LOW RANK COAL AND ITS CONTRIBUTION LOW RANK COAL AND ITS CONTRIBUTION TO THE ENERGY DEVELOPMENT TO THE ENERGY DEVELOPMENT

IN INDONESIAIN INDONESIA

By:By:Soedjoko TirtosoekotjoSoedjoko Tirtosoekotjo

Executive Director ICMA*)Executive Director ICMA*)apbiapbi--icma@indo.net.idicma@indo.net.id

*) ICMA *) ICMA –– Indonesian Coal Mining AssociationIndonesian Coal Mining AssociationRepresenting 96% of national coal productionRepresenting 96% of national coal production

(Opportunities and Challenges)

Presented at Asia Pacific Lower Rank Coal7 – 8 September 2006

OUTLINEOUTLINE1. Introduction1. Introduction2. The role of coal as energy, economic and social development 2. The role of coal as energy, economic and social development 3. What is Low Rank Coal 3. What is Low Rank Coal

-- Definition (in General)Definition (in General)-- Government VersionGovernment Version

4. Low Rank Coal Potential4. Low Rank Coal Potential5. Low Rank Coal Utilization Strategy5. Low Rank Coal Utilization Strategy

a. Power Planta. Power Plantb. Coal Liquefactionb. Coal Liquefactionc. Gasificationc. Gasificationd. Upgradingd. Upgradinge. Otherse. Others

6. Opportunities and Challenges6. Opportunities and Challenges7. Closing Remarks 7. Closing Remarks

INTRODUCTIONINTRODUCTION(Why LRC?)(Why LRC?)

Energy is a fundamental driver of economic development Energy is a fundamental driver of economic development and contributor to peopleand contributor to people’’s quality of life and poverty s quality of life and poverty alleviation. alleviation.

In order to fulfill the energy need, the GOI decided to use In order to fulfill the energy need, the GOI decided to use LRC for generating electricity, producing synthetic oil and LRC for generating electricity, producing synthetic oil and gas fuel and other purposes. This effort is part of the gas fuel and other purposes. This effort is part of the national energy policy to stimulate possibilities of optimal national energy policy to stimulate possibilities of optimal utilization of coal in conjunction with the blue print of utilization of coal in conjunction with the blue print of diversifying energy program.diversifying energy program.

The idea of using LRC is mostly due to the abundant of its The idea of using LRC is mostly due to the abundant of its reserve, still unutilized so far, having low mining strip ratio,reserve, still unutilized so far, having low mining strip ratio,good quality in term of sulfur and ash content. All of those good quality in term of sulfur and ash content. All of those will generate the security of supply and low cost energy will generate the security of supply and low cost energy source. source.

THE ROLE OF COAL AS ENERGY, ECONOMIC THE ROLE OF COAL AS ENERGY, ECONOMIC AND SOCIAL DEVELOPMENTAND SOCIAL DEVELOPMENT (1)(1)

☑☑ GlobalGlobal●● Coal is vital for global energy security. It is abundantly avaCoal is vital for global energy security. It is abundantly available,ilable,

affordable, and reliable.affordable, and reliable.●● Coal is currently mined over 50 countries and about Coal is currently mined over 50 countries and about

seven million people are employed in the industry seven million people are employed in the industry (90% in the developing countries). Proven coal reserve(90% in the developing countries). Proven coal reserves haves haveincreased by over 50% in the past 22 years.increased by over 50% in the past 22 years.

●● Coal produces 39% of the worldCoal produces 39% of the world’’s electricity (the largest source)s electricity (the largest source)and is projected to grow 60% by 2030 and 70% of the woand is projected to grow 60% by 2030 and 70% of the worldrld’’sssteel.steel.

●● Coal generates around US$ 7 billion per annum in exportCoal generates around US$ 7 billion per annum in exportrevenue for developing countries.revenue for developing countries.

●● 1.6 billion people in developing countries do not have access 1.6 billion people in developing countries do not have access to electricity but 1 billion have gained electricity vto electricity but 1 billion have gained electricity via coal on theia coal on thepast two decade.past two decade.

●● Coal provides 7 million jobs worldwide.Coal provides 7 million jobs worldwide.

☑☑ National (2004)National (2004)Coal produces 46% of the national electricity in 2005 which Coal produces 46% of the national electricity in 2005 which is about double the share of gas and oil (25%). This will be is about double the share of gas and oil (25%). This will be projected to grow to 62% in 2010 and will affect to increase projected to grow to 62% in 2010 and will affect to increase the electrification ratio from 54.8% to 70.0%. About 65% the electrification ratio from 54.8% to 70.0%. About 65% (2004) of coal for domestic is used for electricity.(2004) of coal for domestic is used for electricity.In cement industry, almost 100% of this industries used coal In cement industry, almost 100% of this industries used coal as an energy for the process and consumes about 15% as an energy for the process and consumes about 15% (2004) of coal for domestic use.(2004) of coal for domestic use.About 20% of coal for domestic are used for textile, pulp About 20% of coal for domestic are used for textile, pulp paper, metallurgy industry and small industry (in the form of paper, metallurgy industry and small industry (in the form of briquette, etc.). briquette, etc.). In energy mix coal contribute 19,7% and will be around 25% In energy mix coal contribute 19,7% and will be around 25% in 2010.in 2010.It contributes (2004) more than It contributes (2004) more than RpRp 1,7 trillion / year to the 1,7 trillion / year to the government from tax, non tax and royalty.government from tax, non tax and royalty.It generates about 36.000 employees.It generates about 36.000 employees.It contributes about It contributes about RpRp 74 billion/year to community 74 billion/year to community development and social responsibility.development and social responsibility.

THE ROLE OF COAL AS ENERGY, ECONOMIC AND SOCIAL DEVELOPMENT (2)

DEFINITION: LOW RANK DEFINITION: LOW RANK COAL (1)COAL (1)(In General)(In General)

✦✦ There are various definitions; different things to different pThere are various definitions; different things to different people to eople to different country. different country.

✦✦ US ASTM: LRC is Lignite (CV 3500 US ASTM: LRC is Lignite (CV 3500 –– 4600 kcal/kg, 4600 kcal/kg, mmmfmmmf with a total with a total moisture higher than 35%: Referred by USA, Indonesia (?).moisture higher than 35%: Referred by USA, Indonesia (?).

✦✦ ISO system: LRC is Brown Coal (CV < 5700 kcal/kg, ash free): ISO system: LRC is Brown Coal (CV < 5700 kcal/kg, ash free): Referred by Australia/European/Japan.Referred by Australia/European/Japan.

✦✦ Graham Wallis (Coal Consultant PT Gantari Utama): Graham Wallis (Coal Consultant PT Gantari Utama): LRC is in the rank of Sub bituminous C to lignit ( < 5.270 LRC is in the rank of Sub bituminous C to lignit ( < 5.270 kcal/kg kcal/kg mmmfmmmf).).

✦✦ Standard for scientific or trade (commercial) is generally usiStandard for scientific or trade (commercial) is generally using ng different approach in classification standard.different approach in classification standard.

DEFINITION: LOW RANK COAL DEFINITION: LOW RANK COAL (2)(2)

(Government Version)(Government Version)

For more practical and commercial means, LRC in For more practical and commercial means, LRC in this paper refers to Government version i.e.:this paper refers to Government version i.e.:

a. Coal with high moisture content (>35%), a. Coal with high moisture content (>35%), and low calorific value (<5100 kcal/kg and low calorific value (<5100 kcal/kg adbadb*).*).

b. Coal Rank Lignit to sub bituminous C included. b. Coal Rank Lignit to sub bituminous C included.

*) GR No.45/2004 and Keppres No.13/2000

Carbon content of coalHigh

LRC (47%) Hard Coal (53%)

Lignit (17%) Sub. Bituminous (30%) Bituminous (52%) Anthracite (1%)

Thermal Metallurgical Steam Coal Coking Coal

Moisture Content of Coal

LRC: Low carbon content High moisture content

Source: WCI, The Coal Resource 2004

High

Source: Graham Wallis,Bali Coaltrans 2005

TOTAL MOISTURE VS CALORIFIC VALUE OF LRC

Total Moisture content in Kalimantan’s LRC < Sumatera’s LRC

LRC Potentials in Indonesia (2003)LRC Potentials in Indonesia (2003)No.No. LocationLocation ResourcesResources ReservesReserves

1.1. JavaJavaCentral JavaCentral Java 0.820.82 n.a.n.a.

2.2. SumateraSumatera

AcehAceh 91.7691.76 n.a.n.a.

North SumateraNorth Sumatera 19.9719.97 n.a.n.a.

RiauRiau 126.32126.32 n.a.n.a.

BengkuluBengkulu 21.9221.92 n.a.n.a.

JambiJambi 51.1351.13 n.a.n.a.

South SumateraSouth Sumatera 11,384.8911,384.89 2,653.982,653.98

3.3. Kalimantan:Kalimantan:

West KalimantanWest Kalimantan 420.92420.92 n.a.n.a.

Central KalimantanCentral Kalimantan 483.92483.92 n.a.n.a.

South KalimantanSouth Kalimantan 971.86971.86 536.33536.33

East KalimantanEast Kalimantan 1.959.501.959.50 261.73261.73

4. 4. Sulawesi Sulawesi

Central Sulawesi Central Sulawesi 117.33117.33 0.060.06

5.5. PapuaPapua

Total Total

n.a.n.a.

15,114.07 *)15,114.07 *)

n.a.n.a.

3,452.04 **)3,452.04 **)

M Tons

n.a. = data not available *) 26,13% of national coal resources, **) 49,44% of national coal reserves

Source: Coal Division, Directorate of Mineral Resources Inventory (2003)

LRC RESERVESLRC RESERVES

ReservesReserves % of national reserves *)% of national reserves *)-- South SumateraSouth Sumatera 2,653.982,653.98 38.0138.01-- South KalimantanSouth Kalimantan 536.33536.33 7.687.68-- East KalimantanEast Kalimantan 261.73261.73 3.753.75TotalTotal 3,452.043,452.04 49.4449.44

*) National Coal Reserves = 6,981.62 M tons

Source: Coal Division, Directorate of Mineral Resources Inventory (2003)

M Tons

L R CUpgrading

UpgradedCoal

Export/Domestic use

Coal Liquefaction

Synthetic Oil

Transportation

Other purposes

Power Generation

Electricity

Briquette for Small Industries

Gasification

-Synthetic gas (Petrochemicals)

- Synthetic fuel (Industrial Fuel)

LRC UTILIZATION CONCEPT (NCP, ESDM DECREE NO.1128/2004)

LRC FOR ELECTRICITY DEVELOPMENT LRC FOR ELECTRICITY DEVELOPMENT PROGRAM PROGRAM

(Stipulated in (Stipulated in InpresInpres No.71 & 72/2006)No.71 & 72/2006)

☑☑ Objectives:Objectives:-- To increase electricity ratio from 54% (2005) to 60% (2010)To increase electricity ratio from 54% (2005) to 60% (2010)-- To reduce the use of oil fired power plant from 30% (2005) to To reduce the use of oil fired power plant from 30% (2005) to

5% (2010) 5% (2010) -- To increase the use of coal for fired power plant from 40% (20To increase the use of coal for fired power plant from 40% (2005) 05)

to 62% (2010) to 62% (2010)

☑☑ Initiative: Initiative: -- To built additional coal fired power plant in Indonesia from 9To built additional coal fired power plant in Indonesia from 9.060 MW.060 MW

(2005) to 22.260 MW (2010)(2005) to 22.260 MW (2010)-- LRC will be used for an additional coal supply of 43 M tons inLRC will be used for an additional coal supply of 43 M tons in 2010 2010 -- Total coal consumption for power generation an 2010 will be Total coal consumption for power generation an 2010 will be

72,3 M ton.72,3 M ton.

Source: Tonny Agus, PLN 28 August 2006

CRASH PROGRAMS IN ACCELERATING CRASH PROGRAMS IN ACCELERATING ELECTRICITY DEVELOPMENT (2005 ELECTRICITY DEVELOPMENT (2005 –– 2010)2010)

(2)(2)

*) 1 MW = 3.500 tons LRC

Total 23.250 MW, consumed 81.5 M tons LRC

Source: Bakti S. Luddin Kadi 30 May 2006

No.No. Executing Executing AgencyAgency

Power Generation Power Generation Capacity (MW)Capacity (MW)

Coal Consumption Coal Consumption M Tons*) (est.)M Tons*) (est.)

Location Location PointsPoints

1.1. PLNPLN Java : 7.870Java : 7.870Outside Java: 3.038Outside Java: 3.038Sub Total : 10.900Sub Total : 10.900

27.527.511.811.838.338.3

121229294141

2.2. IPPIPP Java : 7,560Java : 7,560Outside Java: 2.856Outside Java: 2.856Sub Total : 10.416Sub Total : 10.416

26.526.510.010.036.536.5

181826264444

3.3. Joint VentureJoint Venture Private : 1.152Private : 1.152IPP : 774IPP : 774Sub Total : 1.926Sub Total : 1.926

4.04.02.72.76.76.7

}}}} 4040}}

LRC FOR PRODUCING SYNTHETIC OILLRC FOR PRODUCING SYNTHETIC OIL(COAL LIQUEFACTION)(COAL LIQUEFACTION)

(Stipulated by (Stipulated by KeppresKeppres No.2/2006)No.2/2006)☑☑ Initiative Initiative

To replace the domestic use of natural oil by synthetic oilTo replace the domestic use of natural oil by synthetic oilproduced from coal (LRC) liquefaction.produced from coal (LRC) liquefaction.

☑☑ TargetTarget-- 2% of oil consumption in 2025 should be replaced 2% of oil consumption in 2025 should be replaced

by synthetic oil (7 modules). It will consume 25 M tons by synthetic oil (7 modules). It will consume 25 M tons of LRCof LRC-- 11stst coal liquefaction plant (1 module) will be built in 2016coal liquefaction plant (1 module) will be built in 2016-- 1 module consume 9,1 M ton/year of LRC1 module consume 9,1 M ton/year of LRC-- 1 BCL Technology will be used1 BCL Technology will be used-- 1 ton of LRC (daf) will produce 4,5 bbl1 ton of LRC (daf) will produce 4,5 bbl-- the production cost of crude synthetic oil will be about US$30the production cost of crude synthetic oil will be about US$30/bbl /bbl

☑☑ Current Status:Current Status:Still in the process of action by National Working Group.Still in the process of action by National Working Group.

COAL GASIFICATION COAL GASIFICATION (Stipulated by (Stipulated by KeppresKeppres No.5/2006: Energy Diversification Policy)No.5/2006: Energy Diversification Policy)

☑☑ Objective:Objective:➢➢ To convert coal to To convert coal to syngassyngas or or synfuelsynfuel..

☑☑ Initiative:Initiative:The initiative is to replace the use of natural gas by LRC The initiative is to replace the use of natural gas by LRC gasification in petrochemical industry and as gas gasification in petrochemical industry and as gas fuel in other industrial purposes. fuel in other industrial purposes.

➢➢ 1 ton of coal (LRC) 1 ton of coal (LRC) ➙➙ 1515--20 MMBTU of gas20 MMBTU of gas

➢➢ Initial Application (Indonesia)Initial Application (Indonesia)-- Simple Fix Bed Coal Gasifier (Agro Simple Fix Bed Coal Gasifier (Agro –– Drier, Burner) Drier, Burner)

Reduce Fuel Cost up to 60% (compared with oil)Reduce Fuel Cost up to 60% (compared with oil)-- Hybrid Hybrid –– Diesel Application (80% coal gas + 20% diesel oil)Diesel Application (80% coal gas + 20% diesel oil)

Reduce fuel costs up to 80% (compared with 100% diesReduce fuel costs up to 80% (compared with 100% diesel oil)el oil)

☑☑ Target:Target:-- All fertilizer plant using natural gas is instructed by the GoAll fertilizer plant using natural gas is instructed by the Government to be replaced by coal gasification.vernment to be replaced by coal gasification.-- The gasification process of LRC can produce also methanol, oneThe gasification process of LRC can produce also methanol, one of the fuel source for transportation in of the fuel source for transportation in

the future.the future.-- Study shows (Study shows (HumpreyHumprey & Glasgow) that LRC with the level price of US$ 30/ton will be & Glasgow) that LRC with the level price of US$ 30/ton will be equal to gas of equal to gas of

US$ 2/MMBTU. When the level price of gas become US$ 3/MMUS$ 2/MMBTU. When the level price of gas become US$ 3/MMBTU and the price level of coal still BTU and the price level of coal still US$ 30/ton then using coal (LRC) to produce fertilizer wUS$ 30/ton then using coal (LRC) to produce fertilizer will much cheaper (less than US$ 35/tons of ill much cheaper (less than US$ 35/tons of product)product)

➢➢ Current Status: Current Status: The intensive R&D on Coal Gasification still to be serioThe intensive R&D on Coal Gasification still to be seriously conducted by TEKMIRA.usly conducted by TEKMIRA.

↗↗ (Synfuel [Electricity, Industry])(Synfuel [Electricity, Industry])

↘↘ Syngas (Petrochemical)Syngas (Petrochemical)Coal ➙ Gasifier ➙

UPGRADED LRC FOR BETTER USE UPGRADED LRC FOR BETTER USE (an additional of exportable coal sources and other (an additional of exportable coal sources and other

domestic use)domestic use)☑☑ InitiativeInitiative

Due to the limitation of high coal grade reserves theDue to the limitation of high coal grade reserves theinitiative is to upgrade the LRC by UBC process into initiative is to upgrade the LRC by UBC process into better coal grade. better coal grade.

☑☑ TargetTarget-- 11stst upgrading plant (1,7upgrading plant (1,7 M tons/year) will be built in 2010. M tons/year) will be built in 2010. -- In 2025 about 7 Plant will be built and consume about In 2025 about 7 Plant will be built and consume about

32 M tons /year of LRC and produced 22 M tons of better32 M tons /year of LRC and produced 22 M tons of bettercoal grade. coal grade.

☑☑ Current Status:Current Status:The intensive R&D activities to scale up coal liquefactionThe intensive R&D activities to scale up coal liquefactionfrom pilot plant to demo plant level still to be seriously from pilot plant to demo plant level still to be seriously conducted by TEKMIRA.conducted by TEKMIRA.

WHAT IS THE BENEFIT OF USING WHAT IS THE BENEFIT OF USING LRC? (OPPORTUNITIES)LRC? (OPPORTUNITIES)

✦✦ Supply will be secured, due to:Supply will be secured, due to:●● Large reserves.Large reserves.●● UnUn--exportable grade coal exportable grade coal ➙➙ no conflict with export allocationno conflict with export allocation..●● Covered by many coal producersCovered by many coal producers

✦✦ Competitive pricing Competitive pricing ●● Low cost due to low mining strip ratioLow cost due to low mining strip ratio

✦✦ Incentive in royalty due to use Low Rank Coal Incentive in royalty due to use Low Rank Coal (stipulated in (stipulated in KeppresKeppres No.75/96)No.75/96)

✦✦ Good quality in terms of ash and sulfur content.Good quality in terms of ash and sulfur content.

✦✦ Some deposits are located near the seashore, Some deposits are located near the seashore, it will reduce land transportation cost to the coal terminait will reduce land transportation cost to the coal terminal.l.

WHAT IS THE RISK USING LRC FOR WHAT IS THE RISK USING LRC FOR POWER PLANT ? (CHALLENGES)POWER PLANT ? (CHALLENGES)

High moisture content affect to lower efficiency of High moisture content affect to lower efficiency of combustion. (More coal being used per unit of electricitycombustion. (More coal being used per unit of electricitygenerated) generated)

Transportation cost will be higher per unit heat content.Transportation cost will be higher per unit heat content. Tends to self combustion.Tends to self combustion. Increasing CO2 emission per unit of electricity generated Increasing CO2 emission per unit of electricity generated

due to higher volume of LRC consumed.due to higher volume of LRC consumed. Dust problem during handling and loading/unloading.Dust problem during handling and loading/unloading.

Question: Question: Why donWhy don’’t use LRC in the mine mouth power plant in order t use LRC in the mine mouth power plant in order to minimize the inferior characteristic above?to minimize the inferior characteristic above?

THE LRC DEMAND ESTIMATION SCENARIOTHE LRC DEMAND ESTIMATION SCENARIO(2005 (2005 –– 2025)2025)

Consumer Consumer 20052005 20102010 20152015 20202020 20252025

ElectricityElectricity 0.50.5 43.043.0 49.049.0 45.045.0 85.085.0

Coal LiquefactionCoal Liquefaction -- 2.32.3 13.813.8 24.024.0 32.032.0

Upgrading Upgrading -- 1.71.7 8.58.5 12.012.0 17.017.0

GasificationGasification -- 3.03.0 5.05.0 7.07.0 9.09.0

OthersOthers -- -- --

Total 1Total 1 40.040.0 50.050.0 76.376.3 108.0108.0 143143

SUBBITUMINOUS + BITUMINOUS COAL ESTIMATION SCENARIO SUBBITUMINOUS + BITUMINOUS COAL ESTIMATION SCENARIO DEMAND (2005 DEMAND (2005 –– 2025)2025)

Consumer Consumer 20052005 20102010 20152015 20202020 20252025

ElectricityElectricity 30.030.0 30.030.0 30.030.0 30.030.0 30.030.0

Cement Cement 6.56.5 10.010.0 11.011.0 13.013.0 16.016.0

Other IndustriesOther Industries 2.52.5 3.53.5 4.54.5 5.55.5 6.06.0

Total 2Total 2 39.039.0 43.543.5 45.545.5 48.548.5 52.052.0

Total 1 + 2 = 79.0 93.5 121.8 156.5 195.0

THE ESTIMATION OF LRC THE ESTIMATION OF LRC COMPONENT COMPONENT IN DOMESTIC USE DEMANDIN DOMESTIC USE DEMAND(2005 (2005 –– 2025)2025)

0

100

200

2005 2010 2015 2020 2025

40.0

93.5

121.8

156.5

195.0

43.5 45.5 48.5 52.0

Dom

estic

Use

M t

ons

➙ year✵ = Low Rank Coal

Sub bituminous and Bituminous

♒♒

♒♒

♒♒

♒♒

♒♒

✵✵✵

✵✵✵✵

✵✵✵✵✵

✵✵✵✵✵✵✵✵

CLOSING REMARKSCLOSING REMARKS1.1. The overall picture shows that LRC will be able to The overall picture shows that LRC will be able to

provide the domestic coal consumption in provide the domestic coal consumption in Indonesia in the next decade.Indonesia in the next decade.

2.2. LRC will be essential part of the energy mix and LRC will be essential part of the energy mix and is vital for the continued secure of supply of is vital for the continued secure of supply of affordable electricity.affordable electricity.

3.3. Beside that, LRC is essential to be converted to Beside that, LRC is essential to be converted to liquid fuel, gas fuel, synthetic gas for liquid fuel, gas fuel, synthetic gas for petrochemical industry, to be upgraded for petrochemical industry, to be upgraded for better use, etc. All of these will support to the better use, etc. All of these will support to the energy demand in the country.energy demand in the country.