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INDONESIA COAL MINING INDUSTRY

EXECUTIVE SUMMARY
INDONESIAN COAL MINING INDUSTRY
CHALLENGES AND PROSPECTS
JUNE 2008

1. CURRENT ISSUES
1. Rising demand for coal follows growing industrial sector
notably rapid growth recorded by China, India and Southeast
Asia. The growing demand for coal also comes as a result of
the soaring prices of crude oil and gas. Coal becomes more
important as an alternative source of energy.
2. The total proven reserve of 6.9 billion tons, Indonesia could
rely on coal as a source of energy for 147 years. Meanwhile,
the countrys oil reserves are expected to be depleted in 18
years.
3. The report issued by ABARE (Australian Bureau Research for
Agriculture and Economic Resource) in March 2007 on coal
trade in the world in 2005-2006 places Indonesia as the
largest supplier of coal accounting for 25% of the total
supply to the world market, followed by Australia, South
Africa, China, Russia, Colombia, and the United States. In
2007, coal exports by Indonesia were estimated to reach
148.55 million tons in or an increase of 14.8% from 129.4
million tons in 2006.
4. Starting 2010, the government will impose coal exports
maximum limit at 150 million tons a year to guarantee

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supply to meet growing demand in the country especially for

power generating plants
5. The government has discussed the quota system with
producers and it has been part of conditions to be complied
by contractors holding contract of works (COW/PKP2B).
6. In the past two years China and India have been more
aggressive in seeking coal supply from Indonesia, mainly in
Kalimantan. China even offers to build railroads in South
Sumatra to facilitate coal transports from interior areas to
seaports in that region. The offer is to guarantee supply of
20 million tons from that region a year over a period of 15
years. It is more efficient to import coal from abroad such as
from Indonesia and Australia than transporting it from
northern China.
7. The draft Law on Mineral and Coal, which will replace the
Law No 11/1967 on general mining is still being debated by
House of Representatives (DPR). The debates dragged on
especially on the extent of the authority of the center and
the regions in issuing license and on plan to replace working
contract (CoW) Mining Business License (IUP).
8. The draft Law will simplify licenses into two exploration
license and production license. There will no new license
for CoW, which is it be replaced with IUP (Ijin Usaha
Pertambangan or Mining Business License), which will consist
of two phases Exploration IUP and Production Operation
IUP.
9. Other important things regulated in the bill is the aspect of
added value with processing and refinery required to be held
in the country encouraging the use of low rank coal. Also
regulated are the use of local workers, local goods and
services and partnership.
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2. OVERVIEW OF COAL MINING INDUSTRY

1. As a source of energy and the most potential substitues for
oil, coal has followed the lead of crude oil in price. The
world still has large reserve of coal that could be used as a
cheaper source of energy although the price of coal has
increased sharply.
2. The high need for coal by the new industrial countries forced
them to find a new supply source or increase volume from old
suppliers.
3. Indonesia becomes one of the main coal suppliers in the
world is the target of many countries, including developed
countries that have been relying on coal supply from
Indonesia. Since the need for coal in the home country has
increased rapidly, the Indonesian government began to make
regulations on coal export sale, by fixing export quota limit.
4. Coal production from coal producer countries that relatively
keeps increasing, will not automatically increase sale volume
in the worlds market, because the majority of coal
production is used to fulfill their domestic needs.
5. China is the largest coal producer in the world with total
production in 2007 that reached 1,289.6 billion ton. Chinese
coal production has increased rapidly since the last several
years, with more than 100 million ton on average of
production increase per year.
6. Indonesia occupies the fifth position in the worlds coal
production, has a total 174.8 million ton in 2007.
7. Coal production in Indonesia is dominated by mining
companies cooperating with the government (Contractors),
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which keep indicating a rapid production increase compared

to the production growth of companies owned by the
government and companies holding Mining Concession (KP
or MA).
8. Coal consumption in Indonesia continues to increase each
year, except in 2006, when it decreased from the previous
year, because of decline of industrial sector performance in
that year resulting from the skyrocketing price of crude oil,
causing the decrease in the need for coal.
9. Power generating plants are still the largest consumers of
coal. Coal consumption of power plants in 2006 totaled
32.665 million tons or 68% of the countrys total consumption
of coal that year. Cement and ceramic industries are the
second largest consumers using 7,546,004 tons in 2006.

3. COAL RESOURCES AND RESERVES

1. Indonesias coal is mostly of young age dates back to Miocene
of Tertiary age. The coals in this category are lignite and
sub-bituminous. In smaller volume, there is older age coal
dates back to Eocene of Tertiary Age, consisting of
Bituminous and Anthracite coal.
2. About 83.4% of Indonesian coal are younger age (comprising
lignite (56.8%) and Sub-bituminous (26.6%). Olds coal shares
only 16.6% of total reserves.
3. The worlds coal reserves recorded at the end of 2006
indicated that the United States of America is a country with
the largest coal reserve in the world, with total reserve of
246.64 billion ton consisting of anthracite and bituminous
that reach 111.34 billion ton and sub bituminous and lignite
135.30 billion ton.

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4. Indonesia that is the largest coal exporter in the world, owns

its proven reserve of about 6.98 billion ton only.
5. Proven coal reserve of Indonesia in the last several years
relatively indicates an increase although small. The
intensifying activities of continued surveys on proven coal
resources in Indonesia, performed by both new companies
and mining companies that have operated for a long time,
confirm total proven coal reserve in Indonesia more quickly.
6. For the time being, hypothetical or the roughest estimate of
coal resource availability is relatively small, only 533 million
tons which is located mainly in East Kalimantan.
7. Kalimantan and Sumatera are areas with the most potential
coal resources and reserves in Indonesia. Kalimantan has
mineable reserve amounting to 4.629 billion ton, or about
66.3% of total coal mineable reserve.
8. Sumatra coal could be represented by Ombilin Coal and
Tanjung Enim Coal, both are being mined by PT. Bukit Asam
(PTBA) state coal company.
9. Much larger Sumatras coal deposit is found in Tanjung Enim
coal mining area which is controlled and operated by PTBA
state coal mining company. Its total resources is 5,931 million
tons with 870 million tons mineable. The coal has a high
calorific value of 70008000 Kcal per kg with a low sulfur
content (0.31.5%) and low water content (less than 7%).
10. Coal is also found in Java but in insignificant quantities. Coal
dating back to the Eocene is found in Bayah, South Banten,
while coal dating back to the Pliocene is found in the
southern mountain ranges, Trenggalek and Pacitan in East
Java, Bogor and Sukabumi in West Java.

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4. POLICY AND REGULATIONS

1. The national energy policy of the Indonesian government as
outline in the National Energy Policy Plan 2025 targets a cut
in the use of oil from 55% in 2005 to 20% in 2025 with the use
of coal raised from 15.7% in 2005 to 33% in 2025.
2. A notable change is to be made in the use of renewable
energy in 2025 when renewable energy will account for 17%
including biofuel 5%, geothermal 5%, biomass, nuclear, water
and solar energy 5% and coal liquefaction 2% of the total
energy requirement that year.
3. The draft law on mineral and coal, which is now still being
debated by the House of Representatives failed to be passed
into law in April 2008 as expected as the lawmakers are still
sharply split between cons and pros especially over the issue
of working contract.
4. Under the new bill, IUP (Ijin Usaha Pertambangan or Mining
Business License) contractors are required to process and
refine the raw material they produce in he country. This
requirement as ruled in article 18 point 1 and point 3 of the
draft law, is still being debated in the House of
Representatives.
5. Coal Bed Methane is another alternative source of energy
available to be utilized by the country. The government
offers CBM working areas in open areas, in oil and gas
working areas, in coal working areas and in border areas
between oil and coal concessions.
6. Indonesia has CBM reserves estimated to hold 453.3 TCF
found mainly in South Sumatra, Central Sumatra, Barito and
Kutai. Smaller reserves are found in other regions in
Kalimantan and Sulawesi.
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7. The delay in the process of passing the mineral and coal bill
into law is caused by the fact that many still are against
amending the working contract. They said the amendments
will hamper the inflows of foreign investment especially into
the general mining sector.
8. PMA companies operating in Indonesia could be 100% owned
by foreign investors or jointly owned by foreign and local
investors with the status of limited corporation (PT) based
in Indonesia.
9. PMA approval could be issued in Indonesia through the
Capital Investment Coordinating Board (BKPM) in Jakarta, or
provincial investment agency (BPPMD) or through the
Indonesian representative offices (embassies) abroad.
10. New applications for foreign investment projects in the
mining sector outside oil and gas sector, before the mineral
and coal bill is passed into law, must be in the form of
Contract of Work for Coal Mining Explorations between the
prospective investors and the government.
11. The contract of work or the contract of work for coal mining
explorations was treated equal to investment approval by
BKPM. Investment plan for the implementation of the
contract and facilities used must be submitted to the BKPM
with recommendation from the general mining director
general.
5. OPERATIONAL RULES IN COAL MINING OPERATIONS
1. Coal mining operation still refers to the Law No. 11/1967
because of Mineral and Coal Mining Bill/MCMB is not
completed yet, which is planned to be ratified by DPR. The
main issue that delays immediate completion of Mineral and
Coal Mining Bill is an article on transitional provision, in
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which KK (Work Contract) for mining businessmen will be

replaced with Mining Operation Permit (MOP). MOP consists
of two phases, namely MOP exploration and MOP production
operation.
2. KP or MA is the first operational scheme in coal mining
industry which was introduced in 1969 which is still applied
until now. The basic mining law (Law No. 11/1967) is also
applied to coal mining operation. In 1969, after the
introduction of Presidential Decree No. 29/1969, it was
stipulated that all coal mining activities are subject to Kuasa
Pertambangan (KP) or Mining Authorization (MA) scheme.
Although the rules are also intended to attract foreign
mining companies, until now the MA rights have been
extended only to national companies, either limited
liabilities companies (PTs) or cooperatives. The incentives
were not enough to persuade foreign investors to put their
money in coal mining operation.
3. The Government issued Presidential Decree No. 49/1981, to
attract foreign investors by a new scheme, called Coal
Cooperation Contract (CCC). This scheme was later called the
First Generation CCC, because another type of CCC was
introduced in 1993.
4. The government through a Presidential Decree No. 21/1993
invited private investors again to venture in coal mining
under the CCC with modified stipulation, known as the
Second Generation CCC. There were 19 PMDN companies
licensed to venture in coal mining but two of them quit
leaving 17 companies continuing their mining activities.
Some of the 17 companies signing CCC of the Second
Generation began production soon such as PT Antang Gunung
Meratus, PT Gunung Bayan Pratama, PT Jorong Baratama
Greston and PT. Bahari Cakrawala Sebuku.

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5. The agreements were based on the Presidential Decree

No. 21 of 1993, which made some significant changes
such as :
PT Tambang Batubara Bukit Asam (PTBA) as the mining
authorization (MA) holder was

responsible for

the

operational management of the contractors

The contractors are the owners of all machinery and
equipment
Contractors are obliged to comply with the tax laws and
regulations.
6. Through the Presidential Decree No. 75 in 1996, the
Government renewed the pattern of coal exploitation
covering the aspect of investment through deregulation
measure, simplification of the red tape and contract. One of
the changes concerned regulations on contracts from Coal
Cooperation Contract to Coal Contract of Work both for PMA
and PMDN contractors. Under the Presidential Decree No.
75/1996, the coal mining authority, which was previously in
the hand of PTBA, was returned to the Energy and Mines
Minister with the General Mining Directorate General as the
implementing body.
7. The basic elements of the CCOW arrangement which are
included in the Presidential Decree No. 75/1996 are as
follows :
The Contractor will directly conclude a coal contract
with the Government. As there will be no mining
authorization the Contractors will be given conjunctive
title, where they have right to proceed General Survey
to Exploitation and sale in one package continuously,
subject to approval of a satisfactory Feasibility Study
and Environmental Impact Analysis Report and
conformity with the terms and condition of the CCOW.

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The Contractor is obliged to hand over 13.50% (thirteen

and one half percent) of its coal production yield to the
Government in cash at Free on Board price (FOB) or at
the price of the Contractors final load out in the
contract area (Point of Sale price). If the mining
undertaking is carried out by underground mining and/or
the coal produced is obviously of low quality, the
amount of the production yield to be delivered to the
Government may be considered for review, based on the
result of an assessment submitted by the Contractor
concerned.

8. To get a mining license or permit a contractor must submit

an application to the Minister of Energy and Mineral
Resources through the Director General of Mines along with
the following documents:
a. a topographic map to a 1:250,000 scale.
b. an MOU for a joint venture between a foreign and
national party (not necessary if the contractor is not a
joint venture.
c. a company profile on management, production and
marketing capability, with a financial statement
demonstrating that the company holds net assets of no
less than two billion Rupiah.
d. a summary of the companys experience in mining
activities.
e. a work plan and budgeting program, including a brief
description of the area being applied for, a work plan
for each stage of activities, and an investment program.
f. an employment agreement with mining experts or
statement of intent by mining experts to carry out the
project.
9. There are four stages to be completed by investors before
they start their coal mining operation:
a. General Survey Period 1 year (+ 1 year extension)
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b. Exploration Period 3 years (+ 2 x 1 year extension)

c. Feasibility Study Period 1 year (+ 1 year extension)
d. Construction Period 3 years

6. COAL MINING OPERATIONS AND PRODUCTION

1. There are two coal mining methodsopen pit mining and deep
mining. Open pit mining is used when coal is found less then
10 meters below the ground surface generally 56 meters
below the ground surface. Mining could be made only by
removing the upper layer of the ground. Deep mining is used
when the coal lies more than 10 meters below the ground up
to 100 meters. Drilling,therefore, is needed to create tunnel.
2. Process of coal mining generally includes removal of the
cover layer, mining, reclamation and transport to piling
terminal before the coal is shipped to the final destination.
3. There are various methods of exploiting coal deposits in
Indonesia
depending on the width of mining area and
location of the mines as well as efficiency.
- First patern
The mining company handles its self every phase of
the job using equipment and its workers.
- Second patern
A company names a sub-contractor to handle certain
phases of jobs such as removal of outer layers in
open pit mining, digging and reclamation (land fill).
4. KPC, Adaro, Kideco, Arutmin and Berau Coal are five
largest coal producers in the country accounting for 70% of
the countrys total production in 2007. KPC is the largest
with production of 31.377 million tons. followed by Adaro
with production of 20.614 million tons and Kideco 17.073
million tons.

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7. PROFILES OF MAJOR COAL MINING COMPANIES

a. PT TAMBANG BATUBARA BUKIT ASAM (Persero), Tbk
Through a Presidential Decree No. 49/1981, the government
invited private companies to cooperate under a production
sharing system to exploit coal mines in the country. PTBA
was named as the mining authority holder for coal
exploitation in the country. But through a Presidential
Decree No.75/1996 and a Ministerial Decision No.
680/K/29/M.PE/1997, the mining authority was returned to
the government in this case the Mines and Energy Minister to
be implemented by the General Mining Directorate General.

PTBA has become a publicly listed company since 1998/1999,

by selling part of its share in stock exchange following
Government Regulation No. 50/1998 concerning privatization
of state owned enterprises. Officially the company was
registered as a public company in Jakarta and Surabaya Stock
Market on December 23, 2002. Since then its name has
become PT TAMBANG BATUBARA (Persero), Tbk or PTBA for
short.

PT BA is now operating two coal mines, i.e. Tanjung Enim in

South Sumatra and Ombilin in West Sumatra, which are
supported by three wholly owned coal terminal, i.e. Tarahan
in Bandar Lampung, Kertapati in South Sumatra, and Teluk
Bayur in West Sumatra.

The company has a total coal resource of 7,360 million tons

distributed in three coal mines, the largest one being in
Tanjung Enim (80.3% or 5,910 million tons), follows by
Cerenti Mines (18.3% or 1,346 million tons), and Ombilin
(1.4% or 103 million tons).

Unlike private CCOW companies, which experienced a

booming production in the last 5 years, PTBA production
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almost did not increase. It was 10,026 million tons in 2003

gradually declined to only 7,751 million tons in 2007. On the
other hand, coal production by private companies, increased
from 94,866 million tons in 2003 to 164,274 million tons in
2006, or about doubled in 5 years. PTBA is now the sixth
largest coal producer after PT Kaltim Prima Coal, PT Adaro
Indonesia, PT Kideco Jaya Agung, PT Arutmin and PT Berau
Coal.

Recognizing its transportation problem, PTBA is planning to

improve the efficiency and capacity of coal transportation by
railway from the mining area to Tarahan loading port in
Lampung and to Kertapati in South Sumatra.

b. PT KALTIM PRIMA COAL

PT KPC established in March 9, 1982, as a limited liability

company incorporated under Indonesian law and is classified
as a PMA (foreign investment) company. PT KPC was then
jointly and equally owned by Rio Tinto Limited and British
Petroleum Company (BP).

PT KPC was the largest coal producer in Indonesia, producing

31.377 million tons until October 2007, meanwhile, PT Adaro
produced 20.614 million tons in the same year. In the period
of 1996 2004, PT Adaro was always the largest and PT KPC
the second largest producer.

KPC has three mining concessions located in Pinang Block

(Sangatta), Bengalon Block and Separi Santan Block covering a
total area of 140,522 Ha. As of mid 2004 the mineable coal
reserves is estimated at 619 million tons, comprising 462
million tons at Pinang and 157 million tons at Bengalon, plus
2,200 million tons measured and indicated as resources.

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The mines method applied by KPC is multi seam open pit

carried out by 2,700 employees. KPC operates six to 12
individual open pits at any time, the average stripping ratio
being 7.5 bcm (bank cubic meters) of overburden per ton of
coal.

The operation produces two main export quality products,

i.e.:
a) Prima Coal, a high volatile bituminous steam coal with
high calorific value, very low ash, low sulphur and low
total moisture.
b) Pinang coal with similar quality but has a higher moisture
content.

The nature of the deposit and the low ash content of the in
situ coal will enable most coal to be mined clean. With
selective mining, over 90% of the run-off-mine coal only
needs crushing and blending to give export quality Prima
Coal.

A dense medium coal washing plant will treat up to 1.5

million tons per annum of contaminated Prima Coal to
produce coal of the same specification as clean Prima.
Washed and clean Prima Coal will be blended in a 60,000 tons
final product homogenization stockpile. Pinang Coal will be
stocked in a separate 20,000 tons final product stockpile.

The mine site contains separate stockpiles for the Prima and
Pinang products, holding 60,000 Tons and 35,000 Tons
respectively. Coal is reclaimed and transported by a 13 Kmlong, 2,100 Tons/hour capacity overland conveyor to Kaltim
Primas dedicated port facilities at Tanjung Bara.

A 2.5 Km rock-fill causeway and trestle jetty out to a deep

water berth with 19.0 meters below mean sea level will
enable ships of cup to 180,000 DWT to be fully loaded.
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In 2006, KPC coal production totaled 35.301 million tons, of

which 1.188 million tons were sold on the domestic market
and the rest exported. In 2007, KPCs production rose to
38.455 million tons of which 2.727 million tons were disposed
of on the domestic market and the rest exported.

c. PT ADARO INDONESIA

PT Adaro Indonesia, one of the largest coal producers in

Indonesia is now controlled by new owners after a long
selling process. The company is now controlled by Edwin
Soeryadjaya, the youngest son of William Soeryadjaya, the
former automotive legend in Indonesia, the founder and the
former owner of the big automotive Astra group.

Adaro Indonesia is 91.8% owned by PT Dianlia Setyamukti and

8.2% by MEC Indo Coal from the United States.

PT Adaro Indonesias coal concession is located on the eastern

margin of the Barito Sub-basin, close to the Meratus Ridge.
The Barito Sub-basin is the southern part of the Kutai Basin,
a broad sedimentary basin that occupied South and East
Kalimantan during Tertiary time. The Kutai Basin is one of
transition between fluvial and maritime deposition.

The Adaro coal resources are contained within seams in

Miocene sediment. Among a total of five resources regions
have been delineated in the concession, Paringin, Tutupan
and Wara have the greatest economic significance for
exploitable coal reserves.

The brand names of coal produced by PT Adaro Indonesia is

Envirocoal. Envirocoal is a sub-bituminous steaming coal with
low polluting, moderate energy characteristics. Major success
has been achieved in sales to Europe and the United States,
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where legislation limiting emissions from coal-fired power

stations has created a strong market for the ultra clean coal.

Adaro also transships coal through the Pulau Laut Terminal,

which commenced operations in 1997. The high capacity
terminal has a throughput capacity of 10 million tons per
year and can load Panamax vessels of up to 75,000 DWT in
less than two days.

The Pulau Laut Coal Terminal was designed as Southeast

Asias major bulk handling center. The coal terminal is
developed by PT Indonesia Bulk Terminal (IBT), with a wealth
of experience in bulk port operations, using one berth and
750,000 tons capacity stockpile area equipped with
underground reclaim system to ship loaders capable handling
10 million tons per annum (MTPA) at a loading rates of 3,000
tons per hour (tph).

In 2006, production of Adaro totaled 34.368 million tons ,

of which 10.024 million tons were disposed of in the country
and the rest exported. In 2007, Adaros production rose
slightly to 34.526 million tons , of which 9.293 million tons
were sold in the country and the rest exported.

d. PT KIDECO JAYA AGUNG

PT Kideco Jaya Agung is a foreign

investment/PMA,
incorporated on 7 September 1982 in Jakarta. The main
objective of the company is to explore, develop and enhance
the production of
coal
within
the concept of coal
cooperation contract No. J2/Ji-DU/40/82 between the
company and PT Tambang Batubara Bukit Asam (PTBA
formerly Perusahaan Umum Tambang Batubara), approved
by the Minister of Mines and Energy on 14 September 1982 to
explore and develop coal resources in Block V, Pasir Regency,
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East Kalimantan for a period of 30 years from commercial

production by royalty of 13.5% of FOB sales income.

The company holds an authorized working area of 50,400

hectares which is 20% of original mining area after three
times relinquishment.

The company is applying an open pit mining system, utilizing

15m3 hydraulic shovels and 100 tons dump trucks to remove
overburden in Pasir area in East Kalimantan.

Inland transportation functions is to bring raw coal to

crushing plant and then to the stockpile in Tanah Merah Coal
Terminal (TMCT).

For an efficient inland transportation Kideco constructed the

private main haul road, having all-weather workable
condition, from crushing plant to TMCT. This 40 Km haul
road, in which took more than two years for its construction,
having 12 meters traveling width, was designed and
constructed to maintain 60 Km per hour trucking speed.

Kideco is one of the companies enjoying the benefit of

increasing coal price. The company is now the third largest
coal producer in Indonesia after KPC and Adaro, producing
18,890 thousand tons in 2007.

e. PT ARUTMIN INDOESIA

PT Arutmin Indonesia was established on October 31, 1981,

entered into a production sharing agreement with the
Government of Indonesia through the state-owned company
PT Tambang Batubara Bukit Asam (PTBA) on November 2,
1981 (Contract No. J2/Ji.DU/45/81), to explore and develop
coal resources in Block VI area, Kotabaru, Tanah Laut and
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Banjar Regencies, South Kalimantan Province. First

production commenced in 1981 and production target is 11
million tons per annum (mtpa) by year 2001.

Arutmin is operating two mining areas, i.e. Senakin and

Satui. In Senakin, coal is produced from two locations namely
East Senakin and West Senakin, which have a reserves of 420
million MT consisting of 170 million MT of thermal coal and
250 million MT of lignite coal.

Senakin is one of the mining areas operated by Arutmin which

is located in Block IV, Kotabaru, Tanah Laut, East
Kalimantan, Banjar Regency, South Kalimantan.

The Arutmin coal is recommended for industrial, cement and

power generation applications. The coal is low in moisture
and sulphur, high in volatile matter and moderate ash.

In Satui mine coal is removed by open-cut methods using

loaders and trucks. Pits are developed by excavating from the
sub-crop down dip. Overburden is dumped outside the
operating pit until the predetermined maximum economic pit
depth is achieved. Once this depth is reached, overburden
dumping is switched to within the pit.

Coal from Senakin, Satui and Petangis mines is exported

through the North Pulau Laut Coal Terminal (NPLT). Coal for
domestic sales is transported direct to customers aboard selfdischarging barges. NPLCT is located at Tanjung Pemancingan
at the northern end of Pulau Laut, a 100 kilometer-long
island off the coast of South Kalimantan in the Sulawesi Sea.
The port was located at this position because the area is not
susceptible to typhoons.

Coal is transported from the mine barge ports to the NPLCT

by self-discharging barges. The initial fleet consists of four
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7,000 tons barges servicing Senakin, one 7,000 tons barge

servicing Petangis, and four 3,500 tons barges servicing Satui.

Arutmin is one of fast growing coal producer. Its production

increase from 7,006 thousand MT in 1996 to 15,394 MT in
2007, more than doubled in 10 years. The company has been
selling more coal to domestic market, mostly to PLN,
particularly in 2005.

f. PT BERAU COAL

PT Berau Coal is now owned by Indika Group (controlled by

the Sudwikatmono family) 60%, PT Armadian Tritunggal 30%,
and Nissho Iwai Corporation 10%. Berau Coal surpassed
Tambang Batubara Bukit Asam (TBBA) as the fifth largest
producer.

PT Berau operates the mine under a Coal Cooperation

Contract agreement signed on 26 April 1983
with PT
Tambang Batubara Bukit Asam (PTBA), the state-owned
company which was then holding exclusive authority to mine
coal in Indonesia. Berau Coal was appointed as the sole
contractor at a specific mining area in East Kalimantan.
Currently the concession area covers some 1,200 sq.km.

Lati area is in commercial production since 1st October 1994.

Binungan commenced in 1996 and Sambarata in 2001. Other
areas such as Kelai, Teluk Bayur, Punan, etc. are in
exploration or feasibility study stage.

In addition to its domestic power company contracts, Lati

Coal has been exported to such different locations as Taiwan,
Japan, India, Thailand, Bulgaria, and Chile.

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PT Beraus second mine, Binungan, has been in production

since 1998. Binungans proven reserves is more than 100
million MT.

Binungan possesses very low sulphur and ash contents making

a product in great demand. With one base-load power
contract already signed, its excellent quality is attracting
attention worldwide.
Sambarata is the third mine of PT Berau Coal which has a
total reserves of 90.5 million tons measured. The coal from
Sambarata is mainly used for blending products.

Berau Coal commissioned a specially designed custom-built

semi submersible vessel, which transfers coal directly from
the barge to the vessel using an elevator and boom conveyor
system (semi submersible transshipment facility or SST). This
facility was later named SST. Berau has a contractual
guaranteed loading rate of 24,000 tpd. It is currently
achieving a loading rate of 18,000 tpd.

The SST Berau, which was specially designed and constructed

for Berau Coal, is the only one of it kind in the world and
gives the company a competitive advantage over other
operations that use floating cranes or that transship to a coal
terminal.

The Suaran Port intended to serve Binungan mine, covers an

area of approximately 700 hectares. The terminal complex at
the port site includes the following facilities: Product coal
stockpile with reclaim hopper, Barge loading conveyor, Wharf
and dolphins, and Fuel storage tanks.

Berau performed well in its coal production, domestic sales

and export. In 10 years, from 1998 to 2007, its coal
production increased by about 9 times, from 2,252 thousand
tons in 1998 to 11,811 thousand tons in 2007.
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Rising demand of coal from PLNs power plants, Beraus

domestic sales increased more rapidly, from only 924
thousand tons in 1998 to 4,412 thousand tons in 2007.

Its export was even developed much faster, only 1,234

thousand tons in 1998 to 7,540 thousand tons in 2007.

g. PT INDOMINCO MANDIRI

Indomincos Mining areas are in sub-dished Sangata, North

Bontang, South Bontang and Muara Badak in East Kalimantan.
The coal deposit is located 20 km to the west of Bontang
town, 39 km from the port.

The companys coal mining cover a total area of 25,000 km

which is estimated to have 62.4 million ton mineable reserve
of a total coal resources of 283.9 million tons.

The company started producing coal in 1997 at 1,198

thousand MT which then increased rapidly to reach 10,443
thousand MT in 2007 with an average growth rate of 15.7%
per year in the last 5 years. The company has anticipated
high growth rate by providing necessary facilities in the
processing transporting the coal.

The companys coal export increased from 1,001 thousand

tons in 1997 to 12,062 thousand tons in 2007, almost times
in 9 years.

8. DOMESTIC DEMAND FOR COAL

1. Coal consumption increased again in line with the
improvement in industrial sector performance, and the
demand for power energy continued to increase. This is
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because of the development of industrial and property

sector, such as housing, and commercial property, such as
office complex, shopping center, hotel, industrial estate, and
so forth.
2. Domestic coal consumption will increase rapidly soon after
various projects of PLN (State Power Company) power plant
with capacity of 10,000 MW using coal energy source operates
in 2009.
3. Domestic coal sale in Indonesia from 2004 to 2007 relatively
fluctuated, because of increase in demand for coal and the
worlds coal price, and numerous domestic coal users that
purchased from spot market, resulting in decrease in
domestic sale, because when the worlds price rose in the
last several years, many coal producers and traders
performed export sale.
4. Demands from almost all industrial consumers
from the electricity sector has increased sharply
five years. Demand from the electricity sector
25.669 million tons in 2005 to 32,665 million tons

especially
in the past
grew from
in 2006.

5. Similarly demands from cement and ceramics industries

have also surged from 5.152 million tons in 2005 to 7.546
million tons in 2006.
6. Textile industry owns a high dependence on fuel-based oil.
Therefore, with skyrocketing price of fuel-based oil, many
parties change their fuel into coal, although they must
modify their boilers or replace with new ones with coal as
fuel.

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9. COAL EXPORTS
1. Starting 2010, the Indonesia government will limit coal
exports to a maximum of 150 million tons to guarantee
supply in the country. Coal requirement has increased fast
in the country and the requirement is expected to surge in
2010 when the crash program, to build coal fired power
plants with a total capacity of 10,000 MW, has been
completed. The quota system has been included in the
contracts held by contractors holding Contract of Work
(CCOW/PKP2B).
2. The planned quota system already causes concern among
major coal consumers in the world, fearing that coal will be
more difficult to get in the world market. The system is also
almost certain cause an increase in price as Indonesia is now
the worlds largest supplier of caol to the world market.
3. The main Indonesian coal user countries almost do not change
in general, because they are still dominated by permanent
user countries of Indonesian coal. These countries are among
others, Japan, which in 2007, purchased coal amounting to
18,209,715 ton, as recorded until November 2007. The coal
purchase by Japan also experienced a decrease at end of
2007, because from 2,952,142 in January 2007, it decreased
drastically in October 2007 to 881,197 ton.
4. India and China that become the countries with the largest
demand for energy currently, purchased Indonesian coal
mainly to fulfill the needs of their power plants. In 2007,
their coal purchase reached 10,997,906 ton. The same with
other countries, the coal purchase of India also decreased in
several months approaching end of 2007.
5. Kaltim Prima Coal (KPC) continued to become the Indonesias
largest coal exporter until 2007 after it had became the
second largest exporter for several years.
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6. Adaro Indonesia that had became the largest exporter for

several years, continued to become the second largest coal
exporter until 2007. In 2007, its export reached 15,630,771
ton, decreased quite drastically from 2006 that reached
24,137,923 ton.
7. Kideco Jaya Makmur is the third largest exporter with
13,636,138 ton. After 2007, it exceeds export volume of
Arutmin Indonesia that only reached 10,194,114 ton in 2007.
8. Indonesian coal is known as low rank coal, because almost all
products are included in lignite and sub bituminous types,
0with calorie ranging from 4,000 Kcal/kg to 5,900 Kcal/kg.
9. With high demand for coal at present, especially from new
giant industrial countries, such as China and India, which are
technically capable to use this low rank coal, potential
demand for coal resource of this type increases more.

10. COAL TRANSPORTATION AND TERMINALS

1. Transport of coal is now an emerging business. Coal transport
is much briskers with the growing international and domestic
coal trade notably in the past two years.
2. The expansion of coal mining industry has also contributed to
development of shipbuilding and ship repair industries in the
country. Demands for new ships have increased and so have
demands for ship repairs.
3. In PTBAs Tanjung Enim mining unit, the coal is transported
by conveyors to the distribution station and from there to
the piling facility before being loaded to trucks and then
railway cars. The conveyors in Tanjung Enim total 30 kms in
length.
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4. In Kalimantan, coal mines are generally far from coal

terminal. Adaro mine, for example, is located in Hulu Sungai
Utara and Tabalong, located 75 km from the port of Kelanis
at Barito River, Central Kalimantan. Trucks are used to carry
coal to the port. The transport cost therefore is higher, but
Adaros production cost is cheaper as the top soil covering
the coal deposit is thinner, therefore the stripping ratio is
lower.
5. Coal is transported from mine field to be stockpiled for
crushing and washing in a processing plant. Processed coal is
then transported from the stockpile yard the processing
plant to loading port or terminal stockpile, or directly loaded
to the ship using loading cranes. Depending on distance and
some other factors, the coal may be transported by heavy
duty trucks, trailer road trains, railways or belt conveyors.
6. In Tanjung Enim mining unit of PTBA, coal is transported
from processing plant to coal terminal at Tarahan (420 km
from Tanjung Enim) and Kertapati (164 km from Tanjung
Enim) by railways trains.
7. PT Adaro Indonesia, one of the largest coal producing
companies in Indonesia, transports its coal from its mining
area to Kelian terminal (75 km) by using 120 tons capacity
side-dumping double trailer road trains with BHP prime
mover. The company is also utilizing triple trailer trains with
up to 200 tons capacity.
8. PT Kaltim Prima Coal (KPC) is using belt conveyor to
transport its coal from Sangatta mines to Tanjung Bara Coal
terminal (13 km).
9. The essential equipment in the terminals is loading and
unloading cranes. Loading ports are located in coal producing
centers (particularly in Kalimantan and Sumatra) while the
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unloading ports are in coal consuming centers (in Java and

importing countries).
10. The largest coal terminal is the Indonesian Bulk Terminal
(IBT) which is located on South Pulau Laut island, developed
jointly by Consolidated Bulk Handling of Australia and PT
Terminal Batu Bara Indah of Indonesia.
11. The Indonesian Bulk Terminal is serving Adaro coal mines. It
is the latest common-user deep-water port with an initial
stockyard capacity of 1,600,000 MT and capable of handling
up to 200,000 DWT vessels. Commencing operation in 1997.
12. The second largest terminal is Tanjung Bara Coal in East
Kalimantan which was developed by Kaltim Prima Coal (KPC)
at Sangatta, north of Samarinda, East Kalimantan.
13. The state owned PTBA operates 4 coal terminals, namely
Kertapati and Tarahan in South Sumatra, Teluk Bayur in West
Sumatra and Pulau Bai in Bengkulu. Another terminal is being
planned which will be located in Tanjung Api-api, South
Sumatra

11. HEAVY EQUIPMENT ON COAL MINING INDUSTRY

1. Heavy equipment sector in Indonesia has indicated a better
performance within the last three years, following a large
expansion in mining, plantation, forestry, and construction
sectors, which triggers a sudden increase in demand for
heavy equipment.
2. The Association of Heavy Equipment Industry of Indonesia
(Hinabi) projects that the sale of heavy equipment this year
can reach above 7,000 units. This amount increases by 25%

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compared to the 2007 sale that was estimated to reach 5,590

units.
3. The improvement in mining industry performance, especially
coal, also supports performance of heavy equipment business
players, mainly four main players in Indonesia, namely United
Tractors, Trakindo, Hexindo, and Intraco Penta.
4. The number of coal mining contractors, therefore, has
increased with the growing demand for their services. There
are 150 mining service companies registered at the energy
and mineral resources ministry, but only 20 of them actively
operate in the service industry.
5. Among large contractors dominating the job of mining coal
are PT Pama Persada Nusantara, PT Thiess Contractors,
PT Petrosea, PT Bukit Makmur and PT Darma Henwa.
6. At present, there are about 57 coal mining companies
operating in Indonesia. From this amount, 47 are operating in
Kalimantan, 4 in Bengkulu, 3 in West Sumatera, 2 in Riau,
and 1 in South Sumatera.
7. Indonesia has three companies assembling heavy equipment
including Excavators, bulldozers, motor graders, wheel
loaders and dump trucks. They are PT Komatsu Indonesia
which produces Komatsu brands, PT Natra Raya, producing
Caterpillar products, and PT Hitachi Construction Machinery
Indonesia producing Hitachi products.
8. Sales of heavy equipment in Indonesia are all handled by sole
agents. Sole agency was required by the government
regulation as foreign companies were not allowed to do retail
business. However, now they are allowed to sell their
products directly to users although they still maintain the old
system of using sole agents.
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9. The sole agent for Komatsu is PT United Tractors, that of

Caterpillar is PT Trakindo and that of Hitachi is PT Hexindo
Adiperkasa.
10. United Tractor with Komatsu and Trakindo with Caterpillar
dominate 70% of the market of heavy equipment in Indonesia.
In 2007, amid strong demand, Kobelco and Daewoo and other
unknown brands also enjoyed good sales.
11. Heavy equipment market in 2008 is projected to increase by
25%. Numerous orders have come from mining, plantation,
construction, and forestry sectors, thereby encouraging
producers to work hard in order to increase production.
12. The Association of Heavy Equipment Industry of Indonesia
(Hinabi) recorded that in 20072008, total capital
expenditure of the national heavy equipment producers was
estimated to increase US$ 200 million.
13. In line with the development of mining industry, especially
coal mining, heavy equipment financing in Indonesia in 2007
increased quite significantly by 17.8% to Rp 22.088 trillion. In
addition to the mining sector that contributed a quite
considerable purchase, plantation and construction activities
improved significantly in 2007.
14. Joint venture companies still dominate business in heavy
equipment leasing in Indonesia. Joint venture companies are
superior financially and experience as the co-owners of joint
venture companies are dealers or manufacturers of heavy
equipment.
15. In 2007, Dipo Star took over from Orix as the largest leasing
company providing credits for the leasing of heavy
equipment.
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16. Major heavy equipment leasing companies in Indonesia are

affiliated with heavy equipment producers or dealers.

12. DEVELOPMENT OF 10.000 MW COAL FIRED POWER PLANTS

(PLTU) CRASH PROGRAM
1. The increasing demand for electric power energy, with
limited power production capacity of PLN (State Power
Company) currently, results in frequent disturbance of power
supply for both household and industrial sector, and other
lines of business.
2. With the power supply deficit in several years to come,
because of incompliance of power need development with
the increase in power capacity of PLN, the government
assigns PLN to accelerate development program of 10,000 MW
PLTU (coal-fired power plant) that is planned to operate in
2010.
3. In 2003, power production of PLTU with coal energy source
reached 31,736 GWh in 2003, or increased from 29,313 Gwh
in 2002. Slightly decreasing to 30,806 GWh in 2004, this coalbased power production increased quite high to 33,253 GWh
in 2005, and increased significantly to 38,361 GWh in 2006.
4. The use of coal as power plant energy source continues to
increase, in line with reduction of fuel-based oil use for
power energy source.
5. In 2002, the use of coal as power energy source reached
14,054,377.5 ton and continued to increase gradually until
2007 that reached 21,843,000 ton.

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6. The development project of 10,000 MW PLTU will spread in

10 locations in Java with capacity of 7,000 MW and other 25
locations outside Java with capacity of 3,000 MW.
7. Banten is a region in Java Island and in Indonesia that has the
highest additional capacity of PLTU, namely 2,165 MW,
produced by PLTU Suralaya, Labuhan, and Lontar.
8. West Java is the second largest capacity in PLTU
development, namely 2,040 MW, from its two power plants,
namely PLTU Indramayu and Pelabuhan Ratu.
9. Several projects of PLTU in Java have executed the
development contract on March 12, 2007, among others PLTU
2 East Java Paiton 1 x 600 MW with contract value of Rp
777,293,309,274, and PLTU 1 Banten-Suralaya with contract
value of Rp 951,667,973,128.
10. Several projects of PLTU that will enter contract execution
phase are among others, PLTU East Nusa Tenggara, PLTU Riau
Islands, PLTU West Kalimantan, and Central Kalimantan, and
PLTU 1 in East Java.
11. Several projects of PLTU are still in tender process because in
several locations, tender process cannot be performed or
repeat tender must be held because the number of tender
participants has not fulfilled the given amount.
12. The management of PLN decided to distribute the operation
of 10,000 MW PLTU Crash Program in Java-Bali system to
subsidiaries and holding companies, respectively 4 units of
PLTU for PT Indonesia Power, 4 units for PT PJB, and 2 units
by PLN head office (holding).
13. A number of PLTU included in the crash program that have
completed some of their construction portions and will be
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ready to operate in 2009, have build cooperation with several

coal producers among others, PT Bara Mutiara, PT Titan
Mining, PT Arutmin cooperating with PT Darma Henwa, and
several other coal mining companies to supply their needs.

13. PROSPECT OF COAL BED METHANE

1. Coal Bed Methane (CBM) is methane gas formed by microbial
activity (biogenic) or heat (thermogenic) during coal
formation process commonly found/trapped inside coal layer
and constitutes one of the environmentally clean energy
resources that has been used in many countries.
2. The Minister of Energy and Mineral Resources, Purnomo
Yusgiantoro, stated that on January 15, 2008, the
Government will offer CBM work territory in several groups
of work territory, namely in open areas, in oil and gas work
territory, in coal work territory, and in the contact area
between oil and gas and coal work territories.
3. With a total CBM reserves of about 453,3 trillion cubic feet,
Indonesia is of ten mentioned to process the world second
biggest CBM reserves. Regrettably, as far as utilization is
concerned, its nil.
4. Until now there is no CBM gas being produced in Indonesia,
either as a pilot project, let alone commercially. Therefore,
the business undertaking of CBM is very new to Indonesia.
Thus, the participation of the nine companies is a good
beginning for future CBM development in Indonesia.

***

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