Energy demand has been growing at a remarkable rate into the 21st century, where most of the demand is being fulfilled by conventional fossil fuels. With high oil prices, Coal is the most important energy source for electricity generation and also forms an essential fuel for the production of steel and cement. Indonesia with 40 billion metric tons of coal reserves is still among the largest coal supplier in the world. Indonesia is among the top ten producers of coal having 237.4mt coal.
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. Indonesia comprises of 17500 island is the world’s 16th largest country. There are numerous smaller pockets of coal reserves on the islands of Sumatra, Java, and Kalimantan, Sulawesi and Papua but the three largest regions of Indonesian coal resources are:
South Sumatra South Kalimantan East Kalimantan.
Although Indonesia has long history of coal mining, the first commercial operation commenced in 1849 when NV Oost Barneo Maatschappij began mining in Pangaron, East Kalimantan. The discovery of oil in East Java in 1884 reduced interest in coal mining. By start of World War 2 Indonesia was largest supplier of oil in far East, producing 180,000 barrels a day and by 1960 this had risen to 400,000 barrels a day. The coal mining remained at small scale at that time about 2 million tons in 1941 and mainly supplied to shipping industry. As ships moved to oil fired engines, the industry declined to almost nothing producing 200,000 tons of coal by 1972. By 1973 oil impediment resulting from Yom Kippur war tripled oil prices and reignited interest in coal as fuel. The relaxing foreign investment and interest in an alternative led to slow and steady growth in Indonesian coal mining industry, initially though Rio Tinti Zinc and secondary of the Shell Company.
In 1980 and by 1983 five companies had obtained rights to 20 million tons of coal deposits. By 1990 industry was enjoying 30% growth a year and by 1995 Indonesia was supplying 30 millions coal a year. By the end of decade it had risen to 55 million. Indonesia became the world’s largest supplier of steaming coal in 2005 with 117 million tones. By 2009 this had risen to 176 million tones leading to 330 million tons in 2012.This was the real boom in Indonesian coal industry. Only 24% of coal is used in Indonesia internally and the rest is exported.
The value of coal to Indonesia was Rp 5.8 trillion in 2007 that increased by Rp 20.8 trillion in 2012. Although coal extraction increased only 52% in five years but revenue went up by 358%.
The most important buyer of Indonesian steam coal in the Pacific area is Japan with approximately 35 million tons. Other buyers are in particular Taiwan, South Korea and India. China with approximately 20 million tons per year is also an important buyer. For technical and viable reasons Indonesia has become a major supplier of coal to nations with larger coal deposits like china and India. 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 product accounts for around 85 percent of mining revenue.
Indonesia allowed its miners to sell at prices well below the standards. This was possible because it costs Indonesian large miners between $30 to$55 to extract ton of coal and transport it to port. This makes it the cheapest steaming coal in the world and it’s the basic reason that Indonesia is largest coal supplier in the world. It is about price so in short Indonesia at this time has a strong competitive advantage through low cost open cut coak mining operations close to low cost transport facilities.
The merchandise 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 particularly coal accounts for around 50 percent of total Indonesian exports, thus limiting the country's GDP growth in 2009 to 4.6 percent. From the latter half of 2009 until the beginning of 2011 a sharp rebounce 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.
This means that - generally - profits in the coal industry will be limited in the near future. However, if we take it into longer term - when global economic activity is back on track - demand from China and India is forecast to make the coal business very profitable again.. These promising future perspectives are the main reason that in recent years many Indonesian companies have started planning to expanding into the nation's coal mining industry, considering the rising energy prices and growing shortage of energy sources, it will become more expensive to buy coal on the market in the future. For many Indonesian companies this is an incentive to start securing coal reserves now. A number of large companies such as Astra International, Semen Gresik (cement industry) and Perusahaan Listrik Negara (electricity) - last two of which are highly dependent on the supply of coal - are investing in coal mining in order to establish an entire value chain in mining and energy businesses while also securing future supplies, and thus guarding it against fluctuations in global coal prices. Currently, owning a coal mine has become a trend for the richer families and companies in Indonesia.
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 expected future, thus coal remains a vital energy resource and Indonesia is expected being a major player in the coal mining sector.
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. Indonesia comprises of 17500 island is the world’s 16th largest country. There are numerous smaller pockets of coal reserves on the islands of Sumatra, Java, and Kalimantan, Sulawesi and Papua but the three largest regions of Indonesian coal resources are:
South Sumatra South Kalimantan East Kalimantan.
Although Indonesia has long history of coal mining, the first commercial operation commenced in 1849 when NV Oost Barneo Maatschappij began mining in Pangaron, East Kalimantan. The discovery of oil in East Java in 1884 reduced interest in coal mining. By start of World War 2 Indonesia was largest supplier of oil in far East, producing 180,000 barrels a day and by 1960 this had risen to 400,000 barrels a day. The coal mining remained at small scale at that time about 2 million tons in 1941 and mainly supplied to shipping industry. As ships moved to oil fired engines, the industry declined to almost nothing producing 200,000 tons of coal by 1972. By 1973 oil impediment resulting from Yom Kippur war tripled oil prices and reignited interest in coal as fuel. The relaxing foreign investment and interest in an alternative led to slow and steady growth in Indonesian coal mining industry, initially though Rio Tinti Zinc and secondary of the Shell Company.
In 1980 and by 1983 five companies had obtained rights to 20 million tons of coal deposits. By 1990 industry was enjoying 30% growth a year and by 1995 Indonesia was supplying 30 millions coal a year. By the end of decade it had risen to 55 million. Indonesia became the world’s largest supplier of steaming coal in 2005 with 117 million tones. By 2009 this had risen to 176 million tones leading to 330 million tons in 2012.This was the real boom in Indonesian coal industry. Only 24% of coal is used in Indonesia internally and the rest is exported.
The value of coal to Indonesia was Rp 5.8 trillion in 2007 that increased by Rp 20.8 trillion in 2012. Although coal extraction increased only 52% in five years but revenue went up by 358%.
The most important buyer of Indonesian steam coal in the Pacific area is Japan with approximately 35 million tons. Other buyers are in particular Taiwan, South Korea and India. China with approximately 20 million tons per year is also an important buyer. For technical and viable reasons Indonesia has become a major supplier of coal to nations with larger coal deposits like china and India. 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 product accounts for around 85 percent of mining revenue.
Indonesia allowed its miners to sell at prices well below the standards. This was possible because it costs Indonesian large miners between $30 to$55 to extract ton of coal and transport it to port. This makes it the cheapest steaming coal in the world and it’s the basic reason that Indonesia is largest coal supplier in the world. It is about price so in short Indonesia at this time has a strong competitive advantage through low cost open cut coak mining operations close to low cost transport facilities.
The merchandise 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 particularly coal accounts for around 50 percent of total Indonesian exports, thus limiting the country's GDP growth in 2009 to 4.6 percent. From the latter half of 2009 until the beginning of 2011 a sharp rebounce 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.
This means that - generally - profits in the coal industry will be limited in the near future. However, if we take it into longer term - when global economic activity is back on track - demand from China and India is forecast to make the coal business very profitable again.. These promising future perspectives are the main reason that in recent years many Indonesian companies have started planning to expanding into the nation's coal mining industry, considering the rising energy prices and growing shortage of energy sources, it will become more expensive to buy coal on the market in the future. For many Indonesian companies this is an incentive to start securing coal reserves now. A number of large companies such as Astra International, Semen Gresik (cement industry) and Perusahaan Listrik Negara (electricity) - last two of which are highly dependent on the supply of coal - are investing in coal mining in order to establish an entire value chain in mining and energy businesses while also securing future supplies, and thus guarding it against fluctuations in global coal prices. Currently, owning a coal mine has become a trend for the richer families and companies in Indonesia.
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 expected future, thus coal remains a vital energy resource and Indonesia is expected being a major player in the coal mining sector.
