Commodity Modeling and Pricing: Methods for Analyzing Resource Market Behavior

CHAPTER 11

A Forecasting Simulation of Coal in Indonesia’s Energy Future

Ukar W. Soelistijo

INTRODUCTION

At current extraction rates, Indonesian oil reserves will remain productive for another 15 to 20 years. Without new oil field discoveries, by the end of that period, Indonesia will become a net oil importer. Because oil exports fund an oil subsidy provided to Indonesian consumers, this subsidy would disappear when oil reserves run out. There is only a short period remaining before Indonesia will revert from being a net oil exporter to becoming a net oil importer, and the Indonesian government has been planning for years to prepare for this time (Soelistijo 1984).

Indonesia’s other major domestic source of energy is coal. It has the fourth largest coal reserve in the Asia-Pacific region, yet it only consumes some 27% of what it produces and exports the rest, making it the world’s second largest exporter of coal after Australia. In 2005, its exports accounted for 21% of world coal trade (World Coal Institute, not dated, but most data are for 2004 or 2005). The estimated life of its coal reserves is 100 years and possibly longer. The government has carried out efforts to increase the value-added of Indonesian coal since the 1950s and 1960s, using various measures, including plant-scale tests for blast furnace coke using dry distillation. From the 1970s and 1980s to the present, efforts to achieve coal diversification advanced to include efforts to substitute coal briquettes ...