A multibillion-dollar and flagship coal gasification project in South Sumatra might do more harm than good for Indonesia’s economy, the latest Institute for Energy Economics and Financial Analysis (IEEFA) report has found.
The upcoming project, which aims to produce 1.4 million tons of coal-derived cooking gas (DME) each year, will cost Indonesia more from “a new generation of fossil fuel subsidies” than save from lower oil and gas imports, according to the report released on Nov. 10.
“Technical viability is not the same as economic viability. The DME project doesn’t make economic sense,” said report author and energy finance analyst Ghee Peh.
He calculated that the US$2 billion project would cost its executor, state-owned coal miner PT Bukit Asam, around $377 million in operational losses each year. The government would need to heavily subsidize the project just to make it run.