Coal KP owners will also have DMO obligation

The holder of KP (Mining Authoriziation) type of contract will also be obliged to allocate a certain amount of their output to meet domestic demand under the so-called domestic market obligation (DMO), Bisnis Indonesia reported on Monday.

The newspaper quoted Bambang Gatot Aryono, Director General of Mineral, Coal and Geothermal at the Ministry of Energy and Mineral Resources, as saying on that the DMO obligation for the KP holder will be stipulated in a ministerial decree.

KP contracts are issued by the regional governments, while the central government issues another type of contract that is PKB2B, also known as Coal Contract of Work. The Ministry issued the decree No. 34/2009 on Dec. 31, 2009 which impose DMO obligation on PKB2B holders.

?The DMO obligation is imposed on big KP holders, particularly those with sustainable and huge production. Thus, there will be no discrimination," Bambang said.

Bambang said his office is inventorying around 8,000 KP holders which are potentially liable to the DMO obligation.

"What is clear is that the DMO obligation will be imposed on large-scale KP holders, such as (state owned) PT Tambang Batubara Bukit Asam) and PT Pinang Coal Indonesia. We'll start calculating the percentage of production for DMO this month and we expect the total amount (the amount of coal to be sold by KP and PKB2B holders) will become known in July," he said.

Bambang also said the national coal production may reach 280 million tons this year, up by 10-15 percent from the initial target of 250 million tons, thanks to the recovery of coal price on the world market. China is expected to purchase more coal this year, he explained.

The national coal output will continue to increase in the coming years as 15 companies plan to start construction this year, he said.

He said the ministry has made assumptions of coal output and domestic demand through 2014.

The domestic coal demand is estimated at 93 million tons, while output is projected to reach 280 million tons in 2011. The demand will increase to 95 million tons, while national output is expected to rise to 290 million tons. In 2013, the domestic demand is projected at 95.9 million tons, while the national output is estimated to stand at 297 million tons. In 2014, the domestic demand is expected to increase to 110 million tons, while the output is targeted to increase to 309 million tons. (*)