Indonesia starts construction of $2.3 bln coal gasification plant

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Indonesian President Joko Widodo reads his statement following a signing ceremony at the Presidential Palace in Hanoi, Vietnam September 11, 2018. Bullit Marquez/Pool via REUTERS

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JAKARTA, Jan 24 (Reuters) - Indonesian President Joko Widodo launched construction of a $2.3 billion coal gasification plant on Monday, in a bid to slash the country's liquefied petroleum gas (LPG) imports while optimising its coal resources.

The plant is designed to utilise 6 million tonnes of low rank coal to produce 1.4 tonnes of dimethyl ether (DME) annually, which can reduce Indonesia's LPG import by 1 million tonnes per year, according to state coal miner Bukit Asam (PTBA.JK), which is building the plant in partnership with U.S. firm Air Products and Chemicals, Inc.

In 2021, Indonesia consumed 7.95 million tonnes of LPG, 6.4 million tonnes of which were imported, government data showed.

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"We can reduce a subsidy from the state budget by around 7 trillion rupiah ($489.00 million), while improving our trade balance and our current account deficit," said Jokowi, as the president is popularly known.

Indonesia allocated 66.3 trillion rupiah in the 2022 budget to subsidise some domestic LPG consumption.

Indonesia's LPG imports are expected to decline by six times in 2025 from current levels, as it seeks to ramp up coal gasification, which is on a government "priority" investment list offering incentives such as tax breaks.

The plant is in Muara Enim, South Sumatra, a mining hub of state coal miner Bukit Asam. Construction is slated to take 30 months and state energy company Pertamina is expected to use gas produced from the plant.

($1 = 14,315.0000 rupiah)

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Reporting by Bernadette Christina Edited by Fransiska Nangoy, Martin Petty

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