Sunrise for South Sumatra’s coal

One of the major tourist attractions in South Sumatra is the sunrise seen from behind the Ampera bridge, the landmark of Palembang, the capital of the province, that stretches across Musi, the province’s largest province river. As the sun begins to rise, it bathes the Musi river with magical deep orange glow. 

The view of sunrise is however not the main reason many people have come to the province since the colonal era until today.  The province is blessed with abundant fossil fuel resources. In the past, oil and gas wells. Now, despite that its oil and gas reserves have been declining, the region is still attracting investors from many parts of the world – thanks to its huge coal resources!

A joint study by the Center for Geological Resources, a research center at Indonesia’s Ministry of Energy and Mineral Resources, and Japan’s New energy and Industrial Technology Development Organization (NEDO) indicates that South Sumatra holds 2.65 billion tons of mineable coal reserves (39 percent of the country’s total) and 22.24 billion tons of coal resources, compared to 2.41 billion tons
of mineable reserves (34 percent) and 19.56 billion tons of resources in East Kalimantan, and 8.67 billion tons of mineable reserves (16 percent) and 8.67 billion tons of resources in Central Kalimantan. 

Despite that it holds larger reserves, South Sumatra lags far behind the other two provinces in terms of production. East Kalimantan, for instance churned out a total of 140.4 million tons of coal last year, while South Sumatra produced a mere 11.9 million tons with state owned firm PT Batubara Bukit Asam (PTBA) accounting for most of the output. 

The main reason is the transportation network. While East Kalimantan, like other Indonesian provinces on the Borneo Island, lacks modern infrastructure, such as road networks, coal production there is supported by a far-reaching river system. Dozens of rivers crisscross Kalimantan, allowing coal producers to transport  their output from almost any point in the hinterland to seaports. Meanwhile, South Sumatra’s coal producers have to rely on public road or, in the case of PTBA, railway to transport their coal. In fact, PTBA can only marginally increase its output every year due to the limited capacity of the railway that links its mines in South Sumatra to the Tarahan port in Lampung.

Thus, for decades, South Sumatra’s coal industry has been stagnant. There are several ideas that have been put forward by various parties to solve the problems faced by the industry . First, expanding the transportation network so that coal miners I the province can transport a larger volume of coal, and thus boost their output. Second, building mine-mouth power plants to meet the growing demand for electricity in Sumatra and Java;third, turning the coal into gas or liquid fuels. 

There are at least four companies that have proposed to build new railways I the province, that is Indian firms Adani Group and Reliance and a consortium led by Indonesian firm Rajawali group. Adani group has signed a heads of agreement (HoA) with PTBA and South Sumatra’s provincial government to build a railway and coal terminal project in the province, both worth US$ 1.65 billion. The 270-kilometer railway will link PTBA’s coal mines in Tanjung Enim to Tanjung Api-Api port. It will be used to transport between 30-35 million tons of coal per year for exports to Indian market. 

Reliance has proposed a US$ 5 billion megaproject to develop two or three coal mines in South Sumatra and built a railway to transport future coal from the mines to a port in Jambi. The firm plans to invest $5 billion for the project. Rajawali has set up a joint venture with PTBA, called PT Bukit Asam Transpasific Railway (BATR), to build a railway linking PTBA’S mines in Tanjung Enim  to Srengsem port in Lampung.

A low-profile local firm PT Servo Meda Sejahtera through its subsidiary PT Servo Lintas Raya has an idea of building a 228-km coal haul road connecting coal mines in South Sumatra’s hinterland to a port on the  banks of Musi river. It has reportedly started the project. Some companies have announced plans to build mine-mouth power plants in South Sumatra. The problem is there isn’t yet any electricity cable to channel the power to Java, which is the country’s largest power consumer. 

Meanwhile, Pendopo Energi Batubara, which controls 2 billion tons of coal reserved in Pendopo area, has planned several projects aimed to turn the coal into gas and liquid fuels. 

None of the above projects have been realized thus far. Some of the companies are still doing feasibility study or struggling to secure funds. Once some of the projects have been realized, it will looks as if a sunrise has been shining on the horizon to awaken South Sumatra’s coal from its long slumber.