UPDATE 2-Indonesia plans to cap coal exports, official says

* Indonesia to limit coal exports to 150 mln tonnes/year

* Exports cap not seen affecting coal prices immediately

* It will take years for local demand to reach 100 million

(Adds details, background)

By Fitri Wulandari

JAKARTA, Oct 14 (Reuters) - Indonesia plans to cap coal exports at 150 million tonnes a year to ensure domestic supply, an official said on Wednesday, in a move that could eventually curb supply from the world's top thermal coal exporter.

The export cap, which could take effect as early as 2010, is not expected to affect coal prices immediately since industry officials see output outpacing growth in local demand for now.

The government has been drafting regulations to implement a new mining and coal law passed in December 2008, which will include provisions to keep coal output for domestic needs.

"Production is on an uptrend but we would like to maintain coal exports at 150 million tonnes because we are prioritising domestic demand," Bambang Setiawan, director general for mining at the energy and mining ministry, told a conference in Jakarta.

The market has been concerned over the prospect of Indonesia supplying more coal domestically at the expense of exports, just as demand from countries such as China and India remains strong.

Singgih Widagdo, director of the Indonesia Coal Society, said growth in domestic demand was likely to be slow as there were problems completing planned new coal-fired power stations.

"Growth in production is much faster than local demand because there will be delays in power projects," said Widagdo, whose organisation groups coal producers and traders.

"Coal prices won't surge immediately as supply from Indonesia would be sufficient for the time being," he said.

The first phase of the government's crash programme to add 10,000 megawatts of generating capacity from new coal-fired power plants is expected to be completed by 2011, having been put back from 2010 due to financing problems.

Coal for power generation accounts for more than 60 percent of Indonesia's total coal consumption.

The government expects production in Indonesia to be 230 million tonnes this year, with 68.5 million tonnes used domestically and 161.5 million tonnes for export.

The Indonesia Coal Producers' Association is more upbeat on production and expects the Southeast Asian country to produce 250-258 million tonnes of coal this year.

The Indonesia Coal Society estimates domestic coal demand may only reach 120 million tonnes a year by 2016.

For a graphic on Indonesian coal exports and productihere

It is unclear when an export cap would be applied, but Energy and Mining Minister Purnomo Yusgiantoro has said the new regulations may be completed by end of this year.

For a factbox on the draft regulations of Indonesia's new mining law click on [ID:nJAK367075]

LONG TERM SHIFT TO COAL

The government's long-term energy plans focus on using more coal while cutting oil products.

Domestic demand for electricity generation is expected to reach 107 million tonnes in 2018 from 36 million tonnes this year, state electricity firm PT Perusahaan Listrik Negara has said.

Plans to limit exports were not likely to have a significant impact on investment in the coal sector, said Scott Merrillees, head of the natural resources group at PT ANZ Panin Bank, a unit of Australia & New Zealand Banking Group.

"I don't think the new law will have a big impact on (investment). Indonesia is a reliable supplier and has a good reputation in the market," he said. (Additional reporting by Tyagita Silka; writing by Ed Davies, editing by Anthony Barker)