OPINION: Coal in hands of new minister

By Singgih Widagdo
Director of Indonesian Coal Society (ICS)

The President has made up his mind. He has named and installed Darwin Zahedy Saleh as new Minister of Energy and Mineral Resources of the United Indonesia Cabinet Part II. The President has also set five main agenda and eleven national priorities that should become the work target of each minister. Infrastructure and energy are among the five national priorities that need to be developed.

All ministers should accept the short-term 100-day, mid-term and long term work program of SBY as their own agenda and priorities. This reminds us of the words of Abraham Lincoln: ?Determine that a thing can and shall be done, and then, we will find a way?.

Coal ahead
National coal production should not only be posited as a subject of discussion from statistical perspective but, above all things, in its role as an economic booster. Our nation needs a will and cleverness to enable coal to quickly drive the national economy. China can serve as an example. China?s economy is still able to grow 7 percent amid the global crisis. Over the past years, the country was able to make a big leap in establishing an energy supply system that is rooted in the security of national coal supplies.

The economic growth target of 7 percent in 2014 for Indonesia should become the homework of the new minister of energy and mineral resources. As a new pilot of the ministry, he should direct the efforts of increasing the national coal production to the goal of increasing national economy, welfare and improvement of environment. The ministry?s programs of maximizing energy supply for the country and developing alternative fuels can go hand in hand with the program of increasing national coal supplies.

In view of the limited availability of oil and the unequal distribution of energy sources, coal is the only mineral hydrocarbon aside from oil which should be developed the smart way. Distribution of energy supplies should become a benchmark in judging whether or the program of equally distributing welfare among the public has been carried out successfully. Has or will coal be moved to that direction?

The decision by the President to cancel the use of coal for the Phase Two 10,000 MW power program and replace it with renewable energy should not be taken as an excuse to export coal as much as possible. The President knows well that coal is not only a revenue driver. Since the main agenda of the President include economic development and public welfare enhancement, coal should be developed with the purpose of creating added value and multiplier effects for millions of workers.

This year, national coal production is estimated to reach 250 million tons, 80 percent of which are sourced from the holders of PKB2B (Coal Contract of Works) and the rest from the holders of KP (Kontrak Pertambangan). Ironically, it is not easy for the government to obtain accurate production figures from KP holders.

The main consumer of coal, anywhere in the world, is coal-fired power plant. Following the decision to cancel coal-fired power projects in the Phase Two 10,000 MW program, the national demand for coal will stop growing once the Phase One 10,000 MW power program is completed. When all the power plant projects under the Phase One 10,000 MW program is completed in around 2012, PLN?s demand for coal will reach 80 million tons. Coupled with the demand from industries, the national demand for coal that year will reach 100 million tons. On the other hand, the national coal production in the next three years is projected to approach or even surpass 300 million tons.

In light of this situation, are we satisfied with being the world?s largest exporter of coal steam from year to year? For Australia with a population of 22 million tons, export is the main strategy to push the national production. How?s about Indonesia? With a population of more than 230 million and a long line of people looking for jobs, coal production in the country should be driven to solve the problems. Priorities should be given to the development of infrastructure for national coal supply system and the development of coal technology in order to speed up the ability to create coal market in the country for various industries. Since the prices of coal in the country are good enough, or even equal to export prices, there shouldn?t be a problem for most of coal companies to enlarge their market segments in the country. Only this way coal can be prioritized to become energy to drive the national economy.

Infrastructure need
In order to increase the national coal production, a national coal supply system should be developed. As a long term goal of the development of the system, ports should be expanded and new ports in particular areas, railway transportation network, coal blending ports or floating terminals should be developed. As a concept or strategy to attract investment into the sectors, this should be part of the 100-day work program of the new minister.

Following the emergence of thousands of KP during the regional autonomy era and in order to push them to serve the national interest, tough policies should be issued in line with the development of the infrastructure. Otherwise, the coal industry will develop without any direction. Big importers will only buy mines that have proven security of supply and consistency of quality.

Supervision over KPs to ensure they carry out good mining practices will not be effective unless there is a well-developed infrastructure. The Domestic Market Obligation (DMO) will not be successful with the existing infrastructure system, in which not all coal-fired power plants owned by PLN already have coal blending facilities.

Last but not least, in order to create security of national energy supply, all related parties, not only the Ministry of Energy and Mineral Resources, are expected to work hard. The 100-day program will certainly not solve the fundamental problems in the short time. A strong will and determination are needed to realize the program with the purpose of developing the country into a better one. (end)