COAL SUPPLY FOR 10,000-MW POWER PROJECT GUARANTEED

By Andi Abdussalam

Jakarta, March 9, (ANTARA) - While the government is developing its 10,000-MW power production capacity project to meet the country's need for electricity, there is concern about the availability of enough coal to meet the power plants' fuel needs.

        But state-owned power utility company PLN guarantees that coal will be in sufficient supply. PLN had concluded various contracts with coal producers in addition to the government regulation imposing a domestic market obligation (DMO) on coal contractor companies.

        Energy observer Pri Agug Rakmanto expressed fear that PLN would not be able to meet the fuel needs of the 10,000-MW project in the future. Some time in the past, PLN had to carry out alternating power cuts due to a shortage of coal supply.

        "With the need for only 30 million tons at present, PLN is already overwhelmed to obtain such amount of supply, not to mention if its 10,000 MW project is already in operation which needs some 65 to 75 million tons of coal per annum," Rahmanto said last week.

        For this purpose, PLN had to conclude long-term contracts with enough numbers of coal producers in order to guarantee coal supplies.

        "Shortage of coal supply to power generators should not happen again as it did sometime in the past," he said.

        According to Nasri Sebayang, the head of PLN's primary energy affairs, the need for coal supply of PLN's 10,000 MW project would be met. The 10,000 MW project will need some 31.9 million tons of coal annually.

        Sebayang said PLN has signed contracts with coal producers for the procurement of 16.2 million tons of coals per annum to be supplied to the 10,000 MW plants.

        In addition, a tender has been also called for the procurement of another 12.2 million tons, whose contacts are now in the process to be signed. The remaining need of 3.4 million tons per annum will be put out to tender in the third week of March 2009.

        The latest tender will be called for to meet the need for coal of power plants in Aceh, North Sumatra, West Sumatra, Bangka Belitung, Riau, Riau Islands, Lampung and South Kalimantan.

        Director for mineral and coal affairs of the Ministry of Energy and Mineral Resources, Bambang Gatot Ariyono, said the government had reached agreements with coal producer companies where the latter were obliged to supply 68.3 million tons of coal to the domestic need in 2009.

        Of the 68.3 million tons, some 41 million tons are designed for power generators, of which 33 million tons are to be supplied to PLN's power plants.

        With regard to the 10,000 MW projects, Sebayang said that PLN signed contracts not only with one producer but also with several firms for each of its power plants so that supply would be guaranteed.

        The same idea was also expressed by Yogo Pratomo of PLN's team coordinator for the acceleration of the development of the 10,000 MW power project.

        He said that PLN has signed long-term contracts with domestic producers. "Supply is guaranteed because the contractors are reliable," he said.

        Optimism on enough coal supply was also voiced by Sutan Bhatoegana, a member of the House of Representatives (DPR)'s Commission VII which deals with energy affairs.

        Bhatoegana said that the government had guaranteed that coal producers at home would increase their production from 230 million tons per annum to 280 million tons.

        "A production of that volume is sufficient for domestic consumption and exports," he said.

        After all, the government is planning to impose a government regulation (PP) on domestic market obligation (DMO). At present, the government is drawing up the PP on the DMO requirement.

        "With that production volume, coal supply at home would be enough even if no DMO is imposed," Bhatoegana said.

        Gatot Ariyono said next year when the PP is already put into effect, the government would take sanctions against producers which violated it. The sanctions include cuts in production quota.

        The DMO provision is to be included in a government regulation as an implementation of Law No.4 / 2009 on Mineral and Coal Mining. Actually, the government is preparing four PPs on mining, mineral and coal exploitation, guidance and supervision of mining, and reclamation and post-mining activities.

        The DMO provision will be included in the PP on mineral and coal business activities. It is expected that the PPs would be accomplished in the mid of this year.

        Pending, the completion of the PP, the directorate general for mineral, coal and geothermal obliges coal producers to meet the need for coal of domestic market.

        However, energy observer Pri Agung Rakmanto said the government should accomplish soon the DMO regulation for coal producers, so that it would be able to taken sanctions against companies which did not meet their obligation.

        He said that the commitment of producers was not clear enough if the DMO provision was only based on a clause of their present contracts.

        "If need be, the terms of the contracts must be changed, made clear and made more firm. They must mention clear volumes and clear consequences," he said.***2*** (T.A014/A/HAJM/15:45/A/O001) (T.A014/A/A014/A/O001) 09-03-2009 15:40:44