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23 November 2020 (closed)
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The Indonesian Coal Mining Association (APBI) advises the central government to recalculate the amount of coal required for Indonesia's 35,000 MW power plant program. According to APBI, Indonesia does not have enough coal reserves to serve as power source for this ambitious program. The program, launched by President Joko Widodo in 2015, aims to add a total of 35,000 MW to the nation's power capacity by 2019 (about 20,000 MW being coal-fired plants). PriceWaterhouseCoopers states that Indonesia may have depleted its coal reserves by the year 2033.
Pandu Sjahrir, General Chairman of APBI, said there exists a big discrepancy between Indonesia's coal reserves figure as estimated by the Ministry of Energy & Mineral Resources and the figure estimated by PwC. Whereas Indonesia's Energy Ministry puts the nation's proven coal reserves at 32.3 billion tons (2014 estimate), PwC put Indonesia's existing coal reserves in the range of 7.3 - 8.3 billion tons as the result of declining stripping ratios and limited new exploration activities. PwC, the world's largest professional services firm, claims that Indonesia is bound to run out of its coal reserves somewhere between the years 2033-2036 provided existing rates of production are continued, meaning there will not be enough coal to supply 20 GW of power stations for the next 25-35 years as part of the 35,000 MW program.
This would imply that in about a decade or two Indonesia needs to import coal to fuel the coal-fired power plants that are being built as part of the country's 35,000 MW power program. Currently, Indonesia is still one of the world's top exporters of thermal coal. However, both Indonesia's coal production and export have plunged sharply in recent years due to weak global demand and dramatically dropping coal prices (see table below).
Mirza Diran, President Director of Advisory at PwC Indonesia, says the firm's survey shows that it is not economically viable (on the long term) to use coal as energy source for the nation's power stations. In response to weak conditions in the global coal mining industry, Indonesian miners have reduced exploration and stripping ratios to cut costs. This partly explains why the lifespan of Indonesia's coal reserves have been cut. Indonesian coal miners spent a total of around USD $400 million in 2015, down a staggering 80 percent (y/y) from USD $1.9 billion one year earlier. PwC expects spending to decline by 10 - 20 percent in 2016.
Further Reading: Overview of Indonesia's Coal Industry
PwC advises the Indonesian government to change the price mechanism for Indonesian coal. The new price for domestic coal sales should include an incentive for miners to engage in exploration. This way, the future coal supply for 20 GW of the total 35 GW of power plants can be guaranteed. Currently, Indonesia's coal price (Harga Batubara Acuan, abbreviated HBA) is mostly based on the average of global coal prices. However, as domestic coal demand is rising, more and more voices are heard that say the price should reflect this higher domestic demand.
Indonesian Production, Export, Consumption & Price of Coal:
(in million tons)
(in million tons)
(in million tons)
Sources: Indonesian Coal Mining Association (APBI) & Ministry of Energy and Mineral Resources