Patchy Power Challenges Indonesia Minerals Goal: Southeast Asia – by Fitri Wulandari and Eko Listiyorini (Bloomberg News – May 07, 2014)

The challenge of supplying power across an archipelago of more than 17,000 islands is complicating Indonesia’s goal of getting more out of its scattered mineral resources.

While almost 80 percent of Indonesia’s electricity capacity is in the islands of Java and Bali, the majority of its most abundant minerals such as bauxite and nickel are found in provinces including Sulawesi, Halmahera and Kalimantan. That’s testing PT Perusahaan Listrik Negara, the state utility, which received requests from 25 companies to supply new mineral-processing plants with power as of last month.

“The problem is smelters are often located in remote areas where power stations and infrastructure are lacking,” Jarman, the director general of electricity at the energy and mineral ministry, said in an interview in Jakarta.

Indonesia, the biggest producer of mined nickel, banned mineral ore exports in January to boost investment in the smelters and refineries needed to process raw materials locally into higher-value commodities. By 2030, the plants needed to turn the nation’s ore into metals will require additional power equivalent to 13 percent of current capacity, putting a strain on the electricity network in Southeast Asia’s largest economy.

The country had 49,630 megawatts of generation capacity as of March, government data show. More than 20 percent of the population was without electricity as of last year with Listrik Negara aiming to increase coverage to almost 98 percent by 2022, it said in its energy supply plan for 2013-2022.

Mineral Reserves

Sulawesi has more than 72 percent of Indonesia’s total mineable nickel reserves of almost 121 million metric tons, according to data on the Geology Agency’s website. The island of Halmahera in North Maluku province has about 28 percent. For bauxite, a raw material for aluminum, 92 percent of the 30 million tons of mineable reserves are in West Kalimantan and the rest is in Riau province.

“Investors want electricity in the mines, for example nickel mines in Halmahera island, but we don’t have the capacity needed there,” Nur Pamudji, the president director of Listrik Negara, said April 15 in Jakarta. Building smelters will be feasible in Java where power supply is abundant, he said.

Nickel prices have rallied 33 percent this year, the most among the six main metals traded on the London Metal Exchange, on concern Indonesia’s export ban will lead to a global shortfall. It has prompted buyers in Japan and China to scour the globe for alternative supply sources for the material used to make stainless steel. The metal was at $18,616 a ton today, heading for the highest close since February last year.

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