Indonesia May Boost Coal Output 15% to Ease Blackouts

By Naila Firdausi and Yoga Rusmana

Aug. 21 (Bloomberg) -- Indonesia, the world's biggest exporter of power-station coal, may increase production of the fuel by 15 percent because the government plans to allocate supplies to local utilities and ease blackouts.

Output may rise to 270 million metric tons in 2009 from as much as 235 million tons this year, Jeffrey Mulyono, chairman of the Indonesian Coal Mining Association, said in the province of Bangka Belitung today. The association hasn't made any calculations on exports, which stood at 180 million tons last year, he said.

Indonesia, which generates almost half of its electricity from coal, will need an additional 32 million tons annually by 2010, when 41 percent of capacity starts operations. Power shortages have worsened as the government requires some factories to shift 10 percent of their operations to the weekend, when there's space generation capacity.

``Domestic demand will be calculated annually and companies must submit production plans every year to the government for approval,'' Bambang Setiawan, director general of coal and mineral resources, said today. The regulation on sales requirements to utilities is expected to take effect next year, he said.

Indonesia, Southeast Asia's biggest economy, consumed about 28.8 million tons of coal in 2007, according to the BP Plc Statistical Review of World Energy June 2008.

The new ruling on meeting domestic needs may cut exports and boost global coal prices, which reached records this year on rising Asian demand and infrastructure bottlenecks in Australia. The nation exports the fuel to countries including Japan and South Korea.

Power-station coal prices at Australia's Newcastle port, the world's biggest exporter of the fuel, reached a record $194.79 a ton in the week ended July 4. Prices rose 5 percent to $163.90 a ton in the week ended Aug. 15, according to the globalCOAL NEWC Index.

To contact the reporters on this story: Naila Firdausi in Jakarta at nfirdausi@bloomberg.net; Yoga Rusmana in Jakarta at yrusmana@bloomberg.net.