Indonesian domestic coal demand seen to rise driven by electricity sector

Domestic demand for thermal coal is expected to increase in the coming years, driven mainly by increased coal-fired electricity generation, said an industry executive.

Domestic demand is seen to rise from 25.3 million tons last year to 28.6 million tons and 31 million tons in 2002 and 2003, said Graeme Robertson, president of Indonesia top coal producer PT. Adaro Indonesia in Coaltrans seminar in Bali this week.

Robertson said in 2003, electricity sector will need 23,9 million tons, driven by increased of take in Indonesia Power?s Suralaya power plant in Banten province and Asam-asam power plant in South Kalimantan and from the private Paiton Energy and Java Power generating stations in East Java. In 2001, domestic electricity sector burned 18.8 million tons of coal.

Meanwhile, Robertson sees coal demand for cement plant relatively stable at approximately 5 million tons per year until next year, and coal demand for pulp and paper industry at around 1.2 million tons per year.

Robertson predicted an even higher domestic coal demand from electricity sector beginning 2005 with the operations of 1,320 mega watt Tanjung Jati power station in Central Java and new coal-fired power stations coming onstream as result of current negotiation between state electricity firm PLN and independent power producers (IPP).

PLN is seeking to renegotiate Power Purchasing Agreement (PPA) with IPPs to bring down electricity price below US cents per kilowatt-hour.

?Driven by increasing demand from the electricity sector, domestic coal market will grow between 5 and 10 percent after 2004, which would bring domestic demand to 50 million tons per annum by 2010,? he said. (alex)