Indonesia's Downstream Coal Processing Target: Will It Be Achieved?

Indonesia has ambitious targets for coal downstream processing (hilirisasi). This is evident in a presentation by the Director of Coal Mining Business Development at the Ministry of Energy and Mineral Resources (ESDM), titled "Current Conditions and Challenges of the Coal Mining Industry" (October 2020).

In the presentation, the Ministry of ESDM projected that the national downstream coal industry could process coal into:

1. Coke making
2. Coal upgrading
3. Coal briquetting
4. Coal gasification
5. Underground coal gasification
6. Coal liquefaction
7. Coal slurry/coal water mixture

These downstream processing efforts are believed to contribute to coal industry development, reduce LPG imports, enhance energy security, and reduce CO2 emissions.

However, during the 2020-2023 period, Indonesia's coal downstream processing efforts were limited to coke making, coal upgrading, and coal briquetting.

Even then, volumes were only in the range of 10,000 to 1 million tons per year, a very small amount compared to the total national coal production of around 600 million tons per year.

For other types of downstream processing, namely gasification, liquefaction, and coal mixing, Indonesia appears to lack the necessary capital and capabilities.

The Ministry of ESDM projects that the national downstream coal industry will be able to conduct gasification starting in 2024, underground coal gasification starting in 2026, and coal liquefaction and mixing starting in 2028. The total processed volume is also projected to increase steadily, as shown in the graph.

However, this projection faces many challenges. Furthermore, the US company that was an investor in a coal gasification project in Indonesia, Air Products and Chemical Inc (APCI), recently withdrew.

"Yes, for the (APCI investment) project with PTBA and KPC, they withdrew, all of it. Perhaps because the business scheme and economic aspects haven't been resolved," said the Acting Director General of Minerals and Coal at the Ministry of ESDM, Muhammad Idris Froyoto Sihite, as reported by Katadata.co.id on Thursday, March 9, 2023.

Meanwhile, the Director of Coal Mining Business Development at the Ministry of ESDM, Lana Saria, expressed hope that companies from other countries will step in and support this project.

"It's okay, there are many others. Many other countries have the technology, God willing, there will be a replacement," said Lana.