Indonesian coal miners urge govt to delay upgrading rule - Reuters

Indonesian coal miners are urging the government to delay a planned rule that will require producers to upgrade low-quality coal before exporting it, as this could dampen interest in mining investments, said an industry official on Tuesday.

The energy and minerals ministry is drafting a regulation that would by 2014 require coal producers to upgrade low-quality coal to a medium-quality coal before exporting. The coal would need a minimum heating value of 5,600 kcal/kg on a air-dried basis.

The planned regulation is part of a new mining and coal law introduced in 2009 that requires miners to process coal and minerals into higher value products before exporting them, as the country seeks to boost revenue from the mining sector.

"People have started investing in mining low-quality coal. It will cause them financial losses if the government decides to ban it," said Supriatna Suhala, executive director of the Indonesian Coal Mining Association.

About two thirds of Indonesia's 105 billion tonnes of coal resources was seen as not viable because of high moisture content and low heating value. But limited mineable reserves of high-quality coal have forced miners to tap low-quality sources to feed growing demand, particularly from India.


The coal association has said Indonesia's mineable reserves of low-quality coal may reach 10 billion tonnes or half of current total reserves of around 21 million tonnes, within the next 2-3 years, as more firms are expected to start producing coal with a heating value of 3,000-3,400 kcal/kg.

Indonesia, the world's top thermal coal exporter, has about 16 firms that produce coal with a heating value below 4,000 kcal/kg, with combined production estimated at 7.5 million tonnes, industry data shows.

However, the technology to transform brown or low-quality coal worth less than $30 a tonne to a bituminous-type of coal, whose prices hover at about $120 a tonne, will still serve as a challenge for miners.

Some firms have been working to develop such technology with several pilot projects under way, but so far there has been none producing large-scale upgrading.

"We think the government should delay imposing the regulation until there's a proven upgrading technology," said Suhala, speaking on the sidelines of a coal conference.

The association proposes the government should give incentives to investors or miners who are interested in investing in coal upgrading technology.

"It would be good, for example, if the government cut royalties for miners who set up an upgrading facility," he said.