INDONESIAN COAL MINING POLICY

DIRECTORATE GENERAL OF MINERAL AND COAL

MINISTRY OF ENERGY AND MINERAL RESOURCES

KEYNOTE SPEECH

Clean Coal Day in Japan 2015 International Symposium

BAMBANG GATOT ARIYONO

DIRECTOR GENERAL OF MINERAL AND COAL

OUTLINE I. BACKGROUND

II. COAL RESOURCES, RESERVE AND QUALITY 2010 – 2014

III. PRODUCTION, DMO, EXPORT AND WORLD COAL PRICE 2010-2015

IV. THE MAIN POLICY OF INDONESIAN ENERGY

V. COAL PRODUCTION CONTROL

VI. MINERAL AND COAL INVESTMENT

VII. LABOR AND COMDEV

VIII. COAL PRICES REFERENCE/(HBA) VS 4 INDEX

IX. THE STATE REVENUE OF SUB SECTOR MINERBA

X. LETTER OF CREDIT

XI. COAL MAIN PORT FOR COAL EXPORT

XII. CLOSING REMARKS

1. Refering to the Constitution, coal right is held by the state and the coal

is utilised for the most of the people’s prosperity. It also implies that the

state must increase the value of the coal in order more benefit is gained

by the people.

2. The new Mining Law No. 4/2009 mandates the Government should

manage the resources through conserving, prioritization of domestic coal

demand and increasing value added of mineral and coal for the purpose

of creating sustainable economic development.

3. There are some issues regarding coal mining for this forum such as:

production controll, DMO, port for coal export, L/C and state revenue.

1. BACKGROUND

2. INDONESIAN COAL RESOURCES, RESERVE AND QUALITY 2010 - 2014

The growth of yearly national coal resources are approx. 5% and reserves are

approx. 12%. This growth mainly influenced by the increase in world coal prices

Only 23% of resource can be modified to reserve, it is mainly influenced by land

acquisition problem, lack of infrastructure and scarcity of LRC utilization in mine

mouth.

There is an information of thick deep seated coal (> 25 m thickness).

Indonesian coal greatest potential is mid rank (± 4800-5800 cal/ g GAR) and

followed by low-rank (± <4800 cal/ g GAR).

3. INDONESIAN PRODUCTION, DMO, EXPORT AND WORLD COAL PRICE 2010-2015

Coal production growht about 14% per annum (2010 - 2014). World coal price (demand) affecting Indonesian

coal production and export. Coal production remained up when coal price fell because coal company maintain

revenue and many IUP has begun the production phase.

Production until April 2015 about 130 million ton or decrease 21% compared to April 2014 (164 million ton). This

is mainly due to rainfall and impact of coal export sales policy.

Domestic coal demand growth very slow when compared to export (4% per annum). Quality for domestic market

: 4.000 – 6.500 Kcal/Kg GAR

Coal export about 75-80% of total coal production, coal export for 2014 growth 3,5% of 2013.

0

50

100

150

200

250

300

350

400

450

500

2010 2011 2012 2013 2014 2015*

250

389 395 401421 425

280

353

412

474458

231

185

312 316 321330 323

210

287

323

402382

187

6577 79 80 82

102

65 66 67 72 76

46

Mill

ion

Tonn

es

production (plan) Production (realization) Export (plan) Export (realization) DMO (plan) DMO (realization)

*: up to July 2015

4. THE MAIN POLICY OF INDONESIAN ENERGY

Energy Law No. 30 of 2007 which further regulated in Government Regulation

No. 79 2014 About the National Energy Policy (KEN):

Energy resources for national economic development, creation of domestic

value added and employment.

To reduce fossil energy exports gradually, especially coal, and set a deadline

to start halt coal exports.

To realize economic balance of energy, national energy development priorities

based on use of coal as a mainstay of the national energy supply.

Utilization of coal for electricity, industry and utilization of new energy sources

in form of liquid coal and hydrogen for transport.

Primary energy mix of coal by 2025 at least 30% and by 2050 at least 25%.

Based on the National Mid-Term Development Plan of 2015-2019 (Presidential Decree No. 2 of 2015:

➢ Production Plan in 2015 amounted to 425 million tons and decreased to 400 million tons in 2019.

➢ Domestic percentage of the National Coal Production in 2015 amounted to 24% and increased to 60% in 2019

5. COAL PRODUCTION CONTROL (2015 – 2019)

No End User Year

Quality (Kkal/Kg) 2015 2016 2017 2018 2019

1 a. Existing Powerplant 74.000.000 76.200.000 76.200.000 76.200.000 76.200.000 3800 - 6150

b. Powerplant Program 35 GW 16.600.000 18.300.000 32.500.000 89.900.000

2 Metalurgi 3.582.000 4.648.000 4.648.000 4.648.000 4.648.000

4200 -7400

a. PT krakatau Steel & Group :

1. PT Krakatau Steel 222.000 968.000 968.000 968.000 968.000

2. PT Krakatau Posco 2.195.000 2.195.000 2.195.000 2.195.000 2.195.000

3. Meratus Jaya Iron & Steel 400.000 400.000 400.000 400.000 400.000

b. PT. Antam 565.000 885.000 885.000 885.000 885.000

c. PT. Vale 200.000 200.000 200.000 200.000 200.000

3 Fertilizer 1.305.700 1.980.200 1.995.200 6.875.200 11.075.200

4200 - 4910

a. PT Pupuk Sriwijaya 30.500 705.000 720.000 3.710.000 4.900.000

b. PT Pupuk Iskandar Muda 0 0 0 450.000 560.000

c. PT Pupuk Kujang Cikampek 0 0 0 450.000 560.000

d. PT Petrokimia Gresik 475.200 475.200 475.200 475.200 475.200

e. PT Pupuk Kalimantan Timur 800.000 800.000 800.000 1.790.000 4.580.000

4 Cement 10.542.300 12.039.831 13.990.161 15.604.904 16.372.105

4900 - 6499 a. PT. Semen Holcim 1.700.000 1.850.000 1.850.000 1.850.000 1.850.000

b. PT. Semen Indonesia 5.999.295 6.189.831 7.140.161 7.754.904 8.522.105

c. Semen Lainnya 2.843.006 4.000.000 5.000.000 6.000.000 6.000.000

5 Textile 2.200.000 2.390.000 2.590.000 2.790.000 3.020.000 4200 - 5600

6 Pulp/paper 650.000 700.000 760.000 820.000 880.000 4500 - 5500

7 Briquette 30.000 30.000 30.000 30.000 30.000 >3800

Strategic Plan 92.310.000 114.588.031 118.513.361 139.468.104 202.125.305

Long Term Plan 102.000.000 111.000.000 121.000.000 131.000.000 240.000.000

Gap (Longterm plan-Strategic plan) 9.690.001 (3.588.031) 2.486.639 (8.468.104) 37.874.695

5.1 DOMESTIC COAL PLAN UTILIZATION

6. MINERAL AND COAL INVESTMENT

Investment in MINERBA annually increased by an average 27%, which in Ccow

by 6% and mining services grew by 59%, it is influenced by the increase in

demand and price of coal. Most Ccow use services of mining contractor.

Expatriate only 0.3% of Ccow and Main Contractor Labor.

Ccow and Main Contractor Labor only 9.6% of Mining Sector Labor (data from Statistic Of Indonesia).

7. LABOR AND COMDEV

Realization largest Comdev costs in

2012 and decreased in 2013.

We suspect Comdev costs are affected

by the company's financial condition as

a result of the price of coal.

HBA = 25% ICI 6500 + 25% Platts 5900 + 25% NEX 6322 + 25% GC 6322;

Since 2011 coal prices continued to decline this was due to the oversupply in the Asia

Pacific market is mainly due to exports of Indonesia and Australia, while coal

consumer uptake slowed mainly to Tiongkok.

8. COAL PRICES REFERENCE (HBA) VS 4 INDEX

0.00

20.00

40.00

60.00

80.00

100.00

120.00

140.00

160.00

180.00

200.00

Har

ga (U

S$/t

on)

HBA

ICI-1

NEX

GC

PLATTS-1

HBA AUGUST

2015 =

US$ 59,14

8.1. HBA will be revised formula related to use of coal price condition on basis

quality of Indonesian coal.

Revision includes:

1. Calorie basis for low calorie steam coal (GAR): 4200 (3 sources index)

2. Revised index for coking coal: 2 sources index

Proposed revision:

1. Changing composition of coal Index for HBA 2

2. Changing sulfur content correction factor and ash :

using percentage of coal price, or

using correction tables for each level.

Average increase in total

non-tax revenues by 18%

per year.

Growth of non-tax

revenues 15% coal and

mineral 23% of sales.

Coal contributes an

average of 84% of non-tax

revenues.

Target non-tax of 2015

amount 52 Trillion Rupiah.

State revenues (tax and

non-tax) from the mining

sector in 2013 amounted

to 145.1 Trillion dollars

(9.7% of the budget).

NON TAX REVENUE BY COMODITY

NON TAX REVENUE BY ACCOUNT

9. THE STATE REVENUE OF SUB SECTOR MINERBA

Basic Legislation:

1. Minister Of Trade Regulation No. 04 / M-DAG / PER / 1/2015 (January 5, 2015)

regarding Terms of Use L/C for the Export of Certain Goods.

Export of mineral and coal must use the method of payment L/C;

Through the national Foreign Exchange Bank;

L/C payment documents examined by surveyors.

2. Minister Of Trade Regulation No. 26 / M-DAG / PER / 3/2015 (March 30, 2015)

regarding Implementation of the Special Conditions of Use L/C for the Export of

Certain Goods.

In the case of exporters have not been able to use the method of payment L/C,

the exporter may apply suspension to the Minister of Trade after getting a

recommendation from technical ministries.

10. LETTER OF CREDIT

Objective: The effective implementation of export policies, optimization and accuracy

of foreign exchange earnings from exports, export certainty, etc.

3. Circular of the DG of Mineral and Coal No. 03.E / 30 / DJB / 2015 regarding On

Requirements For Getting Technical Considerations Suspension of Payment

ways L/C.

Requirements Copies of ET-Mining Products of the Ministry of Trade;

Sales contracts that have set the mode of payment other than L/C

The ability of exporters to adjust the payment method using L/C

Status Request Suspension of Payment L/C (May 11, 2015):

1. Recommendations: 24 application;

2. Rejection: 15 application;

3. Evaluation process : 9 application.

Summary: 48 application.

4. Letter of the MEMR to the Minister of Trade Number: 2924/30 / MEM.B / 2015 (20

April 2015) regarding Application Exception To The Terms Of Use L/C for Mineral

and Coal Exports.

11. COAL MAIN PORT FOR COAL EXPORT (PROPOSED LOCATION)

Kalimantan Timur, location:

1. Balikpapan bay

2. Adang bay

3. Berau bay

4. Maloy bay

Kalsel/Kalteng, location:

1. Taboneo/Pulau laut,

2. Sungai Danau,

3. Batu Licin

Lampung Tarahan

“Existing PTBA”

Sumsel

Tanjung Api Api Jambi

(around Jambi bay)

Bengkulu

(Bengkulu port)

Sumatera Barat

(Padang)

Riau

(Riau bay)

Aceh

(South Aceh)

Existing Coal Export Port Kalsel

1. NPLCT

2. IBT

Existing Coal Export Port Kaltim

1. BoCT

2. BCT

3. KPC Port

11.1. THE POTENTIAL CAPACITY OF COAL EXPORT PORTS (million tons) YEAR 2014*

Kalimantan Timur, wilayah:

1. Balikpapan bay: 57.8 **)

2. Adang bay: 34

3. Berau bay: 34

4. Maloy bay: 6.5

Kalsel/Kalteng, location:

1. Taboneo/Pulau laut: 55.8 ***)

2. Sungai Danau: 13.5

3. Batu Licin: 5.5

Lampung Tarahan

“Existing PTBA”: 2

Sumsel

Tanjung Api Api: 6.4

Jambi

Around Jambi bay: 3

Bengkulu

Bengkulu port: 3

Sumatera Barat

Padang: 2

Riau

Riau bay: 2

Aceh

South Aceh : 0.5

Existing Coal Export Port Kalsel

1. NPLCT: 20

2. IBT: 20

Existing Coal Export Port Kaltim

1. BoCT: 12

2. BCT: 3.8

3. KPC Port: 40

*) if there is no transshipment

**) out from Mahakam River

***) out from Barito River

12. CLOSING REMARK

1. Need to do a strategic move to increase its reserves of existing coal

resources;

2. Prioritized coal as an energy source for national power generation and

industry;

3. Efforts to increase utilization of low rank with utilization around the mine

site through increased added value and utilization of coal for Mine Mouth

Power Plant;

4. The subsector mineral and coal has play important role as national

economic backbone (investment and state revenue);

5. Decline of coal prices affect slowing exploration spend, slowing reserve

growth, decline in the state revenues and decline of Community

Development expenditures.

www.minerba.esdm.go.id

ATTACHMENT

2008-2013 HIGHLIGHT INDONESIAN COAL EXPORTS

Sources: Statistic Of Indonesia

TOP TEN DESTINATION (% ton)

Main destination of coal export are to Asia Pacific where largest to Tiongkok, India, Japan, South

Korea, etc.

Largest value FOB Vessel of coal export are to Tiongkok, India, Japan, South Korea, Taiwan, etc.

The sales price of coal is the largest average sales to Japan, Italy, Taiwan, Philippines, Malaysia, etc.

TOP TEN FOB VALUE (Billion US$)