At current rates of production (and if new reserves are not found), global coal reserves are estimated to last for around 112 years. The biggest reserves are found in the USA, Russia, China and India.

Top 10 Coal Producers in 2015¹ ²

 1. China      1827.0 Mt
 2. USA       455.2 Mt 
 3. India       283.9 Mt 
 4. Australia       275.0 Mt
 5. Indonesia       241.1 Mt
 6. Russia       184.5 Mt
 7. South Africa       142.9 Mt
 8. Colombia        55.6 Mt
 9. Poland        53.7 Mt
10. Kazakhstan        45.8 Mt

¹ commercial solid fuels only, i.e. bituminous coal, anthracite (hard coal), lignite and brown (sub-bituminous) coal
² million tons oil equivalent
Source: BP Statistical Review of World Energy 2016

Coal in Indonesia

Indonesia's Coal Production and Export

Indonesia is one of the world's largest producers and exporters of coal. Since 2005, when it overtook Australia, the country is leading exporter in thermal coal. A significant portion of this exported thermal coal consists of a medium-quality type (between 5100 and 6100 cal/gram) and a low-quality type (below 5100 cal/gram) for which large demand comes from China and India. According to information presented by the Indonesian Ministry of Energy, Indonesian coal reserves are estimated to last around 83 years if the current rate of production is to be continued. Regarding global coal reserves, Indonesia currently ranks 10th, containing roughly 3.1 percent of total proven global coal reserves according to the most recent BP Statistical Review of World Energy. Around 60 percent of Indonesia's total coal reserves consists of the cheaper lower quality (sub-bituminous) coal that contains less than 6100 cal/gram.

There are numerous smaller pockets of coal reserves on the islands of Sumatra, Java, Kalimantan, Sulawesi and Papua but the three largest regions of Indonesian coal resources are:

1. South Sumatra
2. South Kalimantan
3. East Kalimantan

The Indonesian coal industry is rather fragmented with only a few big producers and many small players that own coal mines and coal mine concessions (mainly in Sumatra and Kalimantan).

Since the early 1990s, when the coal mining sector was reopened for foreign investment, Indonesia witnessed a robust increase in coal production, coal exports and domestic sales of coal. Domestic use of coal remains relatively small. Indonesia’s coal exports account for between 70 and 80 percent of total coal production, the remainder is sold on the domestic market.

Indonesian Production, Export, Consumption & Price of Coal:

  2007 2008 2009 2010 2011 2012 2013 2014 2015
Production
(in million tons)
 217  240  254  275  353  412  474  458  461
Export
(in million tons)
 163  191  198  210  287  345  402  382  366
Domestic
(in million tons)
  61   49   56   65   66   67   72   76   87
Price (HBA)
(in USD/ton)
  n.a   n.a  70.7  91.7 118.4  95.5  82.9  72.6  60.1

Sources: Indonesian Coal Mining Association (APBI) & Ministry of Energy and Mineral Resources

Indonesian Government's Benchmark Thermal Coal Price (HBA):

Month    2012    2013    2014    2015
   2016
January   109.29    87.55    81.90    63.84    53.20
February   111.58    88.35    80.44    62.92    50.92
March   112.87    90.09    77.01    67.76    51.62
April   105.61    88.56    74.81    64.48    52.32
May   102.12    85.33    73.60    61.08    51.20
June    96.65    84.87    73.64    59.59    51.87
July    87.56    81.69    72.45    59.16    53.00
August    84.65    76.70    70.29    59.14    58.37
September    86.21    76.89    69.69    58.21    63.93
October    86.04    76.61    67.26    57.39
November    81.44    78.13    65.70    54.43
December    81.75    80.31    69.23    53.51

in USD/ton
Source: Ministry of Energy and Mineral Resources

What Drives this Increase in Indonesian Coal Production and Export?

  • Coal is the dominating force in power generation. At least 27 percent of the world's total energy output and more than 39 percent of all electricity is produced by coal-fired power plants due to coal's abundance, its relatively easy and low-cost extraction, and less expensive infrastructure requirements compared to other energy resources.

  • Indonesia contains abundant reserves in medium and low-quality coal. These types of coal are competitively priced on the international market (partly due to Indonesia's low labor wages).

  • Indonesia's strategic geographical position towards the giant emerging markets of China and India. Demand for low quality coal from these two countries has skyrocketed as many new coal-fired power plants have been built to supply electricity to their immense populations.

The main export destination countries for Indonesian coal are China, India, Japan and Korea. Coal has a clear importance for Indonesia's state revenue as the commodity accounts for around 85 percent of mining revenue.

Future Prospects of the Indonesian Coal Mining Sector

The commodities boom of the 2000s generated significant profits for companies engaged in the export of coal. The rise in commodity prices was - to a large extent - triggered by accelerated economic growth in emerging and developing economies. But this profitable situation changed with the outbreak of the global financial crisis in 2008 when commodity prices went down fast. Indonesia was affected by these external factors as export of commodities (in particular coal and palm oil) account for around 50 percent of total Indonesian exports, thus limiting the country's GDP growth in 2009 to 4.6 percent (which still represents an impressive number, largely supported by domestic consumption). From the latter half of 2009 until the beginning of 2011 a sharp rebound in global coal prices occurred. However, reduced global economic activity has lessened demand for coal, thus resulting in a downward trend of coal prices starting from early 2011.

Apart from sluggish global economic growth (and the hard landing of China's economy) reducing demand for commodities, there is also another factor at play. During the lucrative 2000s commodities boom many new coal mining companies were established in Indonesia while existing coal miners raised investment to expand production capacity. This caused a severe supply glut that was exacerbated by coal miners' eagerness in the years 2010-2013 to produce and sell as much coal as possible - amid low global coal prices - in order to generate revenue and profit.

Despite global awareness to reduce dependency on fossil fuels, developments in renewable energy resources do not show an indication that dependency on fossil fuels (especially coal) will be reduced significantly in the foreseeable future, thus coal remains a vital energy resource. Clean coal technologies in coal mining, however, will gain significance in the future (partly due to commercial relevance) and Indonesia is expected to become heavily involved in that process being a major player in the coal mining sector. These clean coal technologies focus on the reduction of emissions produced by coal-fired power generation but lack sustained progress yet. Upstream activities connected to coal mining, such as the development of coalbed methane (CBM) reservoirs of which Indonesia contains great potential, has begun to receive attention recently.

Indonesian Government policy will affect the nation's coal mining industry. To secure domestic supplies, the Indonesian Ministry of Energy and Mineral Resources orders coal producers to reserve a specific amount of their production for domestic consumption. Moreover, the government can use export tax to discourage coal exports. The government aims for more domestic consumption of coal as it wants coal to supply around 30 percent of the country's energy mix by 2025:

   Energy Mix
      2011
 Energy Mix
      2025
Oil        50%        23%
Coal        24%        30%
Gas        20%        20%
Renewable Energy         6%        26%

Source: Ministry of Energy and Mineral Resources

Another recent development is that the Indonesian government intends to curb shipments of all raw materials (except for coal), instead requiring the mining sector to add value to the products before export takes place. Initially, the plan was to ban raw mineral exports from 2014 onward. Recently, however, the government has stated that it will be more flexible towards this ban and expressed that some exports can continue under certain conditions. Coal will not be affected by this ban according to government statements made in 2012, thus can continue to be exported without being processed first.

Updated on 5 September 2016