PT Arutmin Indonesia future product alternative and potential market

Kresno Adiprasetyo -2201921224

Summary

PT Arutmin Indonesia is an Indonesian Government contractor in Coal Mining and Coal Production,
which is bound with an agreement on both parties. Indonesian Government issue a permit for PT
Arutmin Indonesia to operate and planning for AVP(added Value Project), also known as IUPK. (Izin
Usaha Pertambangan Khusus- Special Mining Business Permit). On the current permit, PT Arutmin
Indonesia activity is limited to Coal Mining and Production also the coal gasification activity. Therefore,
in terms of future possible product development, besides of coal, PT Arutmin Indonesia can only create
product diversification in form of Syntetic Natural Gas as a product of coal gasification. For future
market, there are several potential international and domestic market for this product

Objective

The purpose of this research is to produce insights on niche market that haven’t been developed by PT
Arutmin Indonesia. At current situation, Syntetic Gas market from processed coal is not really attractive,
since the investment for the Gasification Plant is relatively high. Along with the decreasing current fossil
fuels and the awareness of clean energy, gas demand is forecasted to be high in the future, and became
a potential market for PT Arutmin Indonesia

Current Situation

World Gas Market Situation

World energy demand is increasing along with the economic growth. In line with the increasing of
greener environment, the source of energy is considered to be cleaner. Natural gas is considered as
green energy source and required by the world. In the future, gas demand forecast is exceeding the coal
and oil demand.
BP Energy Outlook 2019

Figure 1. World Primary Energy Demand

In terms of region, new emerging market in Asia, led by China and India will be the best potential market
for PT Arutmin Indonesia to export the product, along with the OECD Countries. Due to the high demand
and consumption in the future, gas market share will be higher than other fuels.

Table 1. World Fuel demand

Along with the increasing demand which is currently not followed by the demand, there is a great
opportunity for price increase, which will attract the market of this product.
Domestic Gas Market Situation

Currently Indonesian gas market share is dominated by power plant and petrochemical industry which is
supported by adequate infrastructure support. Other market has not been potentially developed due to
the infrastructure support currently is not available to adsorb the supply. This situation requires the gas
to be converted into Compressed Natural Gas (CNG) which increases the price. For transportation
sector, Indonesian Government facilitate the allowance for public transportation sector to stimulate gas
utilization. Several public transportation has combined the fuel by using oil and gas, so that the fuel cost
can be reduced.

Future Market Forecast

International Future Market Forecast

With the advance of technology usage in India and China, which are the emerging market for gas,
demand will be high in the future. PT Arutmin Indonesia, which marketed the coal under the auspices of
PT BUMI Resources Tbk. has establish good relationship with customers from these region, so that it will
ease the effort in penetrating the market. India and China clients has become loyal customers for PT
Arutmin Indonesia, so that the brand awareness is high.

Domestic Future Market

For domestic future market, there are two potential market which are PLN(Electric State Company) and
gas deficit region. PLN has committed to adsorb the domestic gas supply. Future advance in Gas Power
Plant does not require fixed pipe line connection with the gas source, therefore it can utilize gas product
from PT Arutmin Indonesia. PLN has become one of the domestic Loyal Customer for PT Arutmin
Indonesia, so that trust has been gained. PT Arutmin Indonesia will supply the gas product to the several
power plant to fulfill the demand for power grid.
 Figure 2. PLN Gas Power Grid

Based on the forecast by ESDM(Energy and Mineral Resources) Ministry, Java and Sumatra region(also
called Region I-IV) will face gas deficit in 2027, if there is no additional supply from current producers. To
fill the niche market in Java and Sumatra Region, PT Arutmin Indonesia gas product can enter the market
to substitute the natural gas product from current producers

Figure 3. Indonesia Gas Region

Outcome
Using this market research, researcher’s expect that for current coal producers to have insight on the
one of future possible product alternative and potential market. Coal producer nowadays are required
to create a product that can give added value both for the producer and the country. Future gas market
is potential , as long as there is no major deviation from the assumption during the feasibility study.

Source Enerdata

Figure 4. Indonesia Gas Outlook

Data Collection
The data collected on this research is sourced from the study performed by Tekmira, a research unit
under ESDM Ministry. Tekmira has conduct study on the PT Arutmin Indonesia potential product
alternative. It is also parallel with BUMI Resources Tbk. Plan as the holding company to develop coal
gasification plant to generate added value of the coal product. Other graphics and articles are sourced
from ESDM, and several relevant public websites
Research Methodology
The research o uses literature review, and analyzed to give reliable insight and recommendation for PT
Arutmin Indonesia and coal producers in general. Other public reference is limited from research on coal
gasification.

Further Outcome
Through this research, it is expected there will be further study on coal gasification plant process that
can reduce the cost, since the investment on plant construction is the major item in the investment, and
attract investors to fund the project. Based on the potential future market, the customer target and
segmentation could be broadened, and using marketing mix strategy, future additional revenue can
support for the business sustainability.