JAKARTA (Reuters) - Indonesia’s PT Bumi Resources (BUMI.JK) is looking into building a coal gasification plant potentially worth more than $1 billion, a director said on Wednesday, noting such a move would support Indonesian plans to reduce its reliance on energy imports.
President Joko Widodo’s main economic agenda for his second term in office is to have more of the country’s resources processed at home to increase the value of exports.
Among his targets is processing coal into gas to help reduce energy imports, one of the biggest contributors to Indonesia’s current account deficit.
Bumi Resources, the country’s largest coal miner, is conducting a feasibility study into building a plant to process coal into gas, company director Dileep Srivastava said in an interview.
The study is expected to be concluded this year, which Bumi will take up to their shareholders and lenders for consideration.
“We are actually very seriously and actively engaged,” he told Reuters.
Depending on the plant’s capacity, Srivastava said Bumi could be looking at between $1 billion to $2 billion in investment.
He said Bumi, which in 2019 produced around 87 million tonnes of coal, will supply coal from its units such as Kaltim Prima Coal for the potential plant as feed stock and to power the facilities.
“We believe that about 4 million to 5 million tonnes of coal can be easily consumed here,” he said.
The company, however, needs to convince its creditors to allow Bumi to make such investments.
“It is not something we can raise right now. We need an endorsement,” Srivastava said.
Bumi is aiming to settle a $1.7 billion debt in 2022 and conclude a mandatory bonds-to-equity conversion by 2024 following its debt restructuring process in 2017.
Srivastava believed incentives planned by the government for downstreaming coal would be attractive for investors.
As part of a draft bill known as an “omnibus law” aimed at attracting investment, the government will offer incentives for coal miners investing in gasification, Indonesia’s Coordinating Ministry of Economic Affairs said last week.
The incentives could include removal of coal miners’ mandatory sales to domestic power plants, removal of royalty charges, and an extension of mining permits for as long as a mine’s lifespan.
Bumi will likely wait for more certainty on its mining license extension status before making any investment decision.
“Certainty on coal license status would make it easier to catalyse future investment decisions including gasification,” Srivastava said.
State coal miner PT Bukit Asam (PTBA.JK) is planning to develop a plant with state oil and gas company PT Pertamina to process coal into dimethyl ether in Riau province.
The plant is expected to start production in 2025 and estimated to consume 8.7 million tonnes of coal per year.
Bukit Asam is also planning to build gasification facilities in South Sumatra which may consume another 8 million tonnes of coal.
Reporting by Fransiska Nangoy; editing by Jason Neely and Philippa Fletcher