An Indonesian and a Chinese company have inked an agreement to begin a feasibility study for a coal-to-methanol plant worth $560 million.
The announcement comes as the Indonesian government is pushing for downstream development to get more value out of the country’s rich coal reserves.
The agreement was signed between Indonesia’s Powerindo Cipta Energy (PCE) and China National Chemical Engineering Corp, which have formed a consortium for the project.
The plant is to be located near a coal mine in Meulaboh, Aceh, processing 1.1 million tonnes of coal into 600,000 tonnes of methanol annually, around half of last year’s domestic demand for methanol, according to an industry ministry estimate.
“This project will [employ] 600 to 700 workers. According to the plan, the project will be in the construction phase in mid-2022,” industry minister Agus Gumiwang Kartasasmita, who attended the signing ceremony at his office, said in a statement on October 18.
The project is in line with the government’s intention to push coal gasification, as stated in the 2020 Job Creation Law and the 2020 revision of the Mining Law.
According to Agus, the regulations grant companies in the project incentives in the form of royalty exemptions, special coal pricing and mining business permit (IUP) facilitation.
Coal is one of Indonesia’s top commodities with reserves exceeding 38 billion tonnes, enough to support the country’s needs until 2091 with 600 million tonnes in annual consumption.
The commodity also tops the country’s exports with $25 billion worth of shipments in 2020, according to Statistics Indonesia, followed by palm oil at $20 billion.
However, the growing political pushback against coal has prompted policy changes in several countries to cut usage of the commodity for electricity production.
Funding for coal-fired power plants is also drying up, with China the most recent country to announce it would stop backing such projects.
In Indonesia, the government has reduced the role of coal in its latest long-term electricity procurement plan (RUPTL), with only 34 per cent of new power plant capacity to be coal-fuelled, down from 48 per cent.
Muhammad Khayam, director-general for chemical, pharmaceutical and textile industries at the ministry, said the new project would greatly increase the country’s methanol supply and reduce the need for imports.
“Methanol imports have been increasing each year due to rising industry demand and the biofuel programme,” Khayam said in the statement.
THE JAKARTA POST/ASIA NEWS NETWORK