Govt plans to turn coal into fuel

Govt plans to turn coal into fuel

JAKARTA (JP): The government is studying the possibility of
establishing a coal liquefaction plant to benefit from the
country's massive coal reserves, especially in South Sumatra,
Minister of Energy and Mineral Resources Purnomo Yusgiantoro said
on Wednesday.

Purnomo said he hoped that by 2010, the liquefaction of coal
would result in a fuel output equivalent of between 100,000 to
150,000 barrels per day (bpd).

"It is possible, as there have been research studies conducted
in Japan and by the BPPT (Agency for the Study and Application of
Technology). It is important now to turn that (research) into
concrete steps," Purnomo told reporters on the sidelines of the
international conference on coal for energy security in the ASEAN
Region, which was held by the ASEAN Forum on Coal (AFOC).

To realize the coal liquefaction plan, he said, the project
had to be commercially feasible.

According to him, the costs of such a project could amount to
US$1.5 billion.

"We will invite investors to develop this project in South
Sumatra," he said.

Investors, he said, were only interested in the project if
they could buy the coal for approximately $10 per ton. At
present, coal prices hover at approximately $28 per ton.

Purnomo expected that an oil refinery could start operating by
2010 with a fuel output of up to 150,000 bpd.

He said that the liquefaction of coal was necessary, in order
to reduce the country's growing dependence on oil.

Indonesia is nearing a depletion of its oil reserves and the
country is estimated to become a net oil importer in 20 years
time.

"Even though local fuel consumption continues to rise, our
coal reserves are enough to last for more than 200 years,"
Purnomo explained.

He said that South Sumatra's coal reserves amounted to about
34 billion tons of coal. But because of the coal's mediocre
quality, the reserves were not commercial feasible for
exploitation.

"The technology to liquefy low quality coal is already there,"
said R.A. Sunardi, AFOC chairman.

Although the technology is still expensive, it would be
commercially available sometime in the year 2005 or 2006, he
said.

He added that tests by the BPPT reveal that coal in South
Sumatra is the most suitable type in Indonesia for the
liquefaction project.

Sunardi, who is also president of the state owned coal company
PT Bukit Asam, also expressed his interest in developing a coal
liquefaction project.

"We are definitely interested, because we have a huge
reserve.... about 5.5 billion tons of coal, of which most is of
low quality," he explained.

Bukit Asam

Bukit Asam, he said, was not only interested in supplying its
coal, but also in making the process of liquefaction, a business.

Because of the project's high cost, Sunardi said he planned to
develop the project under a consortium.

"So far, no one has shown any interest, but that is because
the project is still undergoing a feasibility study,"

He expected a completion of the study by either the end of
this month, or the end of March next year.

Bukit Asam's coal mine is located in Tanjung Enim, South
Sumatra.

Sunardi said that his company was unable to raise its coal
production level to 12.5 million tons per year, due to
transportation constraints.

A railway linking Bukit Asam's mine and its Lampung's Tarahan
port is currently operating at its maximum capacity of 11.5
million tons of coal, which is the company's production level, he
explained.

He said that, in order to raise the train's load capacity to
12.5 million tons of coal per year, state railway company PT
Kereta Api Indonesia (KAI) must invest about Rp 630 billion
($66.3 million at the current exchange rate).

Bukit Asam is willing to share the investment, but a
contribution would depend on talks with PT KAI, he went on.

Sunardi further said he was interested in buying PT Indocoal,
a coal company put up for sale by the Indonesian Bank
Restructuring Agency (IBRA). He said that the funds for the
acquisition of Indocoal would come from Bukit Asam's own
cash flow.

Director for coal mining at the Ministry of Energy and Mineral
Resources, Suyartono, said that for this year, Indonesia would be
unable to meet its coal production target.

According to him, of the targeted 83 million tons of coal, the
country's coal industry will only be able to produce between 75
to 76 million tons.

Suyartono, in particular, blamed protracted labor conflicts at
PT Kaltim Prima Coal to have been the major cause for the dent in
production. (bkm)