mining east kalimantan

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dry bulk commodities

The dry bulk commodities businesses provide opportunities for Mercuria to apply its full range of capabilities, allowing it torealize value throughout the supply chain. Strategic investments in mineral resources and infrastructure underpin our growing presence as a major player in the global market.

coal mining in indonesia - indonesian coal industry | indonesia investments

coal mining in indonesia - indonesian coal industry | indonesia investments

Coal - a fossil fuel - is the most important energy source for electricity generation and also forms an essential fuel for the production of steel and cement. A negative characteristic of coal, however, is that it can be labelled as the most polluting energy source due to its high proportion of carbon. Other vital energy sources, such as natural gas, are less polluting but significantly more exhaustive and more susceptible to price fluctuations on the world market. Therefore, the world's industries have increasingly shifted their focus to coal.

Indonesia is one of the world's largest producers and exporters of coal. Since 2005, when it overtook Australia, the country is the leading exporter in terms of thermal coal. A significant portion of its exported thermal coal consists of the medium-quality type (between 5100 and 6100 cal/gram) and the low-quality type (below 5100 cal/gram) for which large demand originates from China and India. According to information presented by Indonesia's Ministry of Energy and Mineral Resources, Indonesian coal reserves are estimated to last around 83 years if the current rate of production is to be continued.

Regarding global coal reserves, Indonesia currently ranks 9th, containing roughly 2.2 percent of total proven global coal reserves according to the most recent BP Statistical Review of World Energy. Around 60 percent of Indonesia's total coal reserves consists of the cheaper lower quality (sub-bituminous) coal that contains less than 6100 cal/gram.

There are numerous smaller pockets of coal reserves on the islands of Sumatra, Java, Kalimantan, Sulawesi and Papua but the three largest regions of Indonesian coal resources are:1. South Sumatra2. South Kalimantan3. East Kalimantan

Since the early 1990s, when the coal mining sector was reopened for foreign investment, Indonesia witnessed a robust increase in coal production, coal exports and domestic sales of coal. The latter, however, has always been rather insignificant as domestic consumption of coal is relatively small in Indonesia. But in recent years there has been a rapid increase in domestic coal sales because the Indonesian government is committed to its ambitious energy program (implying the construction of various power plants, mostly coal-fired because Indonesia has plenty of coal reserves). Moreover, several big Indonesian mining companies (for example coal miner Adaro Energy) have expanded into the energy sector as prolonged low commodity prices made it unattractive to remain focused on coal exports, hence becoming integrated energy companies that consume their own coal.

During the 2000s commodities boom the coal mining industry was very lucrative as coal prices were comfortably high. Hence, many Indonesian companies and wealthy families decided to acquire coal mining concessions on Sumatra or Kalimantan in the late 2000s. Coal became known as the "new gold".

Coal is the dominating force in power generation. At least 27 percent of the world's total energy output and more than 39 percent of all electricity is produced by coal-fired power plants due to coal's abundance, its relatively easy and low-cost extraction, and less expensive infrastructure requirements compared to other energy resources.

Indonesia's strategic geographical position towards the giant emerging markets of China and India. Demand for low quality coal from these two countries has skyrocketed as many new coal-fired power plants have been built to supply electricity to their immense populations.

The main export destination countries for Indonesian coal are China, India, Japan and South Korea. During the peak years coal contributed around 85 percent to total state revenue from the mining sector.

The commodities boom of the 2000s generated significant profits for companies engaged in the export of coal. The rise in commodity prices was - to a large extent - triggered by accelerated economic growth in emerging and developing economies. But this profitable situation changed with the outbreak of the global financial crisis in 2008 when commodity prices went down fast. Indonesia was affected by these external factors as exports of commodities (in particular coal and palm oil) account for around 50 percent of total Indonesian exports, thus limiting the country's GDP growth in 2009 to 4.6 percent (which still represents an impressive number, largely supported by domestic consumption). From the second half of 2009 until the beginning of 2011 a sharp rebound in global coal prices occurred. However, reduced global economic activity has lessened demand for coal, thus resulting in a downward trend of coal prices between early 2011 and mid-2016.

Apart from sluggish global economic growth (and the hard landing of China's economy), there was also another factor at play that caused low coal prices. During the lucrative 2000s commodities boom many new coal mining companies were established in Indonesia while existing coal miners raised investment to expand production capacity. This caused a severe supply glut that was exacerbated by coal miners' eagerness in the years 2010-2013 to produce and sell as much coal as possible- amid low global coal prices - in order to generate revenue and profit.

In the second half of 2016 coal prices surged to levels last seen in early 2014, hence giving some fresh air to the mining industry. This price increase was triggered by the somewhat recovering crude oil prices, rising domestic coal demand in Indonesia on the back of the completion of new coal-fired power plants, but more importantly because of China's coal mining policies. China, the world's largest producer and consumer of coal, decided to cut its domestic coal output. The key reason why China wanted to push the coal price into higher territory in the second half of 2016 is that China's non-performing loan (NPL) ratio in the domestic banking sector had risen to 2.3 percent in 2015. The main reason that explains this rising NPL ratio was that China's coal mining companies had trouble to repay debt.

Despite global awareness regarding the importance to reduce nation's dependency on fossil fuels, developments in renewable energy resources do not show an indication that the world's dependency on fossil fuels (especially coal) will be reduced significantly in the foreseeable future, thus coal is set to remain a key energy resource. Clean coal technologies in coal mining, however, are expected to gain significance in the future (partly due to commercial relevance) and Indonesia is expected to become heavily involved in that process being a major player in the coal mining sector. These clean coal technologies focus on the reduction of emissions produced by coal-fired power generation but lack sustained progress yet. Upstream activities connected to coal mining, such as the development of coalbed methane (CBM) reservoirs of which Indonesia contains great potential, has begun to receive attention recently.

Indonesian government policy will affect the nation's coal mining industry. To secure domestic supplies, the Indonesian Ministry of Energy and Mineral Resources orders coal producers to reserve a specific amount of their production for domestic consumption (domestic market obligation). Moreover, the government can adjust its export tax to discourage coal exports. The government aims for more domestic consumption of coal as it wants coal to supply around 30 percent of the country's energy mix by 2025:

two deaths, zero accountability: indonesias mining pits claim more lives

two deaths, zero accountability: indonesias mining pits claim more lives

SAMARINDA, Indonesia On Sept. 6, five teenagers went together to a man-made lake in Indonesias East Kalimantan province, carved out of a coal-mining pit that had been abandoned and filled up with rainwater. It was a popular recreation site for the locals, thanks to its sparkling blue water.

Satria was 14, and an only child. He was a keen athlete, with ambitions to play soccer beyond school. Now, he and Rizky have become statistics, the latest in a growing list of people mostly children to die in the abandoned mining pits peppered throughout eastern Indonesian Borneo.

Since 2011, there have been 39 recorded deaths in abandoned pits, according to the Mining Advocacy Network (Jatam), a watchdog group. There are at least 1,735 of these pits dotted across East Kalimantan, Indonesias coal-mining heartland, with 64 of them in the district of Paser, where Satria and Rizky died.

That particular pit is located in the former concession of mining company PT Sarana Daya Hutama (SDH). The company obtained a permit for the 186-hectare (460-acre) concession in Paser districts Krayan Makmur village in June 2011. It ceased mining the following year, even though its permit was valid until March 2016.

The pit that it had dug up and abandoned gradually filled up with rainwater that took on a bluish hue a common feature here due to the presence of heavy metals from the mining activity, which also turns the water slightly acidic. Due to their attractive colors, some of these pits have become tourism spots, including the one in the Krayan Makmur. The villagers call it Blue Lake, and its listed as a recreational site on Google Maps, with 12 mostly favorable reviews that call it beautiful, clean, and awesome.

The proliferation of these pits-turned-tourist attractions came after Indonesias Ministry of Energy and Mineral Resources issued a regulation in 2014 allowing former mining pits to be used for various purposes, including fish farming, irrigation, and tourism.

The regulation came despite existing laws requiring mining companies to rehabilitate their concessions after operations end. But the framework of rules governing Indonesias mining sector is riddled with loopholes and blind spots that allow companies to shirk this obligation.

As with most of the other lakes that have sprung up from mining pits, there are no warning signs or security guards at Krayan Makmurs Blue Lake, says Jatam. The lake is also not fenced off, despite this being one of the requirements in an integrity pact signed in 2016 by the East Kalimantan provincial government and 125 mining companies operating here.

Pradarma Rupang, from the East Kalimantan chapter of Jatam, said the polices decision to rule Satria and Rizkys deaths as accidental effectively absolves mining company SDH of any responsibility. He said Jatam plans to report the company to the police for its failure to properly rehabilitate the mine after use, and thus endanger lives.

Azwar Bursa, the head of the provincial mining department, said his office would launch an investigation, including a review of SDHs reclamation planning document, which details the companys post-mining plan, to see if it really intended to turn the mining concession into a tourist attraction at the end of operations. Azwar added that SDH had not relinquished the concession to the provincial government despite having ended its operations in the area in 2012.

But even if found to have violated its obligation to rehabilitate the site, SDH only faces the possibility of meaningless administrative sanctions: a written warning; a temporary closure of the site, which it abandoned eight years ago; or a revocation of its permit, which expired four years ago.

Punishments are rare, and theres only one record of a case like this winding up in court. That was the case of PT Panca Prima Mining, in whose abandoned mining pit two children died in December 2014. The verdict in the case: a two-month prison sentence for the companys security officer and a token fine of 1,000 rupiah, or about 7 U.S. cents.

SDHs office is located in the headquarters of the Tanoko familys paint business, Avian Paint, in Surabaya, East Java. The phone number listed in its registration document is the same as that for PT WITA Internasional Bisnis Artisan, a mining and plantation subsidiary of Avian Paint. When Mongabay called the number, the operator said SDH is a part of WITA.

The pit isnt without its owner. There are parties who are responsible, Jatams Merah said. The companys registration document already shows the identities of the directors, shareholders and board members. Now the government only has to chase them. The government needs to check whether the company has a reclamation planning document or not. And if there is, what was the reclamation plan? Was it really for tourism?

In 2015, the East Kalimantan governor at the time, Awang Faroek Ishak, issued a decree temporarily halting the operations of 11 companies in whose mining pits children had drowned. The decree also instructed the companies to erect warning signs and fences around the pits.

Merah attributed these actions by both the government and the companies to the fact that the problem was being amplified in the media, generating immense pressure for action from not just the families of the victims but also the general public. But the government and companies have been much less responsive recently, he said, with no efforts to close down open mine pits and rehabilitate pits that have been abandoned.

We havent heard of any effort to enforce the law [by the authorities], Merah said. There hasnt been any attempt to seal [SDHs mine pit] even though its been nearly two weeks since the incident.

We havent heard anything [since Satria and Rizkys deaths], he said. Theres no statement from the governor or the district head. The public has to see this and engrave in their memory that this is how the government is taking care of its people, which is by doing nothing.

In the long term, the governments inaction will claim more lives, which makes it tantamount to an extraordinary crime, Merah said. These pits arent caused by natural events. They are the legacy of companies and should have been closed and rehabilitated. We cant narrow down the problem by saying that its a mere accident.

Even if they are rich, the law still applies to them, he said. The law cant be picky because this tragedy keeps repeating. There are already 39 victims. Were like a calculator, we keep on counting [the number of victims]. But these are peoples lives were talking about.

Banner image: The rain-filled mining pit turned tourist attraction, Blue Lake, in East Kalimantan, Indonesia, claimed the lives of two boys who died from drowning in the pit. Image courtesy of Paser Disaster Mitigation Agency (BPBD).

standing for parliament, and against mining in kalimantan | iqra anugrah

standing for parliament, and against mining in kalimantan | iqra anugrah

Like many other oligarchs and businesses exploiting natural resources, mining companies and their elite supporters have a lot of political clout in post-authoritarian Indonesia. This can be seen in the way mining companies have entrenched their influence in local politics, thanks tothe significant role they play in financing aspiring candidates in recourse-rich regions.

One of these resource-rich regions, East Kalimantan province, is a major centre of various extractive industries, ranging from oil and gas, timber logging, and more recently coal mining and oil palm. Consequently, it has also become one of the major battlegrounds for mining industry-influenced political contestation. In East Kalimantan alone,there are 1,404 mining licenses registered by the provincial government.Leading local politicians, such asSaid Amin, and the notoriously corrupt former district head (bupati) of Kutai Kartanegara,Rita Widyasari, either own or receive kickbacks from mining operations. Its not surprising that there is alack of responsiveness from the local governmentregarding the destructive socio-ecological impacts of mining,including in the gubernatorial election last year.

Extractive business interests and local elites have formed collusive relationships at the expense of rural citizens in Kalimantan provinces. In the neighbouring Central Kalimantan province, the expansion ofcorrupt land dealsandoil palm plantationhas seen local political elites enrich themselves, dominate local politics, and suppress dissenting voices who express concern over the destructive socio-ecological impacts of natural resource exploitation. In East Kalimantan, the development of the coal mining industry has broughtdevastating impacts for rural livelihoodsandbred corruption.Such a practices are representative of broader patterns ofhow oligarchic competition for political offices, and the collusive relationships with business that are prevalent among local elites, influences the trajectory of post-authoritarian local politics.

But in the 2019 election campaign, some Indonesian politicians in Kalimantan are trying to speak out against the excesses of the extractive industries there. In Samarinda, East Kalimantan,Baharuddin Demmu (Bahar),a National Mandate Party (PAN) member of the provincial parliament, is a rare example of an activist-turned-politician who continues to criticise extractive business interests and their local elite allies even after joining the local parliament. I spent a week observing Bahar and a number of activists and community members in the 2019 legislative election campaign to try to understand how mining influences electoral politics in East Kalimantan, and the challenges an activist-turned-politician faces in campaigning on a platform of environmental sustainability.

Checking the excesses of coal mining industry in the provincial parliament remains hugely difficult, reflecting the continuing dominance of local predatory interests that benefit from the industry, and the limited influence that rural citizens and their civil society allies have in defending the sustainability of rural livelihoods. In this context, Bahars story is important because it shows how a politician in a resource-rich province is trying to advocate for the rights of communities that have been affected by large resource extractive industries, and rural constituencies more generally. It tells us that there are Indonesian politicians who do care about their voters. But challenging mining-fuelled oligarchic interests, and promoting environmental sustainability and rural livelihoods, requires a much more extensive effort by rural lower-classes and their civil society allies work that cannot rely on one politician alone.

Bahar had a first-hand experience of how extractive industries damage the environment and rural livelihoods.During his childhood, Chevron, a multinational oil and gas company, evicted his family from their house and farm with the help of local military forces back in 1986.This experience influenced him to get involved in community activism during his college days. He thenjoined the East Kalimantan branch of the Mining Advocacy Network (JATAM), a mining watchdog organisation, and led the organisation as its coordinator from 2002 to 2004.

Inspired by his experience serving as an elected village head from 2006 to 2009, Bahar decided to run for a seat as an MP. In his first attempt, he won a seat in the district parliament of Kutai Kartanegara in 2009. In the parliament, he continued to voice his bold opposition against unethical corporate practices by the mining industry, a move that upset many other politicians who benefitted from coal mining. After winning a seat in the provincial parliament, he remained committed to voice his opposition to the excesses of coal mining, where he was a strident critic of the mining industrys social and environmental failings.

Bahars successful foray into politics shows how a politician with an activist background can try to make a difference at the local level. However, just getting there isnt enough: Bahar, like so many activists-turned-politicians, still faces significant challenges in fighting big extractive industry companies from within the system.

John Sidel has argued that quality of local democracy is suppressedin areas where control over the commanding heights of the local economy are dominated by few powerful players.This is true in East Kalimantan, where the extractive sector dominates the local economy. Access to mining money encourages politicians to outspend each other in election campaigns, and the resulting increase in the cost of campaign financing makes it more difficult for cash-strapped candidates to make inroads into local politics.

Given the high cost of election campaigning in Indonesia, political hopefuls with weak ties to voters have no choice but to rely on campaign financing from supportive donors. According to a2018 study from the Corruption Eradication Commission (KPK), many candidates competing in the 2015 executive head elections (known asPilkada) needed external sources for campaign financing. The study also found that around 43% of the candidates who lost their elections spent around Rp15 billion (A$100,000500,000) on their campaign. Those who won their elections, meanwhile, needed around Rp2030 billion (A$23 million) to win a mayor or district head post, and up to Rp100 billion (A$10 million) to secure a gubernatorial seat.

Further research by JATAM has shown that candidates often strike shady deals with mining companies to win local elections in resource areas. The companies will fund their campaign and in exchange receive mining licences once the candidates of their choice win the elections. For instance,after the 2010pilkada, the number of mining licences increased significantly in various resource-rich districts, including Kutai Kartanegara district.This trend continued untilvery recently, in the 2018 executive head elections.In total, JATAM and a number of other civil society organisations estimate thatthe number of mining licenses issued across Indonesia exploded from 750 licenses in 2001 to 10,000 in 2010.

In such a high-cost political arena, it is difficult for someone like Bahar to win election. However, he has attempted to compensate for his lack of campaign funds with his strong ties to local communities. His activism and familiarity with the rural context have become his strongest political assets. Activists and community members that I talked to confirm this assessment: according to them, to win a seat in East Kalimantan, one has to have either a strong connection with the voters or a huge amount of money to buy votes. Bahar has the former, so he does not really need the latter. Bahar claims that he only needed to spend Rp2030 million (A$2,0003,000) for his campaign to secure a seat in the district parliament and Rp100-200 million (A$10,000$20,000) for his campaign for a seat in the provincial parliament. If true, these figures are significantly lower than the figures a successful politician is usually required to spend.

As an incumbent, though, Bahar also maintains the loyalty of his constituencies by facilitating their access to state resources and facilities. If local peasants and fishers do not have their groups yet, then I will help them out (to make one), he said. Bahars colleague, Syarifuddin, another politician from PAN, told me, it is important for our constituencies to have their own peasants and fishers groups, otherwise it will be difficult for them to submit proposals for facilities and the like, he added. Bahar and my interlocutors claimed that by using tactics like this Bahar does not have to buy votes.

Bahar and his supporters are quite optimistic that he will win the re-election for his second term in the provincial parliament. But the more crucial question is what he will do to fight against mining-fuelled oligarchic interests in East Kalimantan and for the betterment of his constituency. Bahar and his activist colleagues are well aware that oligarchs continue to dominate the electoral arena in Indonesia. As Merah explained it to me, he needs to fight oligarchic interests not only from outside but also from inside (his party).

This is a herculean task. Bahar told me about his experience of receiving advice from several people to tone down his criticisms of the coal mining industry. I received phone calls [from an unknown person] advising me to stop criticising miningwhen I was in Jakarta a few people also came to me and told me to stop the investigation [of illegal mining] in the provincial parliament, he told me. Nevertheless, I carried on, he added.

What makes it challenging is the fact that national-level oligarchs have a vested interest in keeping and expanding coal mining businesses in East Kalimantan. A new investigation by Global Witness, an environmental watchdog organisation, has revealed that figures such asLuhut Pandjaitan, a former general and close advisor to Joko Widodo,andSandiaga Uno, Prabowo Subiantos vice-presidential candidate,are significant beneficiaries of coal mining in East Kalimantan. Given their extensive political influence, one might question how individual activists can withstand the influence of national oligarchs in their regions.

Moreover, Bahar has not been able to break free from the common practice in Indonesian politics of building patronage networks.It is true that he neither buys votes nor distributes small gifts to a group of favoured voters,but he has not been able to transform the dependent relationship between him and his voters. Recall his admission of facilitating the creation of local peasants and fishers groups to access state resources and facilities in his constituencies. While this helps the voters to some extent, it also precludes the possibility of a more independent and equal relationship between voters and politicians.

What is equally important is that marginalised rural communities and civil society actors in East Kalimantan and other resource-rich province do not fall for the illusion that electing an MP that represents their interests will solve the many problems caused by coal mining and other extractive industries for once and all.Historical exampleshave shown that it is the disruptive actions of lower-class and civil society movements that led to major political transformations such as democratisation. This is also true at the local scale, including in East Kalimantan: without consistent mass pressure from rural citizens and their civil society allies, it would be difficult to ensure that the many problems associated with resource extraction are heard and accommodated in local and national politics.

When asked about what he thought of Bahars strategy of entering electoral politics, Merah Johansyah Ismail (Merah), the national coordinator of JATAM, said, sometimes he repeats the (dominant) discourse (that working within the system should be the main strategy). But we still respect and maintain our communication with him. I asked Merah what the main strategy for advocating for the rights of communities affected by mining should be. He replied, we have no choice but to promote and rely on mass actions. Merahs assessment is quite accurate:major social movements in the 20thcentury such as workers and civil rights movements were able to force elites to make some policy concessions through mass actions such as protests and demonstrations.

This is not to say that electoral participation does not matter. However, one needs to understand the nature and limitation of elections in places like East Kalimantan, where extractive industries and their elite supporters can easily tilt electoral competition in their favour. As Benedict Anderson warned a long time ago,elections in Southeast Asia including in Indonesia are a sign of bourgeois political dominance,an assessment that remains true to this day.

In other words, a more concerted two-pronged strategywhich involves activists entering electoral politics as well as the intensification of contentious collective actions from belowis needed to substantially improve the quality of democracy in East Kalimantan. Bahar isno Tony Benn (the militant Labour Party politician who remained committed to, and a participant in, lower-class mobilisation while he was in office).But he can learn from his own experiencesome of Bahars voters are the ones who joined him in mass demonstrations against the oil and gas industrys lack of attention to peoples livelihoods back in his activist days. These protesters are also the ones who broadened the local democratic space enough to allowed him to win a seat as an MP. Without these disruptive actions, it would be difficult for ordinary citizens to get their voice heard and make a difference in local politics, even under democratised and decentralised settings.

Nevertheless, Bahars unusual track record has shown how there is a possibility for a more meaningful local democracy in Indonesia beyondilliberal populismoroligarchic hegemony.Unfortunately, such an example remains few and far between. In a sense, Bahars rise is an exception that proves the rule: that oligarchs and their local supporters still dominate Indonesian local electoral politics.

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