Indonesia eases coal export ban

JAKARTA – Indonesia, the world’s top exporter of thermal coal, said it would ease a ban on exports of the fuel that it imposed to head off looming blackouts.

Fourteen ships loaded with coal and destined for overseas markets would be allowed to leave Indonesia, Coordinating Minister Luhut said in a statement. But all other barges with coal for export must divert their cargo to power stations in need of supply, the statement said, adding that the government will re-evaluate exports.

The January 1 ban on shipments of coal used in power generation threw the market into disarray. Prices of the fuel lurched higher as ships laden with hundreds of thousands of tonnes of the mineral destined for major markets in Japan, China and India sat in ports and all new production was diverted to domestic power stations.

The Philippines has urged Indonesia to lift its ban, with Manila warning on Monday the policy would have a “detrimental” impact on the coal-reliant country.

Japan issued a similar appeal last week.

Indonesia’s export ban was imposed after coal miners failed to meet their obligation to set aside 25 per cent of output for the domestic market.

Analysts and coal producers blamed mismanagement at Perusahaan Listrik Negara (PLN), the country’s state-owned utility, which allowed reserves to fall to as low as three days’ supply at some power plants. Of the 5.1 million tonnes called for by the government this month, only 35,000, or less than 1 per cent, had been supplied, the ministry said on January 1.

Even if current acute shortages are eased, analysts have said Indonesia faces long-term structural supply constraints because exporters have little financial incentive to supply the domestic market.

They are forced to sell to the state at a price far below current market rates, analysts said. “Coal producers do not consistently play by the rules, while at the same time the government does not have a mechanism to control whether the need for coal at PLN has been fulfilled,” said Marwan Batubara, director of the Indonesian Resources Studies think tank.

“There is no supervision. There is no mechanism to ensure that each power plant has enough supplies,” Batubara said.

To remedy this, Luhut said coal supply contracts would now include freight and delivery. “Logistics and delivery arrangements become the responsibility of the coal suppliers and PLN can focus on its core business to provide reliable electricity,” the statement said.

PLN must also buy only from coal producers with a commitment to compliance, not traders, and increase the unloading capacity at its power plants, it said.

Thousands of mining, coal permits

Earlier, Indonesia revoked thousands of permits for mining, coal and forestry as the government battles to rein in its vast resources sector.

President Joko Widodo’s announcement comes during a wrangle with coal producers over their failure to supply the domestic market, which sparked a ban on overseas shipments by the world’s biggest thermal coal exporter.

While Widodo did not explicitly mention the coal crisis, his move highlights the challenges Indonesia faces in governing its natural resources, which include up to 17 billion tonnes of coal reserves and Asia’s biggest area of exploitable tropical forest.

Widodo said his administration revoked 2,078 permits for mining, mineral and coal businesses because the firms failed to provide work plans, misused the permits or transferred them to other parties.

The government also revoked almost 200 forestry permits covering more than 31,000 square kilometres (12,000 square miles), an area about the size of Belgium.

“Some permits have been granted for years but they were never carried out. This has turned natural resources that should be used to improve public welfare into a hostage,” Widodo said.

On Monday the president threatened to revoke the licences of power producers who fail to comply with their obligations to ensure domestic electricity generators are supplied.

State utility PLN warned that power stations were just days away from running out of fuel, threatening about 10 million customers with imminent blackouts.

On Thursday, Minister for State-owned Enterprises Erick Thohir sacked PLN’s primary energy director.

In a statement, PLN confirmed it had appointed a new director, saying the move “is part of the efforts to improve the performance of the company”.

Indonesia’s Energy Ministry has said PLN should improve its coal supply mechanisms.

“There is no supervision. There is no mechanism to ensure that each power plant has enough supply,” said Marwan Batubara, director of think tank Indonesian Resources Studies.

With global coal prices much higher than the $70 per tonne cap on what Indonesia pays, producers have no incentive to supply the domestic market, Macquarie Group commodities analyst Lynn Zhao said.