Unlocking Sumatra by Ian Wollff

UNLOCKING SUMATRA COAL ; OUTLOOK AND CHALLENGERS IN EXPLORATION OF NEW GREENFIELD COAL.

Manual mining multi seam mining- interburden removed with bull dozerBukit Asam – Suban Pit 1975

Photo – Ian Wollff

1. Sumatran coal is generally divided between east coast and west coast.

Manual mining pit supervisionBukit Asam – Suban Pit 1975


1.1 East coast coal tends to be thick continuous coal seams of low rank, with low dip.

Manual mining coal with drill & blastBukit Asam – Suban Pit 1975


1.2 West coast coal tends to be thin strongly faulted coal seams of moderate rank and often high dip.

Manual mining with mattokBukit Asam – Suban Pit 1975


1.3 In each case the rank and complexity of the seams tends to increase towards the central mountain range. Coal seams are locally upgraded when in proximity to intrusions.

Manual mining coal with pick & shovel into wicker basketsBukit Asam – Suban Pit 1975


1.4 Most of the Sumatran coal fields were mapped over 100 years ago by Shell in their oil exploration program, and are reflected in today’s Government regional geological maps.

Manual mining fill carry baskets at coal faceBukit Asam – Suban Pit 1975


1.5 Most of the Coal COW’s and IUP’s are located in proximity to the Governments maps indications of such coal fields.

Manual mining carry coal to rail headBukit Asam – Suban Pit 1975


1.6 The greenfield exploration has largely been about relocating and further defining the various coal seams.

Manual mining loading rail carsBukit Asam – Suban Pit 1975


2. Exploration programs tend to follow a well established pattern of outcrop mapping, drilling with down hole geophysical logging, coal assay and surveying.

Manual mining rail loadingBukit Asam – Suban Pit 1975


2.1 The Indonesian development of light weight drills & geophysical logging unites, plus assay laboratories contributes to low exploration costs.

Tanjung Enim Coal wash plantTanjung Enim – 1975


2.2 The overall growth of the Indonesian coal exploration industry contributes to the development of geologists, surveyors and such skilled work force to support the exploration industry.

Tanjung Enim Coal power stationTanjung Enim – 1975


3. The commercial targets for Sumatra Coal are mainly;

Tanjung Enim main streetTanjung Enim – 1975


3.1 Modest amounts of coal are being exported from each coast, however haulage distance is a restricting factor for economic development for export.

General view coal miningMechanized mining- Air Layer Pit – 1975


3.2 Coal upgrading for export (to justify haulage) is yet to succeed commercially.

Overburden bucket wheel excavator & conveyor spreader #1Mechanized mining- Air Layer Pit – 1975


3.3 Development of coal rail (to lower haulage operating costs) is working for PTBA, however a combination of high capital cost, difficult land compensation and government regulations have hampered new private rail.

Overburden bucket wheel excavator & conveyor spreader #2Mechanized mining- Air Layer Pit – 1975


3.4 Mine mouth power stations have been developed & are being considered on each side of Sumatra, however small local consumption of electricity limits development opportunities.

Overburden bucket wheel excavatorsMechanized mining- Air Layer Pit – 1975


3.5The new Government regulations on royalty for mine mouth power station, and for selling electricity into the national grid and abroad may help some exploration projects.

Dragline to prepare floor & for overburden spreadingMechanized mining- Air Layer Pit – 1975


3.6 Coal Seam Gas holds some potential, however unsuitable government regulations and sparcity of oil pipe infrastructure has stalled this potential development.

Mechanized mining #1Air Layer Pit – 1975


3.7 Coal upgrading for export has been tested and tried, but there are no viable operations, and funding for such new technology is difficult.

Mechanized mining #2Air Layer Pit – 1975


4. Social factors now provide a growing restriction over exploration.

Coal Conveyor – mechanized miningAir Layer Pit – 1975


4.1 Indonesia’s population doubles about every 33 years, leading to two divergent community aspirations ;

Arial view coal miningMechanized mining- Air Layer Pit – 1975


4.1.1Competition for land use for housing, infrastructure etc, imposes higher land compensation costs and longer periods to acquire land. This makes the marginal coal fields always “just out of reach” for many coal project developments.

Arial view Air Layer pit & workshopMechanized mining- Air Layer Pit – 1975


4.1.2 Demand for employment and electricity may encourage some coal development projects.

Overburden bucket wheel excavator next to buried coal shovelAir Layer Pit – 1975


4.2 Indonesia’s growing social awareness of the environment, history and recognition of human rights contributes to more regulations placing restrictions on exploration and development.

Mechanized mining- top of electric shovel buried by mud slideAir Layer – 1975Photo – Ian Wollff

4.3 Competition for land use by other industry sectors – particularly forestry wherein the faster pace of plantation development is placing growing restrictions on exploration and commercial coal development.

Tanjung Enim Rail yardsTanjung Enim – 1975


5. Greenfields exploration needs risk taking investors – opportunists.

Mechanized Barge loading conveyor systemKertapati Palembang– 1977


5.1 Greenfields exploration is typically undertaken by investors when there is an opportunity to make great profits. Such opportunities mainly occur when the price of coal is rising (demand greater than supply).

Mechanized Barge loadingKertapati Palembang– 1977


5.2 Greenfield exploration is well known as a high risk - high cost venture, which relies upon sound legal certainty and long development & operation periods.

Coal Barge Kertapati Palembang– 1977


5.3 Indonesia’s recent Government regulations now imply poor legal certainty for foreign investors (divestment) and Indonesian companies (land compensation, forestry, local regulations), needing higher profits to offset the higher project risks.

Trans Sumatra Highway Prabamuli – 1977Photo – Ian Wollff

5.4 The pool of potential and capable Indonesian investors is very limited, where alternative business opportunities (high rise building etc) may offer more competitive business opportunities.

Shell Exploration -Helicopter visit for socializationLubik Linggau– 1975


5.5 The pool of potential and capable foreign investors is vast; however other countries may present a more attractive investment opportunity.

Shell Exploration -Helicopter spotting of coal outcropsSouth Banko– 1975


6. Recommendations.

Shell Exploration –picnic at coal outcropSouth Banko– 1975


6.1 The Governments need to become pro active in attracting investors into the greenfield coal exploration industry. The Government has an active program to support the tourist industry, so why not the failing Sumatran coal exploration industry!

Shell Exploration –drill accessBanko – 1977


6.2 The Government should be encouraged to lift the moratorium on new coal lease applications, such that companies can restart green field exploration.

Shell Exploration – drill & geological loggingBanko – 1977


6.3 The Government should be encouraged to formally publish its coal & mineral spatial planning maps, to provide the exploration industry with assurances that not all the prospective land will be allocated to other uses (plantations etc).

Shell Exploration – drill Banko – 1977


6.4 The Government may reconsider its National development strategy, with Sumatra as a centre for mine mouth power stations supporting manufacturing industries.

Shell Exploration – drill moving on road Tanjung Enim– 1977


6.5 The Government should ensure the project data derived from the recent surge in exploration is properly secured and stored (digitized) as a foundation for the next cycle of exploration.

Shell Exploration – drill heli rig with platform above blow out preventer Tanjung Enim– 1977


7. Conclusions.

Shell Exploration – blow out preventer – heli drill rigTanjung Enim– 1977


7.1 The opportunity to undertake greenfields coal exploration tends to be cyclic, with most opportunities coming from :

Shell Exploration – drill heli moving#1 Tanjung Enim– 1977


7.1.1 Upturns in the coal price (demand more than supply)

Shell Exploration – drill heli moving #2Tanjung Enim – 1977


7.1.2 Changes in Government support for the coal industry (tax concessions, ease development barriers, support for mine mouth power stations etc).

Shell Exploration – Winky rig Banko – 1977


7.1.3 Change regulations to ease development for the CBM industry.

Shell Exploration – Winky rig & pump Banko – 1977


7.1.4 Technology breakthroughs – new systems for upgrading or transporting coal etc.

Shell Exploration – BPB logging unit- trailer mounted Banko – 1977


7.1.5 Greenfields success often comes from creative geologist looking in places, and in ways, others have not.

Shell Exploration – BPB logging unit- heli mounted Banko – 1977


7.2 The previous cyclic for Sumatran Greenfield exploration was 40 years ago with Shell in South Sumatra, 20 years ago with the development of the Coal COW, and 5 years ago with the KP system.

Shell Exploration – BPB logging unit(heli ) - operationBanko – 1977


(7.2 continued) Each cyclic phase had an essential Government stimulant component through making attractive concession licensing and business environment.

Shell Exploration – Geological core loggingBanko – 1977


(7.2 continued) The present down turn in the greenfields exploration industry can not be blamed solely on coal price, but the Government should acknowledge its lack of support for the industry.

Shell Exploration – SurveyingBanko– 1977


7.3 Limited short term potential for greenfields coal exploration may lie with opportunities associated with;

Shell Exploration – Banko exploration campBanko – 1977


7.3.1 High value specialist coals, principally on the west coast.

Shell Exploration – Interested onlookersBanko – 1977


7.3.2 Mine mouth power stations to supply local power demand.

Shell Exploration – Local slash & burn agriculture (Not Shell)Banko – 1977


7.3.3 Mine mouth power stations in the far south of Sumatra to feed the national grid connected to Java (short transmission losses).

Ship loader – Bamco / World BankTanjung Karang – 1985


7.3.4 Mine mouth power stations in close proximity to Singapore to feed future undersea power to Singapore & Malaya.

New Bucket wheel excavator – Bamco / World BankBukit Asam – 1985


7.3.5 CBM development in close proximity to, and to feed into, the existing oil pipe networks.

New Bucket wheel excavator (201)– Bamco / World BankBukit Asam – 1985


7.4 Longer term potential for greenfields coal exploration is largely dependent on a change in coal price, or some form of national support.

Mobile transfer for OB conveyor – Bamco / World BankBukit Asam – 1985


A story associated with these historic photos by Ian Wollff can be found in the Petromindo.com magazine “Coal & minerals Asia” Vol 34.

Mobile OB spreader – Bamco / World BankBukit Asam – 1985


Ian Wollff is a Principal Geologist working with PT. CSA Global international geological consultants , located in Jakarta.

Switching station for OB conveyor – Bamco / World BankBukit Asam – 1985


Thank You

World Bank Exploration –plotting outcrop mapTanjung Enim– 1985


Unlocking Sumatra by Ian Wollff

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