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Govt grants incentives to Bukit Asam’s coal gasification project
The project, a potentially loss-making enterprise that converts coal into a type of cooking gas, is now eligible for a land and building acquisition tax waiver and less red tape.
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A Bukit Asam coal-fired power plant operates in Muara Enim, South Sumatra, on Nov. 3, 2016. (Antara/ Zabur Karuru)
State-owned coal miner PT Bukit Asam’s US$2 billion flagship coal gasification project has been added to the national strategic projects list as the government continues to pursue the development of a downstream mining industry.
Bukit Asam’s project, a potentially loss-making enterprise that converts coal into a type of cooking gas called dimethyl ether, is now eligible for a land and building acquisition tax waiver and less red tape, among other incentives.
The list and its terms are outlined in Presidential Regulation (Perpres) No. 109/2020, a revision of Perpres No. 3/2016, which did not include the Bukit Asam project.
“[This is] a positive signal and big support from the government to optimize the country’s overflowing natural wealth,” wrote Bukit Asam corporate secretary Apollonius Andwie on Tuesday.
Read also: US company to develop $2 billion coal gasification project in East Kalimantan
Shares of Bukit Asam, traded on the Indonesia Stock Exchange (IDX) under the symbol PTBA, had risen 1.27 percent as of 1:24 p.m. Jakarta time on Tuesday, as the main gauge, the Jakarta Composite Index (JCI) gained 0.87 percent. The stocks are down 10.15 percent so far this year.
The coal gasification plant, which is slated to begin operations in late 2024, is being constructed in Tanjung Enim, South Sumatra, a center of coal mining in the country. Having been added to the strategic project list, Bukit Asam is also obliged to create local job opportunities.
Other listed energy projects include oil refineries, gas-rich fields, household gas pipes and publicly listed PT Bumi Resources’ coal-to-methanol plant in Bengalon, East Kutai, East Kalimantan.
The acquisition tax waiver and promises of other fiscal incentives add to a “new generation of fossil fuel subsidies”, as one analyst said, to keep such coal gasification projects running.
Read also: Bukit Asam's coal-gasification project will be loss-maker: Study
Energy finance analyst Ghee Peh, in a recent study, found that producing and selling dimethyl ether would cost Bukit Asam $377 million in operational losses each year.
"Technical viability is not the same as economic viability. The DME [dimethyl ether] project doesn’t make economic sense,” wrote Peh, a researcher with the Institute for Energy Economics and Financial Analysis (IEEFA).
Indonesian coal miners agree that coal gasification is a capital intensive undertaking and have asked for incentives to execute such projects. In response, the government introduced a coal royalty waiver in the recently passed Job Creation Law.
