October 24, 2023
JAKARTA – Gold and copper mining giant PT Freeport Indonesia (PTFI) has announced plans to invest approximately US$1 billion in a new power plant to shift from coal as an energy source to the less-polluting liquefied natural gas (LNG).
The investment is to be used for the construction of a 265-megawatt gas-fired combined cycle gas turbine power plant, which is slated to replace the coal units that were developed to power the Grasberg mine in Papua over 25 years ago.
The facility is targeted to begin operations in 2027, with near-term key activities including engineering, procurement and construction, as well as securing LNG fuel supply.
Kathleen Quirk, the president director of United States-based mining giant Freeport McMoRan, said the incremental economic cost of the project, which is expected to significantly reduce PTFI’s greenhouse gas emissions (GHG), is roughly $400 million.
“The project [is expected to] cost roughly a billion dollars, and the economics as we looked at it would eliminate the cost to refurbish and expand the existing coal units over time,” she said in a Freeport McMoRan third-quarter conference call on Thursday.
“Importantly, the transition would reduce significantly PTFI’s GHG emissions, and together with other initiatives PTFI has undertaken, the total reduction would be in [the] order of 60 percent compared to the 2018 baseline,” Quirk said.
Read also: Miners shift to LNG for smelters amid mounting ESG pressure
Indonesia owns around 51.2 percent of PTFI, while Freeport McMoRan owns the remaining 48.8 percent.
The government-controlled shares consist of 26.24 percent ownership in state-owned mining holding company MIND ID and 25 percent in PT Indonesia Papua Metal and Mineral (IPMM).
Some Indonesian mining companies are switching to electricity from LNG to reduce emissions produced from their mineral processing operations amid growing demand for more sustainable supply chains.
The Energy and Mineral Resources Ministry estimates that in the next five years, Indonesia will need to generate 4.8 gigawatts of electricity to power 52 smelters, 29 of which are nickel smelters.
The lion’s share of the LNG demand, projected at 2.9 GW, is expected to come from smelters in Sulawesi and Maluku.
Similar to the trend of shifting to LNG for smelters, Indonesia plans to use natural gas as a “bridge fuel” in the nation’s transition to renewable energy.
According to the International Energy Association (IEA), GHG emissions from natural gas are 40 percent lower than those from coal and 20 percent lower than those from oil.
State-owned electricity firm PLN has also announced plans to “massively expand” its development of gas-fired power plants, in line with its latest long-term electricity procurement plan (RUPTL).
The government has also entrusted state-owned oil and gas firm Pertamina with converting diesel power plants to gas-fired plants at 33 of PLN’s power stations, which have a combined capacity of around 1.2 GW.
However, climate experts debate the role of natural gas as a bridge fuel, because it still releases the GHG methane and carbon dioxide (CO2), especially when it is converted into LNG through energy-intensive processing.