PLN demand for coal to soar next year as power output rises

State electricity company PT PLN will need more coal next year as it seeks to generate more power through new plants operated by its subsidiary PT Indonesia Power, an official said Tuesday.

Indonesia Power president director Tony Agung said the increase - from 13 million tons of coal this year to 19 million next year - was due to the running of the three newly constructed geothermal power plants located at Labuan, Pelabuhan Ratu, and Suralaya, all in West Java, as part of PLN's 10,000-megawatt (MW) power program to meet the electricity demand in Java and Bali. The company would continue boosting the utilization of the alternative energy.  It needs about 3 million tons of coal for every 1,000 MW of additional power capacity

Besides the three plants, Indonesia Power, one of the largest electricity power generating companies in the country, operates five other power plants - at Tanjung Priok in Jakarta, at Kamojang and Saguling in West Java, Mrica and Semarang in Central Java, Perak in East Java, and Bali, with a total capacity of 8,888 MW. 

Data from the Energy and Mineral Resources Ministry shows Indonesia has total reserves of coal of 104.7 million tons. The country's geothermal capacity is 27,510 MW, or about 40 percent of the world's geothermal capacity. 

However, the great potential is nowhere near fully utilized domestically, while 70 percent of the country's coal is earmarked for export. 

Young Entrepreneurs' Association (Hipmi) chairman Eric Aksa urged the government to speed up coal production for domestic use, saying it would help the private sector survive during the global economic crisis, because coal had "competitive advantages". The authorities should change their paradigm concerning the use of coal as a revenue booster. We should now treat it as a factor to boost the national economy. China and India had taken the approach of prioritizing domestic demand.

Source: The Jakarta Post , Jakarta | Wed, 03/25/2009 1:09 PM | Business 

Bukit Asam aims to save $3m with start of new power plants

Publicly listed coal mining firm PT Tambang Batubara Bukit Asam (PTBA) expects to save around US$3 million of annual energy costs once the planned new power plants starts to operate, the firm's president director says. 

"We'll be able to save around $3 million because the power plants (in South Sumatra) will use our own coal as the source of energy. The construction of the 3 x 10 MW steam-powered power plants (PLTU) would commence in April and be finished in two years. 

PTBA signed on Thursday an Engineering, Procurement, and Construction (EPC) contract worth around US$41 million with a Chinese Overseas consortium and local construction firm PT Weltes Energi Nusantara to build power plants in Tanjung Enim, South Sumatera. Our internal cash stands at Rp 3 trillion ($249 million), enough to fund the construction of the power plants. The constructions of the new power plants, PTBA would no longer rely on state electricity company PT PLN for power. 

The company has been using 23 megawatts of electricity from the PLN, while on the other hand, the South Sumatra province has been lacking electricity. Thus, after the power plants are up and running, PTBA will redirect the PLN power to meet the needs of South Sumatra for electricity, he added. 

The country's energy resources are dominated by coal, which provides about 56 percent of power generation, while oil has fallen to around 15 percent, gas about 20 percent, and other sources 9 percent In the future, PTBA will build other power plants with capacities of 2 x 8 MW in Tarahan, Lampung province. The power plants in Tarahan are still subject to feasibility studies. PTBA will be able to supply its needs for energy independently within four years. The company expected an overall revenue increase for this year of about 20 percent. 

Last year, the company sold 12.8 million tons of coal up from 10.1 million tons a year earlier, resulting in 2008 profits of between Rp 1.7 and Rp 1.8 trillion. Profits had reached Rp 760.2 billion in 2007. Indonesia's total proven reserves of coal are estimated at 18.7 billion tons, mostly located in East Kalimantan, South Kalimantan, and Sumatra, while total potential coal reserves are estimated at up to 105 billion tons.

Antam sales decline on lower output, prices

In a statement sent over the weekend, the company said full-year unaudited sales reached Rp 9.5 trillion (US$880 million) in 2008, down from the Rp 11.8 trillion booked in 2007. 

Lower output amid falling demand and prices were the main reasons for the decline in sales, the statement said. 

In 2008, Antam produced 17,566 tons of ferronickel, 5 percent less than its 2007 output. It sold 17,026 tons of the alloy, which represented a 3 percent decline from 2007. 

The situation was then exacerbated by the lower price, with the average realized ferronickel price in 2008 down around 37 percent from a year earlier. 

The lower price and weakening demand had been seen since the last quarter of last year, with sales in the fourth quarter of 2008 declining 38 percent. During the period of October, November and December, unaudited sales fell to Rp 2.11 trillion from Rp 3.38 trillion in 2007. 

Reflecting a predicted continued slump in demand, Antam said it expected ferronickel production to only reach 12,000 tons in 2009. 

In addition to ferronickel, the company also produces gold and bauxite, which both experienced an increase in sales, partly compensating for the slump in ferronickel. 

In 2008, gold production reached 2,833 kilograms, contributing around Rp 2.7 trillion in sales, or about a quarter of Antam's total sales. The domestic market accounted for 71 percent of Antam's revenue from gold. 

Due to its significant contribution, Antam is intensifying its efforts to boost gold output amid a slump in global ferronickel prices. 

It said it was trying to gain control of the huge Martabe gold mine in North Sumatra from Australia-based Oxiana Limited. 

For 2009, the company has allocated Rp 3.04 trillion for capital expenditure, a huge increase from last year's Rp 758 billion.

Source: The Jakarta Post , Jakarta | Mon, 02/02/2009 4:05 PM | Business 

Government plans to provide incentives for coal bed methane project developm

The government is mulling incentives for companies that develop Coal Bed Methane (CBM) projects in the country, in an attempt to attract more investment in the sector. 

The energy ministry's oil and gas director general, Evita H. Legowo, told The Jakarta Post recently that the incentive scheme for CBM developers would adopt the tax facility system granted to oil and gas contractors in Indonesia. 

"*The incentive is needed because* we want to attract more investment in the *CBM* sector," Evita said. 

Under existing Finance Ministry regulations, every oil and gas activity in the country is exempt from import duties for exploration equipment, and also exempt from value-added tax. 

Even though CBM is closely related to oil and gas exploration activities, the government has yet to include the alternative natural gas in the category that enjoys the tax and duties exemptions. The regulation only allows the incentives for the development of oil, gas and geothermal energy. 

CBM is a method of extracting methane from coal seams. Once the methane has been separated, it can serve as an alternative to natural gas. 

The government first unveiled CBM projects in the country in 2007, offering them up to investors. 

The government provides a relatively better production split for CBM projects than oil and gas projects, increasing CBM operators' profit sharing to 45 percent - much higher than the 15 percent and 30 percent that oil operators and gas operators get, respectively. 

Compared to the development of oil and gas, CBM projects require a lot more investment and time, with the exploration phase involving a process of discharging water from underground, which can take years before the gas can be extracted. 

The government has awarded four CBM development contracts in Kalimantan to a group of mining companies, requiring a total investment of at least US$20 million over the next three years. 

The four companies are a consortium of PT Pertamina Hulu Energi Metana Kalimantan A-Sangatta West CBM Inc; a consortium of Kutai West CBM Inc-Newton Energy Capital Limited; PT Indobarambai Gas Methan, and PT Barito Basin Gas. 

Recently, Vico Indonesia, jointly owned by UK oil behemoth BP Plc and Italy's Eni SpA, announced plans to develop a CBM project in the Sanga Sanga concession in Kalimantan, with a total investment of $600 million. 

Vico, which already owns a gas concession in the area, will speed up drilling for the CBM projects by 2012 and deliver gas from the coal seams by at least 2020. 

Gas production from CBM is expected to help the government reverse a declining trend in gas output. Indonesia has the world's second largest CBM reserves after China, with total potential reserves of 453 trillion cubic feet. 

The government has predicted a decline in gas production to 7.3 billion cubic feet per day this year, lower than the 7.9 billion cubic feet per day recorded in 2008, due mainly to aging fields. 

Under its blueprint for the development of CBM, the government is targeting production of 1 billion standard cubic feet per day, or about 0.18 million barrels of oil equivalent, by 2025.

source: Ika Krismantari and Alfian , The Jakarta Post , Jakarta | Mon, 02/02/2009 4:05 PM | Business

PLN eyes lower production cost

State power firm PT Perusahaan Listrik Negara (PLN) announced Monday it could lower its electricity production cost this year by using less oil-based fuels.

“We estimate our production cost (may fall) to between Rp 1,000 (9 US cents) and Rp 1,100 per kilowatt-hour (kWh) this year,” vice president Rudiantara said.

Currently, the average electricity rate stands at Rp 650 per kWh, lower than average electricity production cost which stands at Rp 1,300 per kWh. 

In 2007, PLN, the country’s sole distributor of electricity, made a loss of Rp 6 trillion. Rudiantara said earlier PLN was forecast to make a further loss in 2008, with final figures not yet known.

“We can possibly cut production costs this year as we will start operating more coal and gas-fired power plant,” Rudiantara said. 

In 2009, PLN plans to produce 121,849 gigawatt hours (GWh) of electricity, 6.5 percent higher that the 114,447 GWh in 2008. Of the total, 67 percent will be generated from coal and gas-fired power plants, up on 58 percent last year. 

Fuel conversion from oil to coal and gas made it possible to cut oil-based fuels consumption from 11 million kiloliters in 2008 to 7.9 million this year, president director Fahmi Mochtar said on Jan. 14. 

This cut will also reduce the required power subsidy from Rp 88 trillion to an estimated Rp 46 trillion. Rudiantara said however that PLN would have no objection should the government cut electricity tariffs.

“Since it (the policy on electricity rates) is heavily regulated, we will be ready (for the cut),” Rudiantara said.

Analysts say the government’s policy to cut electricity rates would further boost the popularity of President Susilo Bambang Yudhoyono ahead of the upcoming general elections. 

Yudhoyono’s Democrat Party has already been seen to promote heavily the recent three-time fuel price cuts through television advertisements. 

The latest revision in electricity rates was in 2003, when the government raised the rates by an average of 6 percent. 

In 2009, PLN needs Rp 55 to 60 trillion to finance its operations, including completing the financing of the 10,000 megawatt (MW) coal-fired power plant program, scheduled to be finished in 2010. 

To complete the projects by 2010, PLN still needs another Rp 17.33 trillion ($1.55 billion) to build power stations and Rp 8.58 trillion for transmission systems. 

About 6,800 MW of the program is located in Java and Bali, provided by 10 new power plants. 

The remaining 3,200 MW is off the Java-Bali system, based on about 20 smaller power plants

Source: The Jakarta Post , Jakarta | Tue, 01/20/2009 2:04 PM | Business