Indonesia denies reports of possible coal export quotas

Indonesia denies reports of possible coal export quotas

Indonesia has denied that it will set a quota for coal exports as it wants to reserve the coal for future use.

The reports had prompted rising interest in the country’s natural resources from energy-hungry China and India.

The reports were baseless and the new mining law likely to be passed by Parliament by June would in fact provide more certainty for mining companies, said Simon Sembiring, director-general of the mineral, coal and geothermal energy department in the Energy and Mining Ministry.

He said the new law would include a plan to set up a mining watchdog that would oversee state reserves of tin, nickel, copper, bauxite, iron and coal.

The announcement comes as companies from China and India are vying for lucrative thermal power mines across Indonesia, which has helped push up the price of coal and shares of companies listed on the Jakarta exchange, including the subsidiary of Thailand’s Banpu Plc.

China No. 2 coal producer, China Coal Energy, said it was exploring investments in Australia and Indonesia while it doubles spending to expand production and feed the world’s largest coal market.

Coal prices FOB (free on board) have nearly doubled over the past year to as high as $125 a tonne.

The hunt for commodities comes as global oil prices continue to soar and some power plant operators look to shift their fuel sources away from petroleum and natural gas.

India’s Reliance Power, controlled by the billionaire Anil Ambani, on MOnday announced plans to invest $650 million in a coal mine, and earlier in April the Indonesian government said that Lakshmi Mittal, the head of the steel giant ArcelorMittal, was looking to invest up to $10 billion in steel, iron ore, nickel and other projects in Indonesia.

Tata Power, another Indian company, last year paid $1.1 billion for stakes in two Indonesian coal mines owned by Bumi Resources.

Indonesia, the world’s largest thermal coal exporter, expects to produce 205 million tonnes of coal in 2008, with domestic demand seen at 52 million tonnes and the remainder to be exported, according to Energy Ministry data.

The new investment plans come on top of earlier plans by Guohua Electric Power Corporation, a subsidiary of China Shenhua Energy, China’s top coal producer, which received approval to develop a coal mine and power plant in Indonesia, its first overseas venture.

As brokers are estimating that the global supply of Indonesian coal is set to fall to 14 million tonnes this year, companies in the sector could stand to benefit from the windfall.

Besides companies from China and India, some large companies from Japan have also entered partnerships with local players in Indonesia.

In March Japan Petroleum Exploration and Mitsubishi said they would spend $360 million to buy half of the Kangean gas block in Java, and Mitsubishi is developing a liquefied natural gas plant with Medco Energi, a local company, for $1.4 billion.

Mitsui, another Japanese conglomerate, is investing in a refinery, The Economist said in a recent report.

All these developments will help Banpu’s listed subsidiary, PT Indo Tambangraya Megah, Indonesia’s third-biggest coal miner, which earlier this month said that it expected its coal sales to climb 7.7% to 19.5 million tonnes in 2008 as it uses more capacity.

The company sold 4.3 million tonnes of coal in the first quarter of the year, up from 4.1 million in the same period a year ago, Reuters reported.

“We can increase [sales] because the capacity is there. We like to grow,” said Somyot Ruchirawat, the company’s president director.

Mr Somyot said that about 70% of the company’s planned 19.5 million tonnes of coal sales had been contracted. The company sold 18.1 million tonnes of coal in 2007.

Indo Tambangraya owns shares in several Indonesian coal miners, including PT Trubaindo Coal Mining, PT Indominco Mandiri, PT Kitadin, PT Jorong Barutama Greston, and PT Bharinto Ekatama.

Indo Tambangraya plans to spend a total of $183 million in 2007-08 on several projects, including the expansion of its Bontang coal terminal in East Kalimantan to 18.5 million tonnes in 2008, up from 12.5 million.

The company is also building a power plant, capable of generating 14 megawatts, to supply power to its mine.

The company, which listed in Jakarta last year, expected to sell its coal at an average price of $60 a tonne, up from $42 last year, Mr Somyot.


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