The world's coal consumption as a source of energy surged after the skyrocketing rise in the prices of oil in 2008. Coal trade, which has increased from year to year since 2004, was brisker after 2008.
The leapfrogging increase in demand for coal was attributable more too growing demand from fast expanding economies of two Asian giants, India and China. Increase was also recorded in demand in Asean countries using coal as an alternative source of energy to more expensive oil.
In he past five years coal trade surged in volume from 755 million tons in 2004 to 941 million tons in 2009. Coal consumption was estimated to reach 4,646 million tons in 2004.
Coal has become the main alternative source of energy to oil as shown by the growing domination of steam coal in coal trade. Steam coal is used mainly to generate electricity or to fuel boilers. In 1995, the world's steam coal trade was recorded only at 297 million tons, but in 2009, the figure shot up to 709 million tons.
Meanwhile, trade of coking coal which is used mainly as fuel in iron smelter, reached 196 million tons in 1995. The coking coal trade has been relatively stable rising only moderately over the next decade to reach 232 million tons in 2009.
Indonesia is world's second largest exporter
Indonesia has continued to boost its coal exports to meet growing demand in the world market and has become the second largest supplier of the material to the world market after Australia. Meanwhile, the positions of China and South Africa among coal exporting countries had declined as a result of their growing domestic consumption. Most of their coal consumption has been used to meet domestic requirement.
Other major suppliers of coal to the world market include Colombia, Russia and the United States.
Japan has become the world's largest importer of coal. Japan, a highly industrialized country, has relied heavily on imports for energy including coal and oil and gas. In r 2009, Japan's imports of coal totaled 165 million tons
China, which once was the largest coal producer and one of major coal exporters in the world, has become a net importer because of growing domestic consumption. India, which also ranks among major coal producers, has become one of the world's largest importers of coal to fuel its fast expanding industries.
Indonesia, which is the second largest coal exporting country in the world, ranks only the 7th in production. China is the world's largest producer turning out 2.48 billion tons of coal in 2008, but it is also the world's largest consumer, followed by the United States and India.
The world's coal production was estimated at 7,271 million tons in 2008 or an increase of 3.2% from 7,047 million tons in 2007. The production did not include brown coal or lignite, the type with low calorific value or low rank coal.
China and the United States are the largest producers and at the same time the largest consumers of coal in the world. In 2008, China's production of coal reached 2.84 billion tons and the United States recorded production at 1.17 billion tons. Most of their coal production is for domestic consumption. Meanwhile, Indonesia exports most of its coal production making it the second largest supplier to the world market although it is only the 7th largest in production. The Indonesia government, however, already started to restrict exports to guarantee domestic supply, which is fast growing especially to feed coal-fired power plants of the state electricity company PLN.
The United States has the largest coal reserves accounting for 27% of the world's total reserves, followed by Russia, China and India. World's proven coal reserves totaled 909 billion tons in 2005, according to the World Energy Council - including 246 billion tons in the United States.
According to data from the World Energy Council in 2005, Indonesia's proven coal reserves totaled only 4.97 billion tons, or around 0.5% of the world's proven reserves. The figure, however, was much lower than 6.9 billion tons, according to the Energy and Mineral Resources Ministry. The proven reserves even shot up 18.8 billion tons in 2009 as a result of brisker explorations boosted by the rise in coal prices. The world's reserves also have increased as some of the reserves considered not commercially feasible have become profitable reserves.
Specifications of Coal
Each coal mine has coal with different characteristics. Meanwhile, the users such as power plants need coal with certain characteristics Specifications, therefore, are set by the users for coal they want with a number of quality parameters. Generally the quality parameters, according to the Bahana Tambang are as follows:
a) Calorie (Calorific Value or CV, cal/gr or kcal/gr)
CV indicates the energy value found in the coal generated by the burning of carbon, hydrogen nitrogen and sulphur.
b) Moisture in percentage
Moisture includes free moisture (FM) and inherent moisture (IM) both making up Total Moisture (TM). Moisture influences the use of prime air to dry coal.
c) Volatile Matters (VM), in percentage
VM content influences burning perfection and fire intensity based on the ratio of fixed carbon (FC) to volatile matters - called fuel ratio. The higher the fuel ratio, the more carbon in the coal not burned. If the ratio is more than 1.2, the burning is less perfect , slowing the process of burning.
d) Ash content in percentage
Ash will cause pollution, thirst and corrosion of equipment.
e) Sulphur content , in percentage
Sulphur content in coal is stated in Total Sulphur (TS). TS determine corrosion of the cool side of the air heating especially when working temperature is lower than the sulphur moisture point. It also affects the effectiveness ash catching in the electrostatic precipitator.
f) Fixed Carbon (FC) in percentage
The value of carbon content is higher for coal of higher quality. Carbon content and volatile matters are used in calculating the quality of fuel in the form of fuel ratio.
g) Coal size
Coal size is measured on span of fine and rough particles. The finest particles are not more than 3 mm and the roughest particles are as larger as 50 mm in diameter
h) Hard grove Grindability Index (HGI)
The performance of a pulverizer or mill is designed on a certain HGI. The machine for lower HGI coal must operate below its standard value to turn out coal with an equal level of fineness.
Following are examples of specifications of coal produced by state coal miner PT Bukit Asam (PTBA). This company sells five types of coal BA 58, BA 59, BA 67, and BA 70 with specifications as follows:
South Sumatra has largest coal deposits
Coal resources in Indonesia are scattered in a number of large islands including Sumatra, Kalimantan, Java, Sulawesi and Papua. Sumatra and Kalimantan have the largest reserves. Based on official data in 2009 of the Geology and Mineral Resources Directorate General, Sumatra had a total reserve of 52.44 billion tons or the largest, followed by Kalimantan with a total reserve of 51.92 billion tons.
According to data from the energy and mineral resources ministry in 2009, Indonesia's coal resources totaled 104.7 billion tons with proven reserves of 18.7 billion tons that commercially feasible. The commercial feasibility, however, depends on the coal price. The soaring price of coal in the last two years has resulted in a surge in the reserve categorized as proven.
The largest proven coal reserves are found in the province of South Sumatra. Based on data in January, 2009, South Sumatra had coal reserves totaling 9.54 billion tons. State company PT Bukit Asam (Persero) Tbk. has a large mine in Bukit Asam.
Other large reserves are found in the provinces of East Kalimantan and South Kalimantan operated by a number of companies like PT Adaro, PT Kaltim Prima Coal, PT Arutmin, etc.
Era of Working Contracts Over
Coal mining industry in Indonesia has expanded rapidly ever since the government allowed the private sector including foreign investors to operate in coal mining under what was called Contract of Work (COW). Previously, only two state companies, which were later merged to form PT Tambang Batubara Bukit Asam (PT BA) were allowed to mine for coal in the country.
The first generation of COW was signed in 1983 with 10 private companies, of which nine have produced coal. Among them are now the largest producers such as PT Adaro, PT Kaltim Prima Coal and PT Arutmin. The second generation of COW was signed in 1993 - 1996 with 18 companies including 8 companies now in the entering the process of production . Four other have stopped activities or have their license revoked.
In 1996, through Presidential Decree No. 75/1996, the government revised the system of coal management including in investment aspect through deregulation, simplification of bureaucracy and contracts. One of the most important revisions concerned regulation on contract from Coal Contract of Work (CCOW) to Coal Cooperation Contract (CCC) both with foreign (PMA) and domestic (PMDN) investors.
The era of COW, therefore, was over after the House of Representatives passed the Bill in Law on Mineral and Coal Mining in January, 2009. The Law No. 4 of 2009 put an end of the era of COW after 41 years being effective. The new law replaced the Law No. 11 of 1967 . Under the new law, mining company operate with license from the government instead of contract.
The change in the system of management is the most crucial in the amendment to the mining regulation as with the license, it gives superiority to the position of the state. Under the COW system the positions of both sides were equal, therefore, any revision of the contract had to be with the approval of both sides.
The Mineral and Coal Law also made clearer decentralization of authority in the management of the mining sector. Provincial and district administrations as well as city administrations are given the authority to issue mining licenses in their respective areas.
The mineral and coal law also recognizes the existence of individually mining enterprises. Another crucial matter concerns efforts to increase added value of minerals by obliging mining companies to build their processing factories in the country.
The new law will likely force mining companies to revise their investment plans, which were earlier adjusted to the COW. The energy and mineral resources ministry said the new law gives better investment certainty. The ministry will have to work immediately to wrap up draft regulations as implementation for the new law.
The mineral and coal law, however, still has some controversial points that created polemic over transfer stipulation which is regulated in Chapter 169 of points a, b and c.
The point a of the Chapter 169 says: The COW and working agreement issued before the new law was effective will remain effective until the end of their terms.
Many saw the Chapter as discriminative against new investors which have to go through stricter stipulations , which the old investors under the COW continue to enjoy incentives . The point a of Chapter 169 is seen as a protection for the existing COW miners.
Control of coal resources
Most coal resources have been controlled by companies operating under COW of the first generation like PT Adaro, PT Arutmin, PT Berau, PT Kaltim Prima Coal and state coal miner PT Tambang Batubara Bukit Asam .
Under the third generation of COW , there are two miners having coal reserves of more than 1 billion tons PT Pendopo Energi Batubara in South Sumatra and PT Yamabhumi Palaka in West Kalimantan, but the two mines have not started production. They are still in the process of explorations.
PT Yamabhumi is the only COW company operating in West Kalimantan and discovered a large reserve of 4.21 billion tons of coal. Based on the official data from the Geology and Mineral Resources Directorate General, by January, 2004, coal reserves in West Kalimantan were not more than 527 million tons.
Coal production up 13.9% per year
In the past 10 years the country's coal production has grown fast. The coal production grew 13.9% on the average annually in the period of 2001-2009 from 92 million tons to 226 million tons. The soaring oil prices forced many countries to look for alternative cheaper sources of energy. Coal is one of the most available alternative. Coal producers such as Indonesia, therefore, boosted their coal production . Indonesia has exported most of its coal production.
Coal production cost in Indonesia is relatively cheaper and Indonesian coal is very suitable to fuel power plants as it causes no much pollution with low sulfur content. It is expected that Indonesia's brown coal production will increase to meet growing demand especially from state electricity company PLN to fuel its coal-fired power plants.
Production by provinces
Kalimantan accounts for most or more than 90% of the country coal production. The largest producer among the provinces is East Kalimantan, which produced 127 million tons in 2009.
Kalimantan is strategically located being close to fast emerging markets in Asia notably China and India, making it more competitive facing other suppliers such as Australia.
South Sumatra has huge coal reserves, but most of the reserves are largely untapped with only PT Bukit Asam as major operator in that region.
Six companies dominate coal mining sector in the country accounting for more than 80% of he country's total production. The six companies are BUMI Energi (the owner of PT Kaltim Prima Coal and Arutmin), which produced around 58 million tons of \coal in 2009, Adaro with production of 40.6 million tons, Kideco 24.7 million tons, Banpu Group 20.7 million tons, Berau 14.3 million tons and state owned company PT Tambang Batubara Bukit Asam (PT BA) with production of 10.8 million tons in 2009.
The largest single producer is PT Adaro Indonesia, followed by PT Kaltim Prima Coal (KPC) with production of 40.6 million tons and 38.15 million tons respectively in 2009.....