Indonesia to have first coal liquefaction plant in 2009

The Jakarta Post, Jakarta

Indonesia, the world's largest coal exporter, is set to build its first coal-liquefaction plant in 2009 at an estimated cost of US$1.3 billion.

A number of coal-mining firms and state-owned oil company Pertamina signed a memorandum of understanding Tuesday to set up a consortium to build the plant, which will convert coal into liquid fuels like gasoline and diesel, and have an initial capacity of 13,500 barrels per day.

Among the firms signing the MoU were the country's biggest coal miners -- PT Bumi Resources, PT Adaro, PT Berau Coal and PT Bukit Asam.

The plant, which will be built either in Kalimantan or South Sumatra, is expected to be in commercial operation by 2013.

Bukin Daulay, the director of the Energy and Mineral Resources Ministry's Mineral and Coal Technology Research and Development Center, said the Indonesian government would collaborate with the Japanese government in providing the technology and arranging financing for the plant.

"For the initial stage, the Japanese government will donate a processing support unit worth $110 million to us," Bukin said. "We will also adopt the technology employed in Japan's coal liquefaction pilot project in Victoria, Australia, which can produce 200 barrels of fuel per day."

Besides technological assistance, Indonesia would also receive financial backup from the Japan Bank for International Cooperation (JBIC), which would provide commercial loans to support the project.

JBIC international finance department director Shin Oya said that the bank would provide up to 60 percent of the total loans needed for the project, while private Japanese banks would provide the rest.

Representatives of the newly established consortium and the Indonesian and Japanese governments will meet in Bali in early June to further discuss the financial arrangements and incentives for the construction of the plant

Coal liquefaction is one of the alternative energy sources that will be developed by the government as part of its efforts to decrease its dependency on oil-based fuels.

Under the government's energy policy, coal liquefaction must account for 2 percent of the total national energy mix by 2025.

Bukin said that in order to meet the 2 percent target, Indonesia's proposed coal liquefaction plants would have to increase their output to 189,000 barrels per day by 2025 from an initial 13,500 barrels per day.

He added that the government planned to increase capacity to 27,000 barrels per day by 2017 at a cost of $2.1 billion.

"Every investor have an equal opportunity to participate in the project because by 2025 we will need seven plants with a capacity of 27,000 barrels per day, with each costing up to $9.6 billion," Bukin said.