Indonesia offers incentives to coal gasification plant

State-owned Indonesian mining firm Bukit Asam's coal gasification plant in south Sumatra has been designated a national strategic project by the government, giving it preferential treatment for permit applications and tax waivers on land and building acquisitions to lower project costs.

This is a sign of the national government's commitment to accelerate the development of Indonesia's emerging downstream coal industry. The policy is also aimed at boosting investment in the sector, following the approval of royalty exemptions for coal that will be used for downstream purposes.

Preparatory work at Bukit Asam's plant is currently under way. Infrastructure construction is expected to start in mid-2021 with an expected target completion date of 2025. Once operational it will consume 6mn t/yr of coal to produce 1.4mn t of dimethyl ether that can be used as a substitute for LNG.

Jakarta also listed the Tanjung Enim industrial park in south Sumatra as a national strategic project. Tanjung Enim is set to be the centre of Indonesia's downstream coal sector.

Indonesia is aiming to add value to the country's coal products by developing the downstream coal sector. The country's energy ministry (ESDM) is aiming for the sector to be fully functional by 2030, with the industry expected to consume 37.6mn t/yr of coal when fully operational. Such a market currently does not exist in Indonesia but the government has been pushing incentives to make the downstream coal industry attractive for private-sector companies.

The ESDM is aiming to bring investment into different sectors of the downstream coal industry, such as the development of coal gasification plants, coal briquette and coke manufacturing, as well as the development of coal slurry mixing to make a type of fuel that can be used in turbines.

Indonesian coal producer Adaro Energy said last month that it is looking to move into the downstream sector. It is working on a pre-feasiblity study on the construction of a gasification facility to convert coal to methanol, as part of plans to add value to its coal products. It is also studying the possibility of partnering with another company as an offtaker of the methanol produced.

Adaro is focusing on coal gasification as it is technologically feasible and fits into its current business operations, the company said. But it is still considering a number of aspects related to the industry, namely market certainty, product pricing and trade volumes. It has set an initial target of 2027 for its coal gasification plant in Kotabaru in south Kalimantan, although the plant's capacity has yet to be finalised.

By Antonio delos Reyes and Andrew Jones