Indonesia to push consolidation of coal mining sector, review licences

NUSA DUA, Indonesia (REUTERS) - Indonesia will push for consolidation in its mining sector while coal prices are low and may soon revoke more than 4,000 licences that have caused problems, mining and energy minister Sudirman Said said on Monday.

Indonesia is the world's top exporter of thermal coal but wants to keep more of the power station fuel to feed its ballooning domestic power demands. "We will install a good system for licensing," the minister told a coal industry conference in Bali, noting that Indonesia had issued around 10,100 of the newer mining licences known as IUPs. "We enjoyed huge profits that were abnormal. Abnormal money drives abnormal behaviour," Mr Said said, referring to the commodity boom. Sanctions could be imposed where rules have been infringed, he said.

The review will only apply to the IUPs. Larger, older-generation firms with so-called Contracts of Work such as Bumi Resources and Berau Coal Energy will be unaffected. "This is the perfect time to consolidate," Mr Said said, referring to depressed coal prices. "We will create opportunities for players who are serious, who want to invest and who always comply with government rules."

According to the energy ministry, there were around 960 coal firms at production stage in Indonesia. Around 900 of these are IUP permit holders that contribute about 80 million tonnes, or approximately 20 per cent of Indonesia's total production.

"This month we will decide whether their permits will be revoked," Coal Enterprise Director Adhi Wibowo said, referring to the 40 per cent of IUPs with problems such as overlapping permits and unpaid royalties.

This year the mining ministry plans to hand over licensing to the investment coordinating board (BKPM), he said.

The government of President Joko Widodo plans to build 35 gigawatts of new power stations by the end of the decade and a further 35 gigawatts by 2025, although critics say the ambitious target is unlikely to be met. "Going up to 35 gigawatts is quite daunting," said Roleva Energy coal industry analyst Bart Lucarelli. "What hasn't changed is the unrealistic schedule set by PLN and the energy ministry," he said, referring to state power utility Perusahaan Listrik Negara (PLN) and Indonesia's previous programme to build 10,000 megawatts of new power plants, much of which faced long delays or never materialised.

The plans could increase coal consumption from around 90 million tonnes a year at present to 250 million tonnes, Mr Said said, including by pushing coal miners to build power stations. "(We) will reach a new balance. The domestic market will be strong while the rest we can play with on the export market, but that won't be the dominant market."

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