Bumi eyes 50 percent stake in coal project

Ika Krismantari, The Jakarta Post, Jakarta

The nation's biggest coal producer, PT Bumi Resources, is eyeing a 50 percent stake in the country's first coal liquefaction project, which will involve a total investment of US$1.3 billion, an official says.

Nenny Sri Utami, the head of research and energy development agency at the energy and mineral resources ministry, told The Jakarta Post on Tuesday that Bumi had sent a letter to her office, confirming its interest in obtaining half the project's shares.

"The letter states its interests in developing the project's next phase, which is a commercial one," Nenny said.

The on-going phase of the project, which the government calls semi-commercial, is run by a consortium made up of local coal producers, including Bumi.

The term semi-commercial may have to do with the fact a portion the fund to develop the project came also from a grant from the Japan Bank International Cooperation (JBIC).

The consortium has been conducting a feasibility study since August, and is expected to complete it soon.

The project, which will have a total capacity of 13,500 barrels per day, is scheduled to start the construction in 2009 and production in 2013, the government said.

The project would be followed with a commercial plant with a double-capacity. This commercial project is estimated to need an additional investment of $800 million.

Based on the government's plans around the coal liquefaction project, the plant will be built in the Arutmin mining concession in Satui, South Kalimantan. Arutmin is a subsidiary of Bumi.

Bumi senior vice president Kaz Tanaka, also the chairman of the project consortium, said the company had not decided whether it wanted to involve the development of the commercial project, saying, "it was still premature and no decision had been made".

Liquid coal is much cheaper than the crude oil but the product is the investment required to produce it is high.

The price of the coal liquid is estimated to be at $35 per barrel, compared to crude oil, whose price many analysts believe to reach $100 per barrel in the next few years.

Coal liquefaction is one of the alternative sources of energy that will be promoted by the government as part of 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 national energy mix by 2025.

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