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Mining sector still plays an import role in economic force, and accounts for a substantial share in the country's endeavor to recover from its economic crisis. Production of oil and gas has been always quantitatively influencing the economy because the production constitutes one of the basic assumptions in planning the annual state budget.
Indonesia is in fact rich in minerals in addition to its oil and gas. Those minerals include tin, copper, nickel, silver, coal, and gold that spread throughout the country.
Due to the important role the sector does play as foreign exchange earner, measures taken in this sector give emphasis on the development of its means and infrastructure to make it self-sufficient in meeting the domestic needs and even exports, as well as in supporting the efforts of economic recovery.
During the past five years the sector of energy and mineral resources has been growing averagely at minus 2.9 percent per annum. In 2003, production of oil dwindled to 456.3 million barrels from 474.9 million barrels in 2002. Gas production, on the other hand, increased slightly to 3,057.8 million Mscf from 3,041.8 million Mscf in 2002.
Government revenues from energy and mineral resources in 2003 amounted to Rp 79,579.4 billion or some 110 percent of the targeted Rp 72,456.2 billion. Of the total amount in 2003 revenues, oil and gas contributed as much as Rp 78,507.4 billion, and other minerals resources Rp 1,072 billion.
OIL AND GAS
Gross revenues from the selling of crude oil in 2003 reached US$11.508 billion or some 112.85 percent of the amount targeted in the 2003 state budget. Gross revenues of gas at the same time, amounted to US$8.615 billion or some 108.49 percent of the target. Oil lifting realization in the year reached 400,621 million barrels or some 84.6 percent of the targeted 463,556 million barrels and that of gas reached 2.392 million metric british thermal units (MMBTU) or some 96 percent of the targeted 2.491 billion MMBTU.
Average price of Indonesian crude oil in 2003 was US$28.73 per barrel or some 30.6 percent above the price fixed for the 2003 state budget of US$22 per barrel.
In speeding up the economic recovery, the Government in 2003 signed agreements on 15 oil and gas working contracts in land and off-shore areas with total commitment of US$140.9 million for the period of three years. Investment realization of production sharing contracts in 2003 amounted to US$3,971 million for exploration, US$2,510 million for production, and US$329 million for administrative matters.
Investment in the down-stream sub-sector in 2003 took place by the issuance of approvals for 20 oil refineries, and one LNG refinery and one LPG refinery, as well as 13 principle agreements on oil and gas supply through pipelines.
In 2004, the Government offered working areas in oil and gas through tenders and direct offers. Cooperation contracts for seven blocks were agreed through direct offer and were signed in March 2004 and ten other blocks in August 2004. The seven blocks are Bulungan, Nunukan, Tingau and Ambalat Timur (East Kalimantan), Seruai (Nanggroe Aceh Darussalam), Lubuk Linggau (South Sumatra), and Boven Digul (Papua or Irian Jaya).
The Government planned also to invest as much as US$7,482 million in up stream oil industry, of which US$779 million for exploration activities, US$2,096 million for development activities, US$3,921 million for production activities, and US$686 million for administrative matters.
It is predicted that crude oil production in 2004 would reach 1,150 million barrels per day, up from 1,081 million barrels in 2003; and of gas, it is predicted to increase to 6,58 billion cubic feet (BCF), from 6,28 billion cubic feet in 2003.
The country's current total oil refinery capacity is 987 MBCD or 360 thousand MBBL. Oil refineries are available in Pangkalan Brandan, Dumai and Plaju (Sumatra), Cilacap, Cepu and Balongan (Java), and Balikpapan (Kalimantan).
Indonesia, the world's top rank LNG producer, in 2003 exported 35.66 billion cubic meters; of the amount, 24.05 billion cubic meters were exported to Japan, 6.93 billion cubic meters to South Korea, and 4.68 billion cubic meters to Taiwan. Its proven gas deposits are estimated at about 90.3 trillion cubic feet, or accounting for 1.5 percent of the world's total deposits.
In augmenting foreign exchange earning, in 2003 a working contract of natural gas supply through piped transmission of 100 million cubic feet a day for a duration of 15 years, was signed by Indonesia and Singapore. The contract is worth US$1.10 billion.
For the year 2004, a contract of an additional natural gas supply of 50 million cubic feet per day through piped transmission to Singapore with selling value of US$0.77 billion, has been also agreed and signed. The supply will last for 12 years. In addition, Indonesia signed in 2003 a contract to sell more than three million tons of LNG from the Tangguh field, Papua, to the US (3 million tons), South Korea (1.15 million tons) and to China (2.6 million tons). Also in 2003, Indonesia exported LNG as much as 1.359 billion MMBTU, LPG as much as 1,105 MT, and crude oil 59.87 million barrels. For domestic needs, the total consumption of oil reached 57.40 million kiloliters, of which 26.71 million kiloliters for need of transportation, 7.58 million kiloliters for industries, and 11.65 million kiloliters for households.
It is the current Government's commitment to continuously reduce oil subsidy by increasing retailed oil prices. In 2001 subsidy for oil amounted to Rp36.40 trillion; it dwindled to Rp32.29 trillion in 2002. In 2003, it reached Rp26.02 trillion, or above the targeted Rp13.2 trillion.
COAL
Indonesia is one of the world's leading coal producers, ranking third after Australia and China. The country's estimated coal reserve deposit is 5.22 billion tons, the greater part of which is available in Sumatra and Kalimantan.
Parakan special coal pier in Tarahan, South Sumatra |
In 2004, coal production is expected to reach 119.7 million metric tons, up from 106.7 million metric tons in 2003 and 100.6 metric tons in 2002.
PT Adaro Mining Company is currently the country's leading coal producer with coal output of 22 million tons per day. Trailing behind are the mining companies Kaltim Prima Coal (18 million tons, plans to produce 24 million in the near future), PT Arutmin (14.5 million tons), PT Kideco (12 million tons), PT Tambang Batubara Bukit Asam (11 million tons), and PT Berau Coal (8 million tons).
The main importers of Indonesian coal are Taiwan, South Korea, Japan, and India.
Tin production indicated a declining trend. While its total production still reached 88,142 million metric tons in 2002, in 2003 it could produce only 71,695 million metric tons. So did its exports. In 2002, the country exported tin as much as 62,031 tons, in 2003 it could manage only 5,798 tons.
GOLD AND SILVER
Gold and silver reserve deposits are scattering in several sites, among other things in Papua, North Sulawesi, West Nusatenggara, and West Java. PT. Freeport Indonesia is the country's largest private gold mining company, with its total selling reached 2.5 million ounces of gold in 2003 or a raise of eight percent compared to that of 2002 amounting to 2.3 million ounces. The company has an estimated gold reserve deposit of 64.5 million ounces. With its fixed production assumption, the reserve can last for about 15 years.
The state-owned gold mining company PT Aneka Tambang operation in West Java could produce gold of 4,176 kg and silver of 28,570 kg in 2003. Private gold mining company operating in West Nusatenggara could produce gold of 585,000 ounces.
The country's total gold production dwindled to 141,019 kg in 2003 from 142,238 kg in 2002, and that of silver shrank from 288,806 kg in 2002 to 278,986 kg in 2003.
NICKEL
Production of nickel ore in 2003 noted a slight increase to 4,395 metric tons in 2003 from 4,366 metric tons in 2002. Part of nickel ore is processed to be ferronickel, the production of which reached 17,803 metric tons in 2003, declining from 42,306 metric tons in 2002. In addition, nickel ore is also processed to be nickel matte produced by PT. Inco. In 2003, total production of nickel matte was 15.5 million pounds, up 18 percent from 13.21 million pounds in 2002.
COPPER
In 2003, production of copper concentrate reached 3,238 million metric tons, decreasing from 3,786 million metric tons in 2002. This concentrate was dug from the Grasberg copper-pit managed by the PT Freeport Indonesia. This copper-pit has reserve deposit of an estimated 2,500 metric tons. One ton copper concentrate contains 1.13 percent of copper, 1.05 percent of gold, and 3.8 percent of silver.
Another copper mining is being worked on in Batu Hijau, Sumbawa Island by PT Newmont Nusa Tenggara by investing about US$1.9 billion. Reserve deposit of copper in Batu Hijau is estimated at 1,000 metric tons; one ton of copper concentrate contains 0.52 percent of copper, and 0.4 percent of gold. The reserve deposit can be mined for and estimated 25 years, with annual production is expected to reach 245,000 tons of copper concentrate and 18 tons of gold concentrate that are exported to Japan, South Korea, Spain, India, the Philippines, Germany and Bulgaria.
BAUXITE
Production of bauxite in 2003 suffered a slight decrease to 1,262 million metric tons from 1,283 million metric tons in previous year. The greater part of bauxite is exported to China and Japan.
ELECTRICITY
There are two main electricity grids in Indonesia: the Java-Bali electricity grid, which is interconnected by extra-high voltage networks; and the outer Java-Bali electricity grid, which has not been interconnected yet, using small and medium capacity electricity generation plants such as diesel-power plants.
The state-owned electricity company Perusahaan Listrik Negara (PLN) supplies most electricity. It is also responsible for the operation and maintenance of power stations and the national grid. Not all the country's territory is covered by the national electricity grid managed by the PLN, so non-PLN bodies such as cooperatives or small private companies manage the supplies, particularly for remote rural areas.
Eleven area electricity boards and four regional electricity distribution boards of PLN are responsible for the distribution and for the retail sale of electricity. Installed capacity of electric power plants in 2002 amounted to 21,114 MW with total production of 108,360 thousand MWh. In 2003, with almost unchanged installed capacity, production was increasing by 8.53 percent to reach 117,605 thousand MWh. Sales of electricity in 2003 amounted to 89,879 MWh, or 3.20 percent higher than that of 2002.
The state-owned company PLN currently operates 41 hydro-power plants with installed capacity of 3,266 MW, producing 10,536 gigawatt hours (GWH). The need for electricity in Java and Bali is supplied by several hydro power plants with total installed capacity of 2,500 MW. Those plants are Area I (33.5 MW), Area II (54.5 MW), Saguling (695 MW), Cirata (1,000 MW), Area III (124 MW), Mrica (176 MW), Area IV (40 MW), Sutami (102 MW), Brantas-Non Sutami (125 MW), and Jatiluhur (179 MW).
Out of the total consumption in 1990s, industry took 49.2 percent (13,644 GWH), commercial 10.3 percent (2,849 GWH), and public 8 percent (2,244 GWH). In 2001, industry took 41.9 percent, household 33.34 percent, and commercial 13.5 percent. The number of households using electricity supply in 2001 was 27.9 millions, making the electricity ratio in Indonesia reach 60.3 percent. The number of villages enjoying electricity supply, at the same time, was 31.2 thousand or 79.4 percent of the country's total villages.
In bettering its national grid and in overcoming short supply, the PLN is to invest Rp5.9 trillion in 2004, of which Rp 2.8 trillion for building transmission networks, and Rp3.1 trillion for distribution expansion. The company is also to complete the Java southern transmission networks to improve the security of electricity supply in Java-Bali interconnection. In addition, the company plans to build two hydro-power plants in Raja Mandala, West Java, with a capacity of 60 MW.
In augmenting the supply of electricity, small-scale private electric companies are encouraged to sell their products to the State-owned electric company PLN. Meanwhile, to make remote villages capable of enjoying the supply of electricity, the Government encourages companies dealing in the supply of electricity to develop micro hydro-power plants and sell their production to the PLN.
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