Implementation of coal development programs and the future role of indonesia as a potential coal supplier in the southwest Pacific region

Abstract

The 1973 oil crisis and the increased domestic oil consumption during the 1970s made Indonesia aware of the vulnerability of its petroleum-based economy. Since oil—a limited energy resource—had formed the main source of foreign exchange earnings for decades, a policy of diversification of energy away from oil was imperative in order to meet the increasing energy demand in the country, while saving the valuable commodity for export purposes. An ambitious program to develop other energy resources, in particular coal, started with the rehabilitation and expansion of the two state-owned coal-mines in Sumatra. The coal produced was expected to fuel the newly built coal-fired power plants and the expanding cement industry. Aware of the limited available funds, the Government of Indonesia invited foreign investors to participate in the development of the nation's coal potential, especially in Kalimantan. The exploration efforts of these contractors resulted in the identification of vast reserves of coal that, when fully developed, would have been sufficient to meet the expected domestic coal demand. However, because of the world-wide recession and the sharp drop in oil revenue, ambitious construction programs in the power sector and the cement industry had to be restrained and coal consumption projections dropped substantially. In view of the vast coal potential identified, which in general is amenable to inexpensive openpit mining, and the large number of contractors involved in the development projects, it is anticipated that production capacity toward the end of the 1980s will far exceed domestic demand. Since the other ASEAN member countries and the northern industrialized Asian countries will be potential net importers of coal and in view of Indonesia's favorable geographic location, there is reason to believe that excess Indonesian coal can be allocated to the aforementioned export markets.