Swallowed by coal: UK profits from Indonesia's destructive mining industry

Just 30 years ago, Samarinda was a sleepy village surrounded by deep equatorial forest and known mostly for its traditionally woven sarongs. Today it is the largest city in Indonesia's East Kalimantan province, with nearly 1 million inhabitants. It is also the centre of the burgeoning coal industry, surrounded by more than 1,000 mines and concessions.

The forests have gone, opencast mines circle the city and giant barges pass down the river Mahakam every few minutes taking coal to India, Japan, Korea and beyond. Nearly 70% of the city has been handed to coal companies as concessions. In theory, Samarinda could be swallowed by coal.

The city and most of East Kalimantan is unrecognisable to those who left some three decades ago, but now, say Indonesian and British campaigners, coal mining is poised to rip through central Kalimantan, or Borneo, a few hundred miles west of Samarinda. Mining companies such as BHP Billiton are moving in with money raised in London to exploit some of the world's largest deposits in what is being called coal's last frontier. So far, 449 exploration concessions have been awarded, covering 15,313 square miles (39,662 sq km) – about 25% of the area of the whole densely forested province famed for its tribespeople, remoteness and wildlife.

According to the World Development Movement and its partner in Indonesia, the East Kalimantan Mining Advocacy Network, mining and the infrastructure needed to extract and export coal from the heart of Borneo will inevitably ruin vast, heavily forested areas at great cost to people living there and the environment.

Apart from the millions of tonnes of carbon that will be emitted from the burning of the coal, massive railway projects are planned, and giant pits and waste dumps will be needed to support the industry. This will lead to pollution of rivers and land-grabbing during the digging of vast open-cast pits each covering several square miles, as people flock there in search for jobs.

The pace of the mining is speeding up in central Kalimantan. More than 8.5m tonnes of coal were dug last year compared with less than 1m tonnes in 2005; and by 2020 companies could be extracting more than 20m tonnes a year. Indo Met, the largest concession in central Kalimantan, owned by BHP Billiton, covers 350,000 hectares and is thought to have coal reserves of more than 774m tonnes.

Where mining has started, people complain of air pollution, flooding, and land grabs. "We receive all the negatives of coal but very little of the benefits. We will receive the full impact of the waste when they start dumping. The forest will be gone and we will lose our rubber trees," Erly Aisha, a Dayak leader from Maruwei village, told WDM.

Waste from Borneo Lumbung's mine has seeped into the local rivers, say other villagers. "The water is dark and dirty and makes your skin itch. We don't drink it now. The new mine is not operating but the company already has our land. We feel afraid," said Yesmaidfa, a mother in Maruwei.

According to WDM, the UK financial sector is involved in more than 50 major coal mines worked by 12 large companies in East and others in central Kalimantan.

BHP Billiton, which is listed on the London Stock Exchange, has recieved millions of pounds of investment from Barclays. Because it is part of the FTSE 100, almost every pension holder in the UK has money invested in it. Borneo Lumbung, which controls the Asmin Koalindo Tuhup mine in central Kalimantan, received a loan of $1bn (£0.6bn) from the UK bank Standard Chartered in 2012. Most of the money, says WDM, was used to buy shares in Bumi, the troubled London-listed firm co-founded by financier Nat Rothschild that owns large stakes in some of the biggest mining projects in East Kalimantan.

BHP Billiton, which has a 75% share in the giant IndoMet coal project, is estimated by WDM to have used about £110m of money raised in London. Elsewhere, Adaro Energy, Indonesia's second-largest producer of thermal coal, received £245m from a coalition of UK banks, including HSBC and Standard Chartered.

"With the financial sector shrouded in secrecy, it will be very hard to do anything more than estimate the true extent of involvement that UK financial and investment institutions have in fossil fuel projects in places such as Indonesia," said Alex Scrivener, author of the WDM report. "The sector and its institutions must be held to account for their bankrolling of climate change and environmental destruction."

Andrew Hickman, from the Indonesian mining watchdog Down to Earth, said: "The energy we consume in Britain is dirty, but the profit that UK companies make from Indonesia's coal is dirtier. Local communities facing health problems, pollution and human rights abuses in Indonesia know that this coal is deadly too. BHP Billiton's Borneo coal concessions will be a disaster for local people, the environment and our climate."

A spokesman for BHP Billiton in London said: "The IndoMet coal project is a joint venture between BHP Billiton and Adaro. The first stage of development is a small operation called Haju and we are continuing to evaluate the potential for larger scale developments in the region. Any development in central and East Kalimantan will be subject to detailed environmental and social impact assessments, feasibility studies and will require all appropriate permits to be in place before activities commence."