Wednesday, 08 August, 2012 | 10:29 WIB
Looking Back: the History of the Indonesian Coal Industry
TEMPO Interactive, Jakarta:The history of coal mining in Indonesia can be traced way back to the days of the Dutch colonial government in 1849, when NV Oost Borneo Maatschappij began mining in Pengaron, East Kalimantan. This was followed by exploiting activity in Ombilin, Sawah Lunto, and Bukit Asam in South Sumatra.
The popularity of coal took a downturn on account of increasingly sophisticated technology developed for pumping oil and gas. In the mid-1970s, during the oil crisis, many parties began taking another look at this source of energy, which was cheaper than oil. Also, at that time, the Indonesian government began encouraging mapping and searching for new reserves in various locations.
However, the desire to excavate this material was not immediately ignited. Its price was still too low to interest investors. Even though it was technologically difficult to do, mining costs were not cheap. As the locations were in remote wilds, shipping was costly. On account of these conditions, in 1992, total national coal production stood at 22.95 million tons.
A drastic change in the coal business came in the following decade, when the economy began to revive after being hit by a crisis in 1998. The number of electricity consumers increased, and new generators were built. This meant an increased demand for fuel, including coal. In 2005, domestic coal production had risen dramatically to 151.6 million tons. The total amount of resources which could be identified also increased to an astounding 61.36 billion tons.
Enthusiasm to mine coal was also encouraged by the increase in world oil prices, which quickly made this commodity attractive. In the stock exchange, shares of companies such as Bumi Resources, Adaro, Bayan Resources, or Bukit Asam were increasingly being sought. Coal became the fuel which drove up trading on the index and lined the pockets of its stockholders.
The race to obtain coal mining concessions became increasing fierce. Mining business licenses continued to be issued by the regents who had gained authority thanks to the new legislation on regional autonomy, unconcerned if those locations were protected forest land or land which was already controlled by other parties. Many disputes emerged as a result of this prolific licensing policy.
According to data from the Ministry of Energy and Mineral Resources, of the more than 10,000 licenses issued—before it was halted by the Law on Minerals and Coal in 2009—about half had overlapping ownership. Another result was forest and environmental damage caused by mining which encroached on forbidden areas.
Disputes and dishonest dealings among mining interests were hotly contested in the courts. Face-offs with supporting muscle, which involved the legal authorities or the military, were commonplace. More than few conflicts ended up in brutal clashes in the field. *****