First coal liquefaction plant proposed for South Kalimantan

Ika Krismantari, The Jakarta Post, Jakarta

Following its establishment in May, a consortium made up of coal mining firms will soon begin a feasibility study on plans to build the country's first coal liquefaction plant.

Bukin Daulay, the director of the Energy and Mineral Resources Ministry's Mineral and Coal Technology Research and Development Center, said Friday that the feasibility study on the project would begin in August and would take six months to complete.

"JBIC (Japan Bank for International Cooperation) will finance the feasibility study by providing a grant of US$500,000," Bukin said following a meeting between the consortium and government officials.

He said that the consortium had agreed during the meeting to build the US$1.3 billion plant in coal-mining firm Arutmin's mining concession in Satui, South Kalimantan.

Based on the results of a pre-feasibility study by Japanese research firms in 2002, Satui was the most suitable site for the project, Bukin said.

He also said that Arutmin might supply 2.5 million tons to the plant, which would convert coal into liquid fuels like gasoline and diesel, and have an initial capacity of 13,500 barrels per day.

The other members of the consortium would likely contribute to the project in the form of equity. However, precise figures had yet to be discussed, Bukin said.

The price of the plants output would be highly competitive, at an average price of $35 per barrel, compared to crude oil, whose price is expected to reach $100 per barrel in the next few years, said Eiichiro Makino, a coal industry consultant advising the ministry.

The plant is expected to come onstream in 2013.

Coal liquefaction is one of the alternative sources of energy that will be promoted by the government as part of its efforts to decrease the country's dependency on oil.

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

The government hopes that the capacity of the South Kalimantan plant can be raised to 27,000 barrels per day by 2017 at a cost of $2.1 billion.

In order to meet the 2 percent target, Indonesia will need the develop coal liquefaction plants with a combined output of 189,000 barrels per day by 2025.