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Mining & Resources

The future of Indonesian coal: Q&A with Ben Lawson

21 May 2014, by Informa Insights

Ben Lawson, Chief Operating Officer, PT Sanaman Coal
Ben Lawson, Chief Operating Officer, PT Sanaman Coal

Earlier this year, Indonesia’s State-Owned Enterprises Ministry issued a regulation that requires all mining companies to dig deeper to explore the possibility of new mineral resources.  The director of the new mineral education program, Paul Lubis said Indonesia had estimated coal reserves of 130 billion metric tons, or enough to last for the next 100 years at current production levels.  While this is good news for the explorers, exploitation limitation has also been put in place to provide sustainability for the industry.

With recent changes such the issuing of mining permits and the IUP-OPK licence requirement for coal exporters, the future of the Indonesian coal industry is difficult to predict.

We caught up with Ben Lawson, Chief Operating Officer at PT Sanaman Coal recently. Ben was previously the Chief Development officer at Apple Coal, however has now moved on to PT Sanaman Coal, which has taken on the largest coal assets in South Sumatra and East Kalimantan.  He will be chairing the 3rd annual Kalimantan Coal Conference this September.  Here he shares with us his view on what the future holds for the Indonesian coal industry and in particular Kalimantan.

Government regulations are seeing some changes recently – What are the key initiatives needed to attract foreign investment into Indonesia?

Ben: I think the original Law No 4/2009 was quite fair and reasonable. However, the implementing regulations are quickly becoming too onerous for many foreign investors.  With recent back-tracks, it seems the government is seeing certain implementing regulations backfire, especially the export ban/tax on certain minerals.  I think by the end of H1 2014, the real effects will start to be seen in a massive drop in revenue (royalties and taxes) and job losses.

What are the implications are of Law No 4/2009 regarding Mineral and Coal Mining?

Ben: The coal industry has been relatively unscathed by the law other than the divestment regulation which limits all (foreign) IUP holders to divest to 49% after 10 years of production.  Unfortunately the government doesn’t seem to realise, or care, that mining is a long-term business and 10 years is not enough time to recoup the massive, multi-million dollar investments in infrastructure and mine development.  Then to have to divest on a “cost recovery” basis, not a fair market value basis is ridiculous.  The fact the government still keeps mentioning the “ban on LRC” has also been on the minds of many foreign investors that I talk to.

In light of these factors, we are already seeing some foreign investment being put on hold or cancelled outright.

The industry is evolving rapidly – What are the implications of growing Asian demand, in particular South Korea?

Ben: Asian energy demand will continue to explode over the next 10-20 years to the tune of several TW of coal-fired power plants.  Even if China is stagnant, it will still import 300million MT per year.  India will soon hit the 300million mark on imports and the Korean and Japanese markets are going to see a huge jump in Indonesian coal requirements.  All of the Korean and Japanese gencos are, and will be, building “built to spec” power plants to burn Indonesian +/-4000GAR coal.  Throughout Asia, Gencos are building these new generation “ultra-super-critical” power plants which are designed to burn high TM coal far more efficiently and cleaner than current technologies.  And with inherently low ash and low sulphur content, along with a significant freight advantage, Indonesian coals are perfectly suited to meet this upcoming demand.

As of July 2014, we may see some changes in China’s policy – What is the impact on Indonesia, in particular Kalimantan?

Ben: China has danced around the idea of banning sub 3900NAR coal for some time now.  Similarly, the Chinese government passed a 5% import tax on LRC last November – Indonesia is exempted from the tax because of the PRC-ASEAN FTA – where else does China get LRC from?  And even if a ban is implemented, India, North Asia and the ASEAN markets will absorb the tons.

Join Ben and 120+ senior executives, and decision makers from government, mining, infrastructure, shipping and supply sectors at the upcoming Kalimantan Coal Conference, taking place on the 2nd and 3rd September in Balikpapan, Indonesia.  For more information about the detailed conference program and to register, please visit the Kalimantan Coal Conference website.


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