Indonesia Mandates Downstream Development for Coal Mining Contract Extensions
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A backhoe unloads coal from a barge at Tidore Islands Port in North Maluku, Thursday, Jan. 4, 2024. (Antara Photo/Andri Saputra)
Antara
November 25, 2024 | 4:17 pm
Jakarta. Coal mining companies seeking to extend their contracts must establish a downstream industry ecosystem, Energy and Mineral Resources (ESDM) Minister Bahlil Lahadalia said on Monday.
"One of the main requirements for extending Coal Mining Work Agreements (PKP2B) is developing downstream industries," Bahlil told
Antara news agency.
Downstream industrialization efforts include coal gasification, a process that converts coal into gas for use as fuel or raw material in the chemical industry. This initiative aims to reduce Indonesia’s reliance on liquefied petroleum gas (LPG) imports.
Bahlil said that the policy aligns with President Prabowo Subianto’s vision to promote the industrialization of natural resources, enhancing domestic value while driving economic growth beyond 8 percent.
"This initiative diversifies national income sources, reduces dependence on raw material exports, and lowers reliance on LPG imports, which remains significant," he explained.
Indonesia consumes 8 million tons of LPG annually, with 6 million tons sourced through imports. Domestic production is limited to just 1.6–1.8 million tons. "We need to boost the production of gases like C3 and C4, which are vital for LPG but are currently scarce in Indonesia," Bahlil added.
To support President Prabowo’s economic agenda, the government has outlined a downstream roadmap for 28 key commodities.
According to Bahlil, 90 percent of these commodities fall under the ESDM Ministry’s domain, requiring an estimated $618 billion in investments by 2040.
Additionally, the government will regulate mineral production allocation to ensure equity across the industry. This will involve adjustments in annual work and budget plans (RKAB) for mining companies.
The policy follows instances where domestic mining firms sought disproportionate production allocations. "For example, Indonesia produces 150 million tons of nickel, but one company requested 50–60 million tons, accounting for 30–40% of national production," Bahlil revealed.
During the APEC CEO Summit in Lima, Peru, on Nov. 14, President Prabowo invited global investors to participate in Indonesia’s $600 billion downstream development plan, aimed at moving up the production value chain for multiple commodities.
"Indonesia is open for business. I am committed to protecting all investments and creating favorable economic conditions," Prabowo said.
This extensive downstream initiative reflects Indonesia’s push for resource nationalism, which began under former President Joko Widodo’s administration. The nickel industry serves as a model, with unprocessed exports halted in favor of domestic processing. Similar policies are being considered for other commodities, including seaweed.
Coal mining companies seeking to extend their contracts must establish a downstream industry ecosystem, Minister Bahlil Lahadalia said
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