituminous
coals from two recently opened
operations, Perkasa Inakakerta
(PIK) and Tambang, elsewhere
in East Kalimantan. As well,
GBP has several new projects in
development or under study.
Indonesian coal quality
Indonesias export thermal coals are
bituminous to sub-bituminous in rank
with widely varying ash, moisture,
sulphur and volatile matter
characteristics. In Indonesia, coals with
as-received heat contents in excess of
5300 kcal/kg (gar) are generally
regarded as bituminous coals while
u
u
coals with as-received heat contents of
4100 to 5300 kcal/kg (gar) are classifed
as sub-bituminous coals. Typical coal
quality specifcations for Indonesian
export thermal coals are summarised in
Table 3.
The bituminous and higher heat
content sub-bituminous coals produced
from Indonesia are typically supplied to
export markets. The lower heat content
Indonesian sub-bituminous coals are
supplied in varying proportions to both
export and domestic markets. Most of
the lowest rank Indonesian sub-
bituminous coals have gained
acceptance in export markets due to
their ultra-low (i.e., less than 0.2%)
sulphur contents.
Although domestic customers
currently consume less than 25% of
Indonesias total coal production, an
ever increasing share of the countrys
total coal output is expected to be
consumed domestically as new coal-
fred generating capacity is installed to
meet growing energy demands.
Much of the increased production is
expected to be from low-rank lignite and
sub-bituminous coal deposits with as-
received heat contents of about
Table 2. Summary of major Indonesian thermal coal exporters
2007 export rank Company No. of export mines Steam coal exports (million t)
2006 2007 2012
1 Bumi Resources 5 48.2 49.7 57.5
2 Adaro Resources 1 2 24.4 26.7 28.5
3 Banpu 4 17.9 17.4 24.4
4 Kideco Jaya Agung 2 13.5 15.5 16.0
5 Berau Coal 3 5.8 7.6 11.5
6 Straits Resources 2 4.8 7.5 8.0
7 Tanito Harum 2 4.1 5.0 5.2
8 Gunung Bayan
Pratama Coal
3 1.3 4.9 9.0
9 Batubara Bukit
Asam
1 3.2 3.8 3.2
10 Anugerah Bara
Kaltim
1 2.5 2.5 2.5
11 Bukit Baiduri Energi 1 2.1 2.2 2.0
12 Mandiri Iniperkasa 1 0.9 1.8 1.0
13 Lanna Harita
Indonesia
1 1.7 1.6 1.7
14 Multi Harapan
Utama
1 0.9 1.0 1.0
15 Padang Karunia 2 0.8 1.3
16 Kapital Asia 1 0.4 0.7 1.0
17 Bornea Indobara 1 0.6 1.0
18 Other n/a 13.8 14.2 5.2
Total 145.5 163.5 180.0
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3700 kcal/kg (gar) to 4200 kcal/kg (gar).
Although Indonesian low-rank coals are
typically ultra-low and low in ash and
sulphur, total moisture contents are
generally greater than 40%. Signifcant
low-rank coal deposits are located in
south Sumatra and in all major
producing areas of Kalimantan.
Inland transportation
Bumis Pinang and Banpus Bontang
mines are currently the only two export
coal operations in Indonesia capable of
directly loading panamax size or larger
ocean-going vessels. Other Indonesian
export coals are typically loaded into
barges at either river- or coastal-sited
loading facilities and transported to an
offshore transfer point for loading onto
ocean-going vessels or barged to a deep
water coal terminal, such as the
Balikpapan Coal Terminal, Indonesia
Bulk Terminal or Arutmins North Pulau
Laut Coal Terminal.
Indonesian coal moves from mines to
shipping points primarily via a
combination of trucking and barging;
however, some inland coal
transportation is by rail (Sumatra) and
conveyor. In Indonesia, coal trucking
and barging operations are typically
performed by contractors.
At most Indonesian export thermal
coal mines, coal is trucked directly to a
coal processing/barge-loading facility
located on tidewater or on a barge-
navigable river. Coal trucking distances
for these direct-haul operations
typically vary between 10 km and
35 km, with a few mines experiencing
longer hauls of up to 75 km. Crushed
coal is generally stockpiled and then
loaded into barges and transported
offshore for transfer to ocean-going
vessels, with this process referred to as
transhipping. Coal destined for the
Indonesian domestic market and also
for some nearby export destinations,
such as Malaysia, is barged directly
from Kalimantan or Sumatra to the
end-users.
At several producers, the barging
and transhipping operations are world-
class. For example, Adaros Taboneo
Anchorage features foating cranes and
a new foating loading facility that
together provide a shiploading capacity
of 80,000 tpd. The Bayan Groups
Balikpapan Coal Terminal and Bumi
Resources KPC and Arutmin loadout
port facilities are also world-class.
Kideco, Berau and Tanito have major
barge-loading and transhipping
facilities.
In summary, Indonesias coal
industry continues to grow with
burgeoning regional and domestic
demand. Producers and investors have
continued to show great interest in
Indonesian coal project development
and expansions despite changes in
markets, Government policies and the
world economy. Indonesias advantages
in coal quality, transportation distance
and cost structure continue to be
attractive to producers and consumers
alike.
Table 3. Typical quality specifications for Indonesian export thermal coals
Quality parameter (as-
received basis)
Bituminous coals Sub-bituminous coals
Total moisture (weight
percent)
10 12 24 38
Ash content (weight
percent)
2 12 1.5 7.5
Volatile matter (weight
percent)
31 42 28 37
Sulphur content (weight
percent)
0.10 0.95 0.07 0.90
Heat content (kcal/kg) 5300 6700 4100 5200
Figure 2. Indonesian thermal coal production.
Figure 3. PT Kideco Jaya Agungs Tanah Merah coal terminal.