Indonesia plans to convert coal into gas to substitute natural gas

Image from The Jakarta Post/ANN.

JAKARTA, Nov 27 (Xinhua): The Indonesian government continues to maximize the use of coal in the country through downstream process so as to make this commodity remain a driving force for the national economy in the future.

The government has decided to turn coal into dimethyl ether and raw material for petrochemical factories, Director of Coal Business Development at the Ministry of Energy and Mineral Resources Sujatmiko said at the Indonesia EBTKE ConEx, an integrated event dedicated to driving the sustainable energy development in Indonesia.

"In this downstream process, we will convert coal into gas that can be used as dimethyl ether. The dimethyl ether can be used to replace LNG (liquefied natural gas) and coal syngas (synthesis gas) and can be used for methanol, fertilizers and petrochemical plant needs," he was quoted by Antara news agency as saying on Friday.

Through the scenario of gasification of coal into dimethyl ether, the government seeks to extend the utilization period of coal as primary energy, he explained.

Based on calculations by the Ministry of Energy and Mineral Resources in 2020, Indonesia's coal resources will reach 143 billion tons, reserves of 38.8 billion tons, production assumptions of 600 million tons per year, and the reserves can last for 65 years, he noted.

The amount of production and demand for coal will continue to increase over the next 20 years to meet national and world energy needs, he said.

The Ministry of Energy and Mineral Resources noted that coal production was only 550 million tons in 2020, and it would increase to 633 million tons in 2025, then continue to rise to 684 million tons in 2030, and decrease slightly to 678 million tons in 2040.

The downstream process of coal would be the main support to anticipate the shortage of gas supply in the country, he added.

"We hope that with this great potential, we can continue to use coal as a driving force for the national economy," said Sujatmiko.

The Indonesian government plans to provide special royalty rates to companies that gasify coal through the Coal to Dimethyl Ether (DME) program.

The policy will be stated in the form of a Regulation of the Minister of Energy and Mineral Resources as part of the government's commitment to accelerate the coal downstream process.

"In an effort to encourage the downstream program, especially the development of coal to DME, the Ministry of Energy and Mineral Resources will issue a regulation in the form of a coal royalty rate specifically for coal gasification of up to 0 per cent," said Minister of Energy and Mineral Resources Arifin Tasrif at a working meeting with the House of Representatives recently.

According to him, currently, the regulation is being drafted by the Ministry of Energy and Mineral Resources, which will technically regulate the criteria and procedures for granting coal royalty incentives.

The provision of these incentives is specifically for the need of coal downstream process, and this will not reduce state revenues that have been obtained so far, the minister said.

In addition to providing royalty incentives, the government will also set a special coal price for the use of gasification, he said, adding that this provision will be included in the Draft Government Regulation for the Implementation of Mining and Coal Mining Activities with a proposed cost scheme plus a margin.

The cost component consists of direct and indirect production costs, as well as general and administrative costs. Meanwhile, the margin is set at 15 percent of the cost.

The coal to DME project is carried out by PT Bukit Asam (a state mining firm) in Tanjung Enim area, South Sumatra province. The project will operate in 2024 with a DME production target of 1.4 million tons per year.

The imposition of a coal royalty of 0 percent is regulated in Article 39 of the Job Creation Law. Coal royalties for Coal Mining Concession Work Agreement holders are currently still charged at 13.5 percent.

Minister of State-owned Enterprises Erick Thohir said the coal gasification project could cut liquefied petroleum gas (LPG) imports while boosting the national economy.

"Coal gasification has direct added value to the national economy on a macro basis, and it will save the trade balance, reduce dependence on LPG imports, and save foreign exchange reserves," the minister said in a written statement recently. - Xinhua

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