Indonesia 2005 coal exports to rise 19%: Report
Monday, September 19 2005 - 09:56 AM WIB
That projection of demand, most of which is for thermal coal for electricity generation, is tied to soaring Asian electricity demand caused by robust economic growth in the region, Jeffrey Mulyono, chairman of the Indonesian Coal Mining Association or APBI, told Dow Jones Newswires recently.
"The better the economy, the higher demand for electricity, and that will support demand for coal," Mulyono said.
Coal producers were seeing increasing demand from energy-hungry China and India, whose booming economies are expected to underpin Asianwide economic growth of 6.6% this year, according to Asian Development Bank projections.
Looking ahead, China is expected to consume 2.5 billion tons of coal annually by 2020, while India will need an additional coal imports of 100 million tons a year by 2015, Mulyono said.
In 2004, China produced 1.96 billion tons of coal, and in January-July this year its imports of coking coal rose 32% to 5 million tons, according to official China data. Until 2004, China was a net coal exporter.
"We are expanding our output capacity to capture (China and India's) huge demand in the future," said Mulyono, without providing specific China or India export forecasts.
APBI now forecasts that Indonesia will produce 155 million tons of coal this year, up 17% from 132.4 million tons in 2004.
Coal remains a leading primary energy for electrical power generation by fueling around 39% of the world's electricity output, data from the World Coal Institute, or WCI, indicates. The WCI is a London-based grouping of coal companies and associations
In comparison, oil contributes 7.2% of total global electrical power generation.
Record-high crude oil prices have also prompted power generation firms to gradually cut their use of oil and turn to other energy sources, like coal, nuclear and hydroelectricity.
"With the current high crude oil prices, coal's opportunity as an alternative energy is getting better," Mulyono said.
Bottlenecks in coal infrastructure points in Australia, the world's biggest coal exporter, will also help boost Indonesia's coal exports, he said.
"Buyers are looking for other coal sources because Australia won't likely export more coal, even if they are able to do it," Mulyono said.
Newcastle port, Australia's biggest export terminal and the largest thermal coal port in the world, is already operating at full capacity and requires expansion to meet demand.
Official Australian Bureau of Agricultural & Resources Economics, or Abare, data show Australia's thermal coal exports slipped 0.3% to 106.39 million tons in 2004-2005 fiscal year ending June 30.
The agency forecasts that Australia's thermal coal exports will increase to 111.7 million tons in the 2005-2006 fiscal year.
The current rosy outlook for Indonesia's coal exports pales in the medium-to-long term due to inadequate investment in the sector.
Unclear mining policies and political uncertainties have frustrated both existing and potential investors, leaving the bulk of Indonesia's massive coal reserves starved of funds for exploration and extraction.
In July 2003, mining group Rio Tinto and British energy company BP Plc sold their ownership in coal miner PT Kaltim Prima Coal to local coal miner PT Bumi Resources following a protracted ownership dispute with local government.
"Our coal output increases every year, but that's from past exploration," Mulyono said.
"We need new investment to find new reserves for the future."
Indonesia has 19 billion tons of proven and possible coal reserve, but only 7 billion tons are currently extractable, said Mulyono.
Rampant illegal mining operations also deter investment.
Illegal coal miners can produce an average of 8 million tons of coal per annum mined from areas operated by legal coal mining contractors, Mulyono said.
Mulyono warned that if that level of illegal mining persisted, it would threaten the government's long-term plan to reduce Indonesia's dependence on oil as a strategic fossil fuel.
The government plans to hike the use of coal as a proportion of the country's energy production mix to 32.7% in 2025 from 14.1% in 2003.
The official plan also calls for a cut in the use of oil to 26%, from 54.4% in the same time period.
Mulyono said by 2025 Indonesia is expected to produce 366 million tons of coal annually, of which 256 million tons would be for domestic use.
"If the government doesn't have incentives for investors how are we going to achieve that?" said Mulyono. (*)