global trends in energy industry

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Global Trends in Energy Industry

by Sando Sasako

Jakarta, 17 August 2016

This article is only a part of a business research on Energy Industry in Indonesia. Read more in

Sando Sasako, Coal Mining Business in Indonesia, Serabdi Sakti, Jakarta, August 2016,

http://bit.ly/2cu6VBA

or you can call us on +62 851 0518 7118 or +62 21 4027 8375 for presenting our research findings

in a flip book version, full of graphs, charts, and tables.

Due to weakening global economy and most of all, the slowing industrialisation of China and its

economic growth, global energy consumption has been decelerating. When China’s economy

sneezes, it is contaging the world with cold, coughs, and ailments. As Chinese economy got

matured, so was its business. Industrial saturation and over-capacity has been accompanied with the

ballooning debts financing the economy expansion.

China has been the world’s largest growth market for energy for the fifteenth consecutive year. In

2015, China’s energy consumption grew at its slowest rate in almost 20 years. Coal consumption in

China fell by 1.48% to 1,920.4 mtoe; while global coal consumption declined by 1.83% to 3,839.9

mtoe. Coal matters in Asia Pacific as it contributed more than 50% of the fuel mix totaled at

13,147.3 mtoe.

The decline in coal consumption was in contrast with other primary energy that grew positive such

as oil, (natural) gas, nuclear, hydroelectricity, and renewables. In total primary energy consumption,

coal only contributed 29.21%. In 1951, 65 years ago, coal provided more than a half of the world’s

energy; while oil’s share was almost exactly to its share today, at a little over 30%. In today’s

money, oil price was equal $16.

As with any other zero sum game, the loss in coal means the gain in other fuel types, mostly oil,

natural gas, and renewable energy, recording solid growth in 2015. On the other hand, the price of

fossil fuels fell sharply. The analogue of zero sum game applies again, as well. The fuel mix

composition adjusts, favours, and shifts to the most economic and abundant resources, that is oil.

Coal seems to get abandoned in the process of changes in the fuel mix, as natural gas and renewable

energy is shifting up. As a result, carbon emission was estimated to be flat in 2015, marking it as the

lowest growth in nearly a quarter of a century. But the challenge to tackle the acceleration of global

warming remains substantial, that is energy efficiency and power mix composition.

The decline in fossil fuel prices has been predicted to occur as the US shale revolution really did

and has unlocked the huge swathes of oil and gas resources. Instead to function as the complement,

the US shale existence means to substitute the existing fossil fuel role in energy mix. It could also

mean that the US shale producers are the real rivals of ‘traditional’ energy producers.

As in any competition, the fierce free market won’t and hardly don’t accept newcomers taking and

stealing the cookies and cakes that have been shrinking from time to time. It’s not the total size that

has been shrinking, but the shares that they have been getting, which is smaller and smaller by the

end of the day (time).






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To get rid of the competition, none is better than applying the cut-throat and predatory pricing.

Some name it, positively, as a long-purse and/or deep-pocket strategy. Whatever the terms is, apart

from the ethical and lawful concerns, the strategy has been implemented for ages and since before

the name, label, attributed for the actions. It’s natural.

The Saudi Factor

Initially implemented in 2014, the cheap oil strategy of Saudi were rumoured to serve many

purposes. One, Saudi will keep on pumping oil to dump US shale. Two, to expel Russia from the oil

markets in Europe and Asia. Three, to ancipitate the economic uncertainty in China due to its

slowing economic growth.

However, Saudi’s strategy implementation don’t come cheap. Saudi has set 500pc rise in water

prices, creating public outcry. On the grassroot levels and neighbouring countries, migrant workers

are becoming increasingly frustrated with the Persian Gulf states. Given on the ratio of non-locals to

locals, social turmoil is just a matter of time to erupt and disrupt everything abruptly.

Saudi was rumoured to have borrowed $10b from a range of US, European and Asian banks. It was

the first international debt issuance in 25 years. In 2015, its main source of revenue fell 23%. The

lead arrangers, each contributing around $1.3b, include the Bank of Tokyo-Mitsubishi, HSBC, and

JPMorgan. Qatar is another country in Middle East that has increased overseas borrowing sharply.

The bond loan to Saudi was provided despite a sharp downgrade in Saudi’s creditworthiness from

Aa3 to A1 following Moody’s assessment in March 2016. Saudi was not alone. Oman also took a

downgrade (from A3 to Baa1) and Bahrain as well (from Ba1 to Ba2). The assessments don’t

downgrade Kuwait, Qatar, and the United Arab Emirates, but a statement of negative outlook. S&P

and Fitch did the same.

The credit rating agencies reasoned that those countries are not well positioned to weather future

shocks, following bad economic performance, either in lower growth, higher debt levels, and

smaller domestic and external buffers. They skipped the ambitious plans of Deputy Crown Prince

Mohammed bin Salman to transform Saudi into a global investment power by 2030.

During the period of 2010-2014, Saudi spending went berserk. About $80-100b a year was spent

inefficiently. In April 2016, state budget was cut by a quarter. Tight money policy has been applied,

including reinstate strict spending controls, tap the debt markets, and develop the VAT and other

levies. On the first half of 2015, the burn rate on Saudi’s cash reserves was $30b a month. In June

2016, Saudi burned another $11b and let its net foreign reserves to fall from the highest level of

$737b to $562b.

We can’t assume anything but actualising the facts. In October 2012, Saudi only had 88 rigs. In

April 2016, there was a report that Saudi has doubled its drilling rigs to 170, exploring and

developing "more costly offshore fields", 7 times more than the existing onshore rigs. Saudi

Aramco has been reported to have started CO2-EOR process, just to extract the last of the field's oil.

It could mean that Ghawar Oil Field, the largest in the world, is running out after about 65 years of

continuous production. From a 2009 dip of 8.25 mbpd, Saudi upped its output to 10.5mbpd and is to






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raise the output tp 11.5mbpd immediately, and 12.5mbpd in the next six-to-nine months starting

April 2016.

On the other hand, the warmonger Saudi has established an alliance with Turkey, planning to seize

Syria and Iraq's oil fields. That doesnot include Saudi’s recent bombings to Yemen, assisted with

the Western establishment. Here are some other facts, in November 2005, the Republic of Yemen

expropriated its oil basins - the Marib Al-Jawf Block - from Hunt Oil Company and ExxonMobil

affiliates.

The detailed 2002 United States Geological Survey (USGS) revealed that Yemen possesses vast

offshore oil reservoirs, exclusive of its 3 billion barrels of proved oil reserves. In 2008, a cable from

Stephen A. Seche as the US Ambassador in Yemen was read that the governorates of Shabwa,

Marib and al-Jawf have high potential for significant gas deposits.

In other oil producing countries, the condition has been less the same. The low oil price has also

transformed Nigeria to become a war-torn country. Venezuela and Brazil are expected to experience

production disturbances, following recent political upheavals in both countries. Venezuela and

Algeria are 2 oil-export-dependent countries that do not have sufficient monetary reserves or clear

access to bond markets.

During hard economic times, most oil producing countries like China, Iran, Saudi, and Russia have

its domestic oil industries been propped up by its government. But not in the US and Canada, as

their governments let oil and gas companies fall into bankruptcy, leaving workers unemployed and

national resources ripe for capture by foreign investors.

The Revolutionary US Shale

At the heights of subprime mortgage crisis, the oil price peaked in July 2008 at $145 per barrel.

This event had created ample incentives to develop advanced fracking technology in the US.

Billions of dollars had been raised to finance the R&D in shale technology as it promises to be the

lowest-cost oil production industry.

Technology development to produce shale natural gas was initiated in 1980s and 1990s by Mitchell

Energy and Development Corporation in Barnett Shale, north-central Texas. In 2000, commercial

large-scale natural gas production from shale came to life. In 2005, Barnett Shale produced almost

half a trillion cubic feet (Tcf) of natural gas.

In the Annual Energy Outlook 2014, EIA estimated that the US has approximately 610 Tcf of

technically recoverable shale natural gas resources and 59 billion barrels of technically recoverable

tight oil resources. This placed the US as the second country to have been endowed with shale oil

resources after Russia and was ranked fourth globally after China, Argentina, and Algeria in shale

natural gas resources.

However, the increased American shale oil production have been unwelcomed by Saudi. Fear of

significant reduction cuts in the market share, Saudi has been rejecting the suasion to lower its oil

production, but keep pumping out the oil and flooding the market. The oil glut has caused oil price






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to crumble below $100 per barrel towards October-November 2014 and went into freefall

afterwards.1

Figure – Potential future global oil projects by average breakeven prices

Source: Wood Mackenzie in Ed Crooks, US shale is lowest-cost oil prospect, New York, 20160713,

https://www.ft.com/content/0a7a817a-4863-11e6-8d68-72e9211e86ab

Note: Brent equivalent

For some time, Saudi strategy succeeded in curbing US output. After peaking at 9.7 mbpd in April

2015, the highest monthly level since 1971, US oil production fell back to 8.9 mbpd in May 2016.

Since then, US oil production appears to have stabilised, while the output forecasts was about 8.3

mbpd in 2017.

At that time, US shale producers were on the phase of higher production cost. The cheap oil has

bankrupted more than 130 US oil and gas companies since 2015. Overexposed with heavy debts,

the US shale companies began to experience lowered capital expenditures, laid off workers, sold

assets, downgraded by credit rating agencies, then filing a bankruptcy protection. It does create

some havoc in the industry and in communities.

In the second half of 2016, reports have surfaced that shale companies can operate with oil prices in

the range of $40-50 per barrel. It means that full-cycle break-even costs have fallen below that price

range. Although new wells production declines, rig counts are going up. Multi-pad drilling means

that 3 wells are now routinely drilled from the same rig, and sometimes 6 or more.

1 Oil glut has been present for several times. The Asian financial crisis in 1997 had created an oil glut, due to

plunging demand. It caused oil price to slip below $10 a barrel in London in December 1998, despite some production

cuts by OPEC in March and June 1998. As oil stockpiles began to deplete in developed economies in early 1999, oil

price began to rise.






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Average well productivity has risen 5-fold in the Permian since early 2012. New rigs can be built in

135 days flat. It is a dramatic contrast to deep-water mega-projects that can take seven to 10 years

just to build 1 new rig. According to Wood Mackenzie, most US shale fields/wells are now viable at

$60.

As much as 90% of the 3,900 drilled but uncompleted wells (DUCs) are profitable at $50. The pre-

tax production costs in the Permian Basin of West Texas have fallen to $2.25 a barrel. This level of

production cost surely far below levels needed to fund the Saudi welfare state and its military

machine, or to cover OPEC budget deficits.

Revolutionary improvements in drilling technology and data analytics have changed the cost

calculus faster than almost anybody thought possible. The shale industry has proved remarkably

nimble and effective in cutting costs and improving productivity. In 2006, the 'decline rate' of

production over the first four months of each well was 90%. In 2012, it dropped to 31% and 18% in

2016. Drillers have learned how to extract more.

This means that Saudi’s predatory pricing has still failed to break the back of the US shale industry.

Nevertheless, Saudi gained some victory in lowering investment in upstream exploration by $1.8t

for the period of 2014-2020 and killing off a string of global mega-projects in deep waters such as

in Nigeria and Angola waters, the Arctic, or the oil sands of Canada and Venezuela's Orinoco basin.

The success stories do encourage. The bleak ones are about to do some deals with the vultures,

eagerly waiting on the sidelines to buy distressed assets and take over the infrastructure.

Private equity groups such as Blackstone, Carlyle, Riverstone, and others are to scavenge the best

US shale oil properties and to purchase advanced fracking machinery at ten cents on the dollar. The

vultures swoop, buy, and cherry pick assets that have been devalued due to heavy debts and bad

investments. Buying binge of troubled shale companies will be on the rise.

References

Ambrose Evans-Pritchard, Texas shale oil has fought Saudi Arabia to a standstill, 20160731,

http://www.telegraph.co.uk/business/2016/07/31/texas-shale-oil-has-fought-saudi-arabia-to-a-

standstill/

BP, Statistical Review of World Energy, 65/e, June 2016.

Grant Smith, Shale Oil Isn't Saudi Arabia's Only Nemesis, 20160302,

http://www.bloomberg.com/news/articles/2016-03-02/saudi-arabia-faces-a-new-oil-titan-

once-battle-with-shale-is-won-ila2vccq

Laura Blewitt and Zachary Mider, Icahn Calls on EPA to Fix 'Mother of All Short Squeezes',

20160816, http://www.bloomberg.com/news/articles/2016-08-15/carl-icahn-calls-on-epa-to-

fix-mother-of-all-short-squeezes

Matt Egan, Saudi Arabia tries to make nice with U.S. shale oil, 20160224,

http://money.cnn.com/2016/02/24/investing/saudi-arabia-us-shale-oil/

Matt Robinson and Annie Massa, A $35 Billion Stock, an SEC Halt and Suspicions of

Manipulation, 20160816, http://www.bloomberg.com/news/articles/2016-08-15/a-35-billion-

stock-was-just-halted-on-manipulation-concerns






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Patti Domm, Saudi Arabia, Iran pump at high levels as U.S. producers cut back, 20160810,

http://www.cnbc.com/2016/08/10/saudi-arabia-iran-pump-at-high-levels-as-us-producers-cut-

back.html

R Sriram, Face-off between US shale and Saudi Arabia will benefit India, 20160802,

http://economictimes.indiatimes.com/markets/stocks/news/face-off-between-us-shale-and-

saudi-arabia-will-benefit-india/articleshow/53494685.cms

Richard Lein, US shale drillers face squeeze from Saudi oil policy, 20150911,

http://www.businessinsider.co.id/afp-us-shale-drillers-face-squeeze-from-saudi-oil-policy-

2015-9/?r=US&IR=T#e67Q36LSJ4H53A0L.97

Rita Nazareth, Oliver Renick, OJRenick, U.S. Shares Regain Records as Fed Outlook Hits Dollar;

Oil Jumps, 20160815, http://www.bloomberg.com/news/articles/2016-08-14/dollar-nurses-

losses-on-fed-outlook-as-japan-futures-signal-drop

Robin Pagnamenta, Saudis may rejevenate US shale instead of destroying it, 20160815,

http://www.theaustralian.com.au/business/companies/saudis-may-rejevenate-us-shale-instead-

of-destroying-it/news-story/a8f5a17bc9c630f3fe1ba9bc0d1db977

Robin Pagnamenta, Saudis may rejuvenate the US shale economy instead of destroying it,

20160815, http://www.thetimes.co.uk/article/saudis-may-rejuvenate-the-us-shale-economy-

instead-of-destroying-it-nbdtzhbff

sputniknews.com, As Oil Prices Fall, Saudi Arabia Borrows $10 Billion to Stay Afloat, 20160421,

http://sputniknews.com/world/20160421/1038357537/saudi-arabia-10bn-loan.html

sputniknews.com, Did the Saudis Kill the American Shale Oil Industry?, 20160518,

http://sputniknews.com/us/20160518/1039782506/saudi-america-obama-shale-oil.html

sputniknews.com, Out of Money: Saudi Arabia Shot Itself in the Foot by Dropping Oil Prices,

20160312, http://sputniknews.com/politics/20160312/1036177589/saudi-arabia-oil-price-

slump-money.html

sputniknews.com, Pump and Dump: Saudi Kills US Shale Oil Industry and Buys it for Pennies,

20160519, http://sputniknews.com/middleeast/20160519/1039930364/saudis-oil-fracking-

obama-economy.html

sputniknews.com, Riyadh's Dirty Secret: Saudi Arabia Thirsty for Yemeni Oil, Gas Reserves,

20160406, http://sputniknews.com/politics/20160406/1037584835/saudi-arabia-yemen-gas-

oil.html

sputniknews.com, Riyadh's Worst Nightmare: Is Saudi Arabia's Oil Business Going Bust?,

20160310, http://sputniknews.com/politics/20160310/1036086686/saudi-arabia-oil-business-

going-bust.html

sputniknews.com, Russia Denies Discussing Oil Output Freeze With Saudi Deputy Crown Prince,

20160420, http://sputniknews.com/middleeast/20160420/1038354274/russia-no-discussions-

saudi-prince.html

sputniknews.com, Saudi Arabia Could Have Gone Completely Broke by Early 2017, 20160423,

http://sputniknews.com/middleeast/20160423/1038499322/saudi-arabia-broke-2017.html

sputniknews.com, Vision 2030: Why Saudi's Financial Future is 'Destined for Disgrace', 20160517,

http://sputniknews.com/middleeast/20160517/1039741502/saudi-arabia-vision-2030.html

sputniknews.com, Wind of Change: Saudi Arabia Prepares for the End of 'The Oil Age', 20160508,

http://sputniknews.com/middleeast/20160508/1039279403/saudi-arabia-society-economic-

reforms.html

Tom DiChristopher and John W. Schoen, OPEC states that wanted production cuts buckle under the

new oil order, 20160601, http://www.cnbc.com/2016/06/01/opec-states-that-wanted-

production-cuts-buckle-under-the-new-oil-order.html

Serabdi Sakti

Jakarta, August 2016

Sando Sasako

Coal Mining Business

in Indonesia

ii – Coal Mining Business in Indonesia

Perpustakaan Nasional RI: Data Katalog dalam Terbitan (KDT)

Sando Sasako.

Coal Mining Business in Indonesia / by Sando Sasako. Jakarta :

CV Serabdi Sakti, 2016.

xi + 139 pp. ; 21 cm

ISBN 978-602-73508-7-…

1. …. I. Judul.

Published by CV Serabdi Sakti

Graha Anggrek

Jl. Anggrek Rosliana VII No.63

Jakarta Barat 11480, Indonesia

Tel. +62 21 4027 8375 (Fren)

+62 851 0518 7118

Copyright © Sando Sasako

All rights reserved.

You may not reproduce the content of this book, in part

or in whole in any form with or without the written

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Coal Mining Business in Indonesia – iii

Foreword

Coal deposits all around the world may have been declining. It’s on the surface, but not in deep

underground. Extracting coal physically beneath the earth, majorly under the deep seabed, is not an

easy task to fulfill and complete. Some advantages may have come for digging coal out of the

underwater. Coal washing doesnot need special water resources and treatment, but from the sea or

ocean. Every thing must have a plus and a minus. It depends on what perspectives you’ve taken all

along.

The choice then lend it to the tasks of extracting the coal ores, that is the molecular carbons in gas,

namely CO, CH4, and H2. Syngas, they used to call it as the term. But not the CO2. CO2 is mostly

considered as the public enemy number one to be captured and imprisoned in a dungeon, deep

underground, for good. Various CO2 absorbents have been sought and developed, along with the

technologies to filter out the impurities embedded with coal, namely SOx and NOx.

Many have mixed up inappropriately the understandingness between coal gasification and coal

combustion. Even FoE. Those two coal treatments are different things. The first is heating the coal,

while the second is burning the coal. Both process involves massive thermal chain reactions. The

problems with UCG is that how can you guarantee that it is the coal seam and the intended ones that

has been gasified.

How about the walls, the roofs, the floors, and the layers buffering the coal seams? How about if the

words of collapse and/or cracks applied to those layers? Won’t they initiate a flow of the

unexpected such as a mud flow for example as in Porong, Sidoarjo, East Java, Indonesia, that hasn’t

stopped since it began to erupt on 29 May 2006.

Even worse is how the earth is burning the coal seams underground. Burning Mountain of Mount

Wingen in New South Wales has been burning for 6000 years, Brennender Berg in German since

1688, Smoking Hill in NW Canada since its discovery in 1826, Emalahleni in South Africa since

1953, and Centralia in Pennsylvania since 27 May 1962.

The list doesnot include the burning of methane in Derweze, Turkmenistan since 1971, known as

door to hell; Baba Gurgur oilfield nearby Kirkuk, Irak for 2500 years, known as eternal fire; Yanar

Dag near Baku, Azerbaijan since 1950s, known as land of fire.

The unanswered questions to protect the environment underground and the surrounding area has left

many UCG projects to be terminated, cancelled, withdrawn, neglected, abandoned, forbidden. They

are all due to lack of environmental protection technologies, and most of all understandingness how

to deal and cope it before hand.

Therefore, UCG is not an option to exploit coal deposits underground. At least for now, and some

decades to come.

Jakarta, 31 August 2016

Sando Sasako

Email: sandosako @ yahoo.com

Mobile: +62 812 8056 516

Coal Mining Business in Indonesia – v

Contents

Foreword ....................................................................................................................................... iii

Contents .......................................................................................................................................... v

List of Tables .................................................................................................................................ix List of Figures ................................................................................................................................. x

Global Trends in Energy Industry .................................................................................................... 1 The Saudi Factor.......................................................................................................................... 1

The Revolutionary US Shale ........................................................................................................ 3 Primary Energy Consumption in the World ................................................................................. 5

Global Coal Trends.......................................................................................................................... 8

Coal Price Dynamics in the World ............................................................................................... 9 Fracking Coalmines ................................................................................................................... 11

Coal Gasification ....................................................................................................................... 12 Underground Coal Gasification .............................................................................................. 15

Kincardine UCG, Scotland, UK ............................................................................................. 16 Raven and Hat Creek Coalfield, BC, Canada ......................................................................... 19

Global Warming or Global Heating ........................................................................................... 21

Greenhouse Gas ..................................................................................................................... 23 CO2 as One of GHGs ............................................................................................................ 25

Oxygen Carriers ..................................................................................................................... 26 CO2 Recovery ....................................................................................................................... 28

Underwater Coalmines .............................................................................................................. 29

Hashima Coal Mine, Japan..................................................................................................... 30 Okinoyama Coal Mine, Japan ................................................................................................ 31

Beizao Coal Mine, China ....................................................................................................... 31 Bomlo Coal Mine, Norway .................................................................................................... 33

Cape Breton Coal Mines, Nova Scotia, Canada ...................................................................... 35 Solway Coal Mines, Cumbria, UK ......................................................................................... 39

North Sea Coal Mines, NE England ....................................................................................... 40 Forth Coal Mines, Scotland, UK ............................................................................................ 41

The End of Deep Coal Mines in the UK ................................................................................. 42

Energy Business in Indonesia in a brief ......................................................................................... 45

Coal-Bed Methane ..................................................................................................................... 47 The Milestone of CBM Commercialisation ............................................................................ 49

CBM Asia @ Kutai West PSC ............................................................................................... 50 Dart Energy & IGas ............................................................................................................... 52

Dart Energy & NuEnergy....................................................................................................... 53

Coal ........................................................................................................................................... 61 History of Coal Business in Indonesia .................................................................................... 66

Regulatory Frameworks ......................................................................................................... 69 The Dutch Colonialism ...................................................................................................... 69

The Mining Law of 1967 ................................................................................................... 69 The Production Sharing Contract in Coal Mining of 1975 .................................................. 71

vi – Coal Mining Business in Indonesia

The Coal Contract of Work of 1981 ................................................................................... 71

Forced Localisation ............................................................................................................ 72

Issues on Enviromental and Decentralisation ......................................................................... 74 Ministerial Regulations (Permen ESDM) ........................................................................... 75

Ministerial Decrees (Kepmen ESDM) ................................................................................ 77

Clean and Clear: The Causes .................................................................................................. 80 The Non-CNC Status ......................................................................................................... 82

Unclear DMO System ........................................................................................................ 85 Forestry Land Use Permit................................................................................................... 89

Korsup Minerba ................................................................................................................. 90

CCoW Companies: The First Generations .............................................................................. 93 BHP Kendilo Coal Indonesia ............................................................................................. 98

BHP Businesses in Indonesia ........................................................................................... 100 Rio Tinto.......................................................................................................................... 100

Tata Power ....................................................................................................................... 101 Arutmin Indonesia ........................................................................................................... 103

Kaltim Prima Coal ........................................................................................................... 103 Bumi Resources ............................................................................................................... 105

The IndoCoal Deals...................................................................................................... 105 Asmin Koalindo Tuhup .................................................................................................... 107

Allied Indo Coal............................................................................................................... 108

References ................................................................................................................................... 111

Directory of Coal Mining Companies in Indonesia ...................................................................... 115 Abadi Batubara Cemerlang .................................................................................................. 115

Abadi Coal Cemerlang ......................................................................................................... 115 Aceh Resources and Mineral ................................................................................................ 115

Aceh Resources and Mineral Core ....................................................................................... 115 Adaro Indonesia ................................................................................................................... 115

Adimas Baturaja Cemerlang ................................................................................................ 115 Allied Indo Coal , PT ........................................................................................................... 116

Andhika Mutiara Etam ......................................................................................................... 116 Andhika Mutiara Lestari ...................................................................................................... 116

Andhika Mutiara Sejahtera ................................................................................................... 116 Antang Gunung Meratus ...................................................................................................... 116

Anugerah Jatimulia .............................................................................................................. 117 Anugerah Jatimulya ............................................................................................................. 117

Arutmin Indonesia ............................................................................................................... 117 Asmin Bara Bronang............................................................................................................ 117

Asmin Bara Jaan .................................................................................................................. 117 Asmin Koalindo Tuhup ........................................................................................................ 117

Astaka Dodol ....................................................................................................................... 118 Bahari Cakrawala Sebuku .................................................................................................... 118

Bangun Banua Persada Kalimantan ...................................................................................... 118 Bara Mutiara Prima .............................................................................................................. 118

Bara Pramulya Abadi ........................................................................................................... 119 Bara Sentosa Lestari ............................................................................................................ 119

Bara Utama Unggul ............................................................................................................. 119

Coal Mining Business in Indonesia – vii

Baradinamika Mudasukses ................................................................................................... 119

Baramarta, PD ..................................................................................................................... 119 Baramarta ............................................................................................................................ 119

Baramulti Sukses Sarana ...................................................................................................... 120 Baramulti Suksessartana ...................................................................................................... 120

Baramutiara Prima ............................................................................................................... 120 Barasentosa Lestari .............................................................................................................. 120

Batu Alam Selaras ............................................................................................................... 120 Batubara Duaribu Abadi, PT ................................................................................................ 120

Batubara Selaras Sapta, PT .................................................................................................. 120 Baturona Adimulya .............................................................................................................. 121

Benakat Energi .................................................................................................................... 121 Benakat Energy ................................................................................................................... 121

Bentala Coal Mining ............................................................................................................ 121 Berau Coal ........................................................................................................................... 121

Bharinto Ekatama ................................................................................................................ 121 Bima Duta Batubara Sakti .................................................................................................... 122

Borneo Bhaktibara Utama .................................................................................................... 122 Borneo Indobara .................................................................................................................. 122

Buana Bara Utama ............................................................................................................... 122 Bukit Baiduri Enterprises ..................................................................................................... 122

Bukit Sunur ......................................................................................................................... 123 Bumi Laksana Perkasa ......................................................................................................... 123

Bumi Panen Sukses .............................................................................................................. 123 Bumi Sukse Mandiri ............................................................................................................ 123

Buntok Perdana Coal Mining ............................................................................................... 123 Calicari ................................................................................................................................ 123

Coal Duaribu Abadi ............................................................................................................. 123 Coal Selaras Sapta ............................................................................................................... 124

Danau Mas Hitam ................................................................................................................ 124 Daya Lapan ......................................................................................................................... 124

Delma Mining Corporation .................................................................................................. 124 Dhamar Tejokencono ........................................................................................................... 124

Dharma Puspita Mining ....................................................................................................... 124 Dutaputra Tanaratama .......................................................................................................... 125

Ekasatya Yanatama .............................................................................................................. 125 Energi Batubara Sumatera .................................................................................................... 125

Energy Batubara Sumatra .................................................................................................... 125 Fajar Bumi Sakti .................................................................................................................. 125

Firman Ketaun Perkasa ........................................................................................................ 125 Galicari ................................................................................................................................ 125

General Sakti Kreasindo ...................................................................................................... 126 Generalindo Prima Coal ....................................................................................................... 126

Gunung Bayan Pratama ....................................................................................................... 126 Gunung Bayan Pratama Coal ............................................................................................... 126

Hulubalang Inti Bumi .......................................................................................................... 126 Indexim Coalindo ................................................................................................................ 126

Indominco Mandiri .............................................................................................................. 127 Insani Bara Perkasa .............................................................................................................. 127

Interex Sacra Raya ............................................................................................................... 127 Intitirta Prima Sakti .............................................................................................................. 127

Intitirta Primasakti ............................................................................................................... 128

viii – Coal Mining Business in Indonesia

Jorong Barutama Greston ..................................................................................................... 128

Juloi Coal............................................................................................................................. 128 Kadya Caraka Mulia ............................................................................................................ 128

Kalimantan Energi Lestari ................................................................................................... 128 Kalteng Coal ........................................................................................................................ 129

Kaltim Prima Coal ............................................................................................................... 129 Kartika Selabumi Mining ..................................................................................................... 129

Karunia Poladaya Bumi ....................................................................................................... 129 Karya Bumi Baratama .......................................................................................................... 129

Kendilo Coal Indonesia ........................................................................................................ 130 BHP Kendilo Coal Indonesia ............................................................................................... 130

Kideco Jaya Agung .............................................................................................................. 130 Kitadin ................................................................................................................................. 130

Kodeco Horna Mandiri ........................................................................................................ 130 Kurnia Sarana Lestari .......................................................................................................... 130

Kutai Kertanegara Prima Coal.............................................................................................. 130 Lahai Coal ........................................................................................................................... 131

Lanna Harita Indonesia ........................................................................................................ 131 Lianganggang Cemerlang .................................................................................................... 131

Mahakam Sumber Jaya ........................................................................................................ 131 Mandiri Intiperkasa .............................................................................................................. 131

Mantimin Coal Mining......................................................................................................... 132 Marunda Graha Mineral ....................................................................................................... 132

Marunda Grahamineral ........................................................................................................ 132 Maruwai Coal ...................................................................................................................... 132

Maruai Coal ......................................................................................................................... 132 Meulaboh Energitama .......................................................................................................... 132

Meullaboho Energitama ....................................................................................................... 133 Mitrajaya Timuragung ......................................................................................................... 133

Multi Harapan Utama .......................................................................................................... 133 Multi Tambangjaya Utama ................................................................................................... 133

Nusa Minera Utama ............................................................................................................. 133 Nusantara Termal Coal (D/A Nusantara Thai Coal) ............................................................. 134

Nusantara Thai Coal ............................................................................................................ 134 Pari Coal .............................................................................................................................. 134

Pendopo Energi Coal ........................................................................................................... 134 Pendopo Energy Batubara .................................................................................................... 134

Perkasa Inakakerta ............................................................................................................... 134 Persada Permata Mulya ........................................................................................................ 135

Persada Permata Mulia......................................................................................................... 135 Pesona Khatulistiwa Nusantara ............................................................................................ 135

Pinang Jaya Sarana Bara ...................................................................................................... 135 Pinangjaya Sarana Bara ....................................................................................................... 135

Ramdany Coal Mining ......................................................................................................... 135 Ratah Coal ........................................................................................................................... 135

Restubara Karya Pratama ..................................................................................................... 136 Riau Bara Harum ................................................................................................................. 136

Salamindo Coalindo ............................................................................................................. 136 Salamindo Pahala................................................................................................................. 136

Santan Coal.......................................................................................................................... 136 Santan Batubara ................................................................................................................... 136

Sarwa Sembada Karya Bumi ................................................................................................ 136

Coal Mining Business in Indonesia – ix

Selatan Selabara ................................................................................................................... 137

Selo Argodedali ................................................................................................................... 137 Selo Argokencono Sakti....................................................................................................... 137

Senamas Energindo Mulya................................................................................................... 137 Senamas Energindo Mulia ................................................................................................... 137

Sinar Benua Prima ............................................................................................................... 138 Sinarindo Barakarya ............................................................................................................ 138

Singlurus Pratama ................................................................................................................ 138 Solok Bara Adipratama ........................................................................................................ 138

Sumber Barito Coal ............................................................................................................. 138 Sumber Kurnia Buana .......................................................................................................... 139

Suprabari Mapanindo Mineral .............................................................................................. 139 Tambang Damai .................................................................................................................. 139

Tanito Harum ...................................................................................................................... 139 Tanjung Alam Jaya .............................................................................................................. 140

Tanjung Alam Raya ............................................................................................................. 140 Taraco Mining ..................................................................................................................... 140

Teguh Persada Coal ............................................................................................................. 140 Teguh Reksa Daya ............................................................................................................... 140

Teguh Sinar Abadi ............................................................................................................... 140 Tempayang Cemerlang ........................................................................................................ 141

Timah Batubara Utama ........................................................................................................ 141 Torah Antareja Mining ........................................................................................................ 141

Trimarta Coal Perkasa.......................................................................................................... 141 Trimata Buana ..................................................................................................................... 141

Trimata Benua ..................................................................................................................... 141 Trimata Coal Perkasa ........................................................................................................... 142

Trubaindo Coal Mining ........................................................................................................ 142 Wadung Mas Tambang Mulia .............................................................................................. 142

Wadungmas Tambang Mulia ............................................................................................... 142 Wahana Baratama Mining .................................................................................................... 142

Whirakaneo Coalindo .......................................................................................................... 142 Whiratama Bina Perkasa ...................................................................................................... 142

Yamabhumi Palaka .............................................................................................................. 143

List of Tables

Table 1 – Primary Energy Consumption in the World by Countries, 2005-2015 (mtoe) ................... 5 Table 2 – Primary Energy: Consumption in the World by Countries and by Fuel Type, 2014

(mtoe) ....................................................................................................................... 6 Table 3 – Primary Energy: Consumption in the World by Countries and by Fuel Type, 2015

(mtoe) ....................................................................................................................... 7 Table 4 – BP coal prices, 1987-2015 ($/tonne)................................................................................. 9

Table 5 – US coal export price, 2010q1-2016q1 ($/short tons) ......................................................... 9 Table 6 – Coal In-Place Resources for Upper Limestone Fm + Limestone Coal Fm,

Kincardine, Nov.2014 ............................................................................................. 17 Table 7 – Coal In-Place Resources for Upper Limestone Fm, Kincardine, Nov.2014 ..................... 17

Table 8 – Coal In-Place Resources for Limestone Coal Fm, Kincardine, Nov.2014 ....................... 17 Table 9 – Coal In-Place Resources, Kincardine, Nov.2014 ............................................................ 18

Table 10 – Estimates of trace chemicals abundance in the global atmosphere, 1980. ...................... 25 Table 11 – Overview of existing chemical-looping combustors ..................................................... 28

x – Coal Mining Business in Indonesia

Table 12 – Some undersea coalmines in Solway Firth, Cumbria, UK ............................................. 39

Table 13 – CBM Resources in Indonesia ....................................................................................... 47 Table 14 – The 20 largest shareholders of Dart Energy Limited, 20100914 .................................... 52

Table 15 – Some subsidiaries of IGas which were held through subsidiaries, 30 June 2015 ........... 53 Table 16 – Coal reserves in Indonesia, 2014 .................................................................................. 62

Table 17 – Coal supply in Indonesia, 2000-2014 ............................................................................ 63 Table 18 – Existing coal terminals in Indonesia ............................................................................. 64

Table 19 – Coal mining companies in Indonesia by permits, March 2015 ...................................... 66 Table 20 – CNC status of IUP by announcements, 20110630-20160104 ........................................ 81

Table 21 – Problems of Non-CNC IUPs by category and regions, 20140203 ................................. 82 Table 22 – Clean and Clear IUPs by province, 2014 – April 2016 .................................................. 84

Table 23 – Coal Domestic Market Obligations in Indonesia, 2010-2015 ........................................ 85 Table 24 – Coal Domestic Market Obligations in Indonesia, by CCoW and KP/IUP

companies, 20100419-20150427 (mt) ..................................................................... 87 Table 25 – Overlay of IUP, COW, and PKP2B with Forest Area Map and IPPKH......................... 89

Table 26 – IUP within conservation forests in 12 provinces, 2014-2015 ........................................ 89 Table 27 – The First Generation CCoW Companies: The dates, area, and resources/reserves ......... 93

Table 28 – The second generation of CCoW Companies: 17 of 19 ................................................. 93 Table 29 – Coal produced from Kalimantan, 1997-2000 (1000 ton) ............................................... 94

Table 30 – The third generation of CCoW Companies: 106 of 114 ................................................ 95 Table 31 – Coal production from CCoW companies, 2005-2012 (1,000 ton) ................................. 97

Table 32 – Financial profile of 3 direct subsidiaries of Tata Power on coal business in

Indonesia, 2015q1 (₹ crore)................................................................................... 101

Table 33 – Subsidiaries of Tata Power related with coal mining business in Indonesia, 2015q1

(₹ crore) ................................................................................................................ 101

Table 34 – Tata Power companies in Indonesia, 2015 .................................................................. 102

List of Figures

Figure 1 – Potential future global oil projects by average breakeven prices ......................................3 Figure 2 – Australian monthly thermal coal price, Jan. 1980 – July 2016 (US$/metric ton) ............ 10

Figure 3 – Monthly coal prices from Australia, Colombia, South Africa, Jan. 1970 – July

2016 ($/mt) ............................................................................................................. 10

Figure 4 – American weekly coal prices, 20080506-20160812 (US$) ............................................ 11 Figure 5 – Various technologies implemented during power generation process ............................ 12

Figure 6 – Some chemical reactions in converting syngas .............................................................. 13 Figure 7 – Some routes of coal to chemicals from methane via syngas ........................................... 13

Figure 8 – Coal cycle and its derived products schematics, from liquid (CTL), to gas (CTG),

and chemicals (CTC) .............................................................................................. 14

Figure 9 – Potential UCG in the UK, 2004 ..................................................................................... 15 Figure 10 – Kincardine UGC project area of interest, 20141105 .................................................... 17

Figure 11 – Kincardine UCG licenses in the Firth of Forth, 20150402. .......................................... 18 Figure 12 – Kincardine area of interest in Midland Valley of Scotland, 20141105 ......................... 19

Figure 13 – Coalmines in British Columbia, Canada ...................................................................... 20 Figure 14 – Selected significant climate anomalies and events, July 2016 ...................................... 21

Figure 15 – Earth's Annual Global Mean Energy Budget, July 1987 – Dec. 1988.......................... 22 Figure 16 – Earth’s Global Energy Budget, March 2000 – March 2004 ......................................... 22

Figure 17 – Monthly mean atmospheric carbon dioxide at Mauna Loa Observatory, Hawaii,

March 1958 – July 2016 (ppm) ............................................................................... 26

Figure 18 – Oxygen transport capability of different MeO/Me systems. ......................................... 27 Figure 19 – The effective aquifuge in Beizao Coalmine ................................................................. 32

Coal Mining Business in Indonesia – xi

Figure 20 – TBU Underwater coal mining in The Baltic Union...................................................... 33

Figure 21 – TBU Coal Island ......................................................................................................... 34 Figure 22 – TBU Sandisle structure ............................................................................................... 34

Figure 23 – Coal mines in Nova Scotia, Canada ............................................................................ 36 Figure 24 – Donkin coal resource block ......................................................................................... 36

Figure 25 – Solway Firth, Irish Sea, UK ........................................................................................ 39 Figure 26 – The map of Tynemouth-Boldon-Sunderland, NE England........................................... 41

Figure 27 – Deep coal mining closures in the UK, 2010-2015........................................................ 43 Figure 28 – Deep coal mining closures in the UK, 1960-1969........................................................ 43

Figure 29 – Onshore coal distribution in the UK by depth, 2014 .................................................... 44 Figure 30 – CBM Basins in Indonesia............................................................................................ 47

Figure 31 – Coal bed methane (CBM) resources in Indonesia, 2010 .............................................. 48 Figure 32 – CBM PSC terms in Indonesia ..................................................................................... 48

Figure 33 – Some CBM PSCs in East Kalimantan ......................................................................... 51 Figure 34 – CBM basin in South Sumatera, Nov. 2011 .................................................................. 54

Figure 35 – Tanjung Enim CBM PSC ............................................................................................ 55 Figure 36 – Muralim CBM PSC .................................................................................................... 56

Figure 37 – Sangatta West CBM PSC ............................................................................................ 58 Figure 38 – The CBM PSCs of NuEnergy in Sumatera .................................................................. 59

Figure 39 – Gasification-based system concepts ............................................................................ 61 Figure 40 – Gasification chemistry ................................................................................................ 61

Figure 41 – Coal distribution in Indonesia by calory class, 2014 .................................................... 62 Figure 42 – Supply and export of Indonesian coal, 1997-2014 ....................................................... 63

Figure 43 – Export share over coal production in top producing countries ..................................... 63 Figure 44 – Coal seaports in Indonesia, 2015 ................................................................................. 65

Figure 45 – UK banks involvement in Indonesian coal companies ................................................. 66 Figure 46 – Mining permits in Indonesia, 20140203 ...................................................................... 67

Figure 47 – Mining problems in Indonesia, 20140203 ................................................................... 80 Figure 48 – JORC's general relationship between exploration results, mineral resources, and

ore reserves ............................................................................................................. 80 Figure 49 – Problems of Non-Clean & Clear Status of IUPs classified and mapped ....................... 83

Figure 50 – Adding value to the coal by implementing clean coal technology ................................ 85 Figure 51 – Coal DMO mechanism in Indonesia ............................................................................ 86

Figure 52 – Monitoring and reporting system on the implementation of coal DMO mechanism

in Indonesia ............................................................................................................ 87

Figure 53 – Clean & Clear Status of IUPs, May 2011 – April 2016................................................ 90 Figure 54 – The mechanics of $600m structure finance (fixed rate note) of IndoCoal in 2005 ...... 106

Figure 55 – The mechanics of unrated $900m structured export notes (FRN) of IndoCoal in

2006 ..................................................................................................................... 106