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Article - April 4, 2012
Center for Production and Processing of National Mining and Energy Reserves
Thanks to Kalimantan’s abundant resources and unique geographic features, the MP3EI has designated this economic corridor as a ‘Center for Production and Processing of National Mining and Energy Reserves.’ Already, oil & gas and mining contribute around half of the total GRDP; nevertheless, a decline in annual total production of the oil & gas sector means there is increasing pressure on other sectors to continue driving economic development. These other sectors include coal, palm oil, steel, bauxite and timber.

With its ever-growing demand for oil, Indonesia has grown increasingly dependent on imports. The Master Plan proposes to counter this trend by promoting exploration of new oil and gas fields, especially in the Kalimantan Economic Corridor, an area known to have large reserves. The region is, however, an important producer of liquefied natural gas (LNG), contributing 37% to Indonesia’s overall production.

Greater investment is required for exploring further hydrocarbon fields as they pose more difficult conditions (ie deep sea exploration). The MP3EI addresses simplifying regulations; designing more production sharing contracts to make investing in Kalimantan’s oil and gas industry more attractive; accelerating the use of Enhanced Oil Recovery technology; and providing technical support to reduce exploration costs.

Another source of energy, coal is a powerful economic driver for the region, with some of the largest deposits of this rock located in Kalimantan. Infrastructure improvements outlined in the Master Plan are expected to raise coal production more than sixfold, and plans for coal conversion activities – such as coal gasification and liquefied coal production – should create more jobs, increase revenues and reduce imports.

Palm oil is another powerful generator of revenues for the region, with oil palm plantations occupying 53% of the total plantation area in Kalimantan. Due to environmental consideration, further expansion is limited. Consequently, the region’s growers must increase production yields of existing plantations, a task they will be aided in with government policies outlined in the MP3EI.

With 84% of Indonesia’s primary iron ore reserves and important reserves of bauxite, Kalimantan’s mining sector also plays a strategic role in the region’s economic development. For the next few years, investment will focus on developing processing industries so as to create on one hand, a self-sufficient steel industry capable of meeting domestic needs and, on the other, an added value chain of bauxite-alumina-aluminum downstream production.

Lastly, timber offers huge potential for Kalimantan as it is home to vast forested areas. Nevertheless, the forestry sector also contains non-timber potential such as fruits, rattan, bamboo, silk and agar.