JAKARTA, INDONESIA — Indonesia continues to speed up the development of cleaner energy, with the downstream coal sector being one of the options targeted at reducing carbon emissions.

Coal downstream is defined as a process of adding values to coal by converting it into its derivative products, such as liquified coal and DME (Dimethyl Ether).

Sudjatmiko, Director of Coal Business Fostering of Directorate General Mineral and Coal at the Ministry of Energy and Mineral Resources (ESDM), said last month that the Indonesian government is focusing on seven schemes of downstream its coal sector: Coal gasification, coke-making, liquified coal, coal upgrading, bricket, underground coal gasification, and coal-water mixture.

The coal industry has applied clean technology

Apollonius Andwie, Corporate Secretary of state coal giant PTBA, stated in a written reply that coal development has been utilising an eco-friendly technology such as supercritical tech—with 42 per cent of efficiency—used in the company’s steam power plant (PLTU) in South Sumatera.

Currently, the company is partnering with state oil firm Pertamina and an American company Air Products and Chemicals to develop downstream coal to DME, aimed at reducing import of Liquified Petroleum Gas (LPG).

The construction of the plant will begin in 2021 in Tanjung Enim, South Sumatera, and the operation is expected to resume in 2024.

The coal gasification project will cut LPG import by more than one million a year as the plant will process 6 million tons of coal that will convert 1.4 million tons of DME every year.

According to data from the Handbook of Energy and Economic Statistics of Indonesia, Indonesia’s LPG import rose from 917,000 tons in 2009 to 5.71 million tons in 2019, Katadata reported.

In the 2021 State Budget plan (RAPBN), the government’s spending on fuel and 3-kilogram LPG rose 32.6 per cent tp Rp 54.4 trillion, Bisnis reported.

Fiscal risk should be taken into consideration

The effort to boost coal downstream should be appreciated. However, the government must consider several factors in pushing coal downstream industry.

Komaidi Notonegoro, Executive Director of Reforminer, told TOC that several countries are also planning to carry out DME projects, namely China, Vietnam, India, Japan, and the US.

In China, the cost of a DME production is higher than that of LPG.

“My conclusion, the calories generated by DME is only 60 per cent of that from LPG. Let’s say, you boil water and it boils in five minutes using LPG, but using DME may take, for instance, 15 minutes,” Notonegoro said, explaining that in China 20 per cent of DME production is blended with 80 per cent of LPG.

A study regarding DME project in Indonesia from the Institute for Energy Economics and Financial Analysis (IEEFA) published this month revealed that the DME project from PTBA, Pertamina, and Air Products is not economical.

The research is based on several basic assumptions such as the need for investment, the DME’s refinery capacity (using 6.5 million tons of coal per year), and the need for investment from loans with an interest rate around 3.8 per cent per year and using the average production cost of Chinese firm Lanhua during the 2016-2019 period.

Apollo stated that the company is focusing on the domestic market, even though there is a possibility for export.

“The marketing of downstream coal products requires cooperation with partners with extensive experience in marketing such a similar product. For DME, we are partnering with Pertamina which distributes gas,” he said.

PTBA Director Arviyan Arifin told CNBC that coal gasification project is estimated to account for around 30 per cent-40 per cent of the company’s sale in 2024-2025.

PTBA financial report per September showed that the revenue stood at Rp 12.84 trillion—mostly from coal export and sale. The figure was down from that at the end of Q3 worth Rp 16.25 trillion.

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