Bukit Asam fires up to raise coal briquette production

By Johannes Simbolon

JAKARTA (JP): State coal mining company PT Tambang Batubara Bukit Asam is set to increase its coal briquette output to one million tons in 2000 to anticipate an increase in demand for alternative fuels.

Bukit Asam currently puts out 14,500 tons of briquettes at four production facilities, including two in Tanjung Enim, South Sumatra, one in Tarahan, Lampung and another one in Gresik, East Java.

Bukit Asam, the country's sole coal briquette producer, plans to increase its output to 48,000 tons this year.

The company turns out about 11 million tons of coal from several mine fields in South Sumatra.

"We estimate the domestic demand for briquettes will increase to two million tons by the year 2000. Bukit Asam will produce one million tons and the remaining one million tons are expected from private companies," company president R.A. Sunardi said last week.

According to Ministry of Mines and Energy data, there are 42 private companies which have received preliminary licenses to produce briquettes.

Sunardi said to reach its one million ton output target, Bukit Asam was preparing to develop another five briquette factories in Serang, West Java, Semarang, Central Java, and Gresik, each with a capacity of 120,000 tons per year.

The projects would require up to Rp 224.2 billion (US$22.4 million) in investments, he said.

The government began a promotion several years ago for the use of coal briquettes as an alternative fuel to kerosene to cut back on fuel subsidies.

The government has indicated that the country's oil resources are dwindling and has said it hopes to replace the use of oil with other sources of energy, including coal.

Considered a highly abundant resource, the country still has coal deposits in excess of 36 billion tons.

Today, Indonesia remains a net crude oil exporter. But the country must import some fuel products due to the limited capacity of the refineries of the state oil and gas company Pertamina.

The country's fuel imports reached 11.4 million kiloliters (kl) in fiscal year 1996/1997, including 2.7 million kl of kerosene.

At present, Pertamina imports kerosene at a price of Rp 1,300 per liter and sells it at Rp 280 per liter on the domestic market. The government subsidizes the fuel at Rp 1,020 per liter.

Sunardi said two million tons of briquettes were equal to 1.3 million liters of kerosene in terms of energy output.

The use of two million tons of briquettes annually could reduce the government subsidy for kerosene by Rp 1.3 trillion per year, he said.

The government projects fuel subsidies to total Rp 7.453 trillion for the 1998/1999 fiscal year.

Market

The most difficult task for Bukit Asam, as well as other private briquette producers, is the expansion of market segments to absorb the company's projected two million ton output.

Poultry companies are the largest briquette consumers, taking up 60 percent of the current national output, Sunardi said.

Poultry farmers burn briquettes to keep newly hatched chicks warm.

Restaurants absorb 8 percent of the national output, while the remaining 32 percent is consumed by various small scale industries to burn limestone and to dry tobacco, coffee and rubber.

Small brick, tile and earthenware industries, scattered throughout Java to support construction activities, also use briquettes.

Sunardi said the use of briquettes could reduce the country's fuel costs between 20 percent and 30 percent.

The use of briquettes instead of kerosene also provides several other benefits for poultry farmers.

It has been found that briquette use decreases the mortality rate of day-old chicks to 1 percent from 10 percent.

Poultry farmers generally do not need to watch over their chicken cages throughout the night when using briquettes because, unlike kerosene, they rarely cause fires, added Sunardi.

Many restaurant owners prefer briquettes because they do not produce soot, unlike kerosene.

Bukit Asam has so far focussed its briquette marketing in several areas across Java, including Palimanan Timur and Cirebon in West Java, Ceper and Klaten in Central Java, and Lebak Jabung and Mojokerto in East Java.

The Ministry of Cooperatives and Small Scale Enterprises reportedly helps the company in its marketing efforts.

Briquettes, however, have yet to enter most households.

Minister of Mines and Energy I.B. Sudjana recently said at a hearing with the House of Representatives that people were still reluctant to replace kerosene with briquettes for cooking.

Unlike kerosene, briquettes cannot instantly burn and cannot be instantly put out, making them more appropriate for non- household activities which require long burning, he said.

Bukit Asam is nonetheless developing briquette furnaces to produce more suitable briquettes for household use.

Sunardi said the company had in fact developed a lighter which could burn briquettes instantly, but that the product had yet to be marketed due to its high price.

"We are more inclined to ask customers to use a simple and cheap method to light briquettes. They may mix ashes produced during the burning of the coal with kerosene, and light it to initiate burning," Sunardi said.

He quickly added that the Ministry of Environment had verified that Bukit Asam-produced briquettes meet standard environmental requirements.

The current economic crisis has dealt a blow to the country's briquette market as many of its main consumers -- mainly poultry farmers -- have closed down their businesses due to increases in operational costs.

Sudjana admitted that Bukit Asam's traditional market was shrinking, but he said the company could expand its sales to other small-scale industries.

Some analysts say Bukit Asam and other would-be briquette producers will find it extremely difficult to enlarge the market to absorb two million tons over the next two years.

But with an imminent government decrease in fuel subsidies and the subsequent rise in kerosene prices, many believe the market will look to alternative fuels.