PT Bumi Resources Tbk (BUMI) is currently conducting a study on coal downstreaming, with targeted products being methanol or ammonia.

Bumi Resources Director, Rio Supin, stated that the company has signed a strategic partnership agreement with a new investor following the exit of Air Products & Chemical Inc (APCI) from the coal gasification project with its subsidiary, PT Kaltim Prima Coal (KPC). However, Rio did not provide full details about the new investor's name or country of origin in the coal downstreaming project.

"We signed the strategic agreement last year as a replacement for APCI. APCI withdrew, and we have a new replacement," Rio said in South Jakarta, quoted on Tuesday (15/9/2024).

Rio mentioned that Bumi Resources is finalizing plans for the coal downstreaming industry, aiming to complete the study by 2025.

Market Focus

According to Rio, although the feasibility study (FS) has been completed, the company continues to assess market dynamics to determine which downstream product to focus on. BUMI notes that other coal mining companies with special mining licenses (IUPK) as extensions of the Coal Mining Work Agreement (PKP2B) are also producing similar downstream products, such as methanol.

“If everyone produces methanol, what's the demand in Indonesia? If everyone produces methanol, where will it go? What's the market?” he asked.

He added that coal-based methanol faces challenges competing in foreign markets due to its higher capital expenditure (capex) requirements compared to methanol production from natural gas. BUMI would have to invest heavily in infrastructure, including logistics and power plants, to produce methanol from coal.

Aside from methanol, BUMI is also exploring ammonia production, which is more export-oriented. This product has a large market, especially if Japan succeeds in using ammonia in its power plants. However, BUMI faces the dilemma of whether Japan will accept grey ammonia from Indonesia, which still generates carbon emissions.

“If current products lack CCUS (Carbon Capture, Utilization, and Storage) and green energy linkage, they will be considered grey products,” Rio explained.

“Grey products might survive temporarily, but when regulations mandate blue and green ammonia, it will be challenging. Our industry is still young, and when the plant hasn’t yet paid off, debt isn’t repaid, and we haven’t reached the break-even point, it will be hard to compete when new regulations emerge.”

0% Royalty Assurance

During the discussion, BUMI also raised the issue of 0% coal royalty for companies engaging in downstreaming activities.

“The 0% coal royalty law exists, but further regulations on how to obtain it haven’t been issued,” Rio added.

This regulation is included in Government Regulation in Lieu of Law (Perpu) No. 2 of 2022 on Job Creation. Article 128A Paragraph 2 of the law stipulates that special treatment for state revenue obligations related to coal development and/or utilization activities can include a 0% royalty.