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Tuesday, 06 September 11
INDONESIAS PROPOSED COAL EXPORT BAN MAY HAVE IMPACT ON THE INDIAN POWER SECTOR - DIPESH DIPU
.jpg) COALspot.com - This is a special interview about Indonesian proposed coal export ban by 2014, with Mr. Dipesh Dipu, Director of Deloitte Touche Tohmatsu, India.
The Indonesian government is currently in the process of drafting a new regulation that could ban the export of low-grade coal by January 12, 2014. This is likely to apply to coal below 5700 kcal/kg on air dried basis in value.
As of now Indonesia is producing around 150 million tons of coal with calorific value below 5700 GAD (according to chairman of Indonesian coal mining association). However by 2014, there are possibilities the total production of below 5700 GAD coal may reach more than 200 million per annum.
Will Indonesian coal export ban impact on the Indian fuel requirements?
The earlier grade of coal that was being considered for proposed ban has GCV of 5100 kcal/kg of less (adb), which can be comparable to 3800-4200 kcal/kg (arb) domestic coal available in India. This grade of coal has found favor in India primarily due to likely price advantage but economics of power generation based on such grade of imported coal may be a suspect. This considering that such grades of coal from Indonesia typically have high moisture content, which makes transportation cost per unit of energy generated higher. The quantum of the low grade of coal (<5100 kcal/kg adb) procured from Indonesia is likely to remain relatively low.
However, if the new definition of low grade coal is applied (<5700 kcal/kg adb), it may be reasonable to believe that such a ban may have impact on the Indian power sector as volumes in this grade of coal are expected to rise in the proportion of coal exports to India. Several of the acquisitions made by Indian power generation companies in Indonesia have been in coal blocks that will produce coal of this grade, and a blanket ban on the exports can jeopardize power plant development in India.
On the other hand, the domestic Indonesian market may not be prepared to consume all the coal mined of this grade in view of the power generation capacity addition plans in Indonesia. In such a case, the coal mine development is likely to be deferred. The Indonesian law makers may need to reconsider domestic market demand, investment climate in coal sector and impact of the legislation on the export revenues.
What is the alternative source for Indian power industry if the proposed coal export ban come into effect by 2014?
Indian power generation companies have been forced to look out for coal assets abroad due to the investment and regulatory environment within the country. India boasts of more than 110 billion tonnes of coal reserves, which largely fall within a 300 meters of depth. If the regulatory and investment environment is amended to allow greater participation of private sector Indian dependence on imports will be reduced.
However, for imports, India will continue to look at Indonesia, South Africa, Australia and newer destinations like Mozambique and Columbia. But these sources also have constraints, domestic demands in South Africa is likely to restrict quantum jump in exports out of South Africa. Indonesia has also proposed domestic market obligations. Mozambique may have infrastructure constraints for large volumes of coal being transported from Tete province to ports of Maputo, Ncala or Beira. Australian coal is of high quality but may have higher costs of mining and transport.
What would be the additional cost if Indian consumers switch their sourcing origin from Indonesia?
Indonesia has competitive advantage due to its geographical closeness. However, on a per tonne basis, assuming comparable quality, costs of transport may make marginal difference when compared with South Africa and Mozambique.
When compared to Australian coal, due to the high quality, cost of energy may well be comparable even though shipping costs are higher. Between Indonesian coal (5500 kcal/kg adb priced at USD 90 per tonne) and Australian coal (6500 kcal/kg adb priced at USD 120 per tonne), indicative variable cost difference of power generation may be about Indian Rupees 0.20 to 0.30 per kWh (electricity unit) in favor of Indonesian coal.
Will it affect Indian economy growth or this coal export ban is ignorable as India can easily identify alternative sources of fuel?
The magnitude of growth in power generation in India will necessarily mean that coal will remain the mainstay. Natural gas has had issues of availability. Nuclear plant development is facing socio-political challenge in view of the risks of technology failure. Development of hydel power has also faced issues of land acquisition, rehabilitation & resettlement apart from the technical issues of hydro-geological features. Renewable sources such as solar and wind generation are still projected to constitute a small portion of India power generation mix. Identifying an alternative source that can match coal in its accessibility, availability and affordability in the context of scale of capacity addition required in India is a challenge.
What is the Indian government's role on this issue, whether government has to come out with the solution such as easing Indian mining and environment law, open up mining for foreigners, G2G arrangement, etc…?
There is a need to look at domestic sources with pro-active and constructive approach and make all necessary legal and statutory amendments that make the resources available and mineable. Easing the regulations may not be one of such measures but making those regulations work in sync with each other in a time bound and predictable manner must certainly be.
There is certainly a case for opening the domestic coal sector for private participation, including independent miners, and for foreign participation so that newer technology and enhanced scale of operations are implemented in India. The regulation also needs to permit risk capital to come in for prospecting and exploration.
For imports the G2G relations can be leveraged to secure coal assets. India has good relationship with Indonesia and has also signed a tax treaty with Mozambique in 2010 which will facilitate investments. Government may also engage with these countries to ease exports to India and extend fiscal support to coal mining companies investing in mining and associated infrastructure development.
About Dipesh Dipu
Dipesh Dipu works as Director with Deloitte Touche Tohmatsu India Pvt. Ltd in the Energy and Resources consulting practice of the firm and anchors the Firm’s initiative in the mining and metals sectors.
He is a mining engineering graduate from Indian School of Mines and is a Chartered Financial Analyst (CFA). He has also done executive program in business management from Indian Institute of Management Calcutta. Dipesh has recently been awarded the Abheraj Baldota Gold Medal for the Young Mining Engineer of the Year 2007 by the Mining Engineers’ Association of India in recognition of his contributions in the improvement of mining industry in India.
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- Sarangani Energy Corporation, Philippines
- Ministry of Transport, Egypt
- Coal and Oil Company - UAE
- Petrochimia International Co. Ltd.- Taiwan
- Holcim Trading Pte Ltd - Singapore
- Parliament of New Zealand
- Grasim Industreis Ltd - India
- San Jose City I Power Corp, Philippines
- Indonesian Coal Mining Association
- Agrawal Coal Company - India
- Bhushan Steel Limited - India
- Borneo Indobara - Indonesia
- Carbofer General Trading SA - India
- Marubeni Corporation - India
- Bhoruka Overseas - Indonesia
- Renaissance Capital - South Africa
- South Luzon Thermal Energy Corporation
- Mjunction Services Limited - India
- Energy Link Ltd, New Zealand
- Jindal Steel & Power Ltd - India
- Sindya Power Generating Company Private Ltd
- GMR Energy Limited - India
- Eastern Coal Council - USA
- Sical Logistics Limited - India
- Port Waratah Coal Services - Australia
- Kepco SPC Power Corporation, Philippines
- Anglo American - United Kingdom
- Salva Resources Pvt Ltd - India
- Indian Energy Exchange, India
- Xindia Steels Limited - India
- Chettinad Cement Corporation Ltd - India
- Kideco Jaya Agung - Indonesia
- The State Trading Corporation of India Ltd
- Minerals Council of Australia
- Globalindo Alam Lestari - Indonesia
- GVK Power & Infra Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Mintek Dendrill Indonesia
- Power Finance Corporation Ltd., India
- Global Business Power Corporation, Philippines
- Iligan Light & Power Inc, Philippines
- LBH Netherlands Bv - Netherlands
- Bank of Tokyo Mitsubishi UFJ Ltd
- Siam City Cement PLC, Thailand
- CNBM International Corporation - China
- Dalmia Cement Bharat India
- Ind-Barath Power Infra Limited - India
- ASAPP Information Group - India
- Meralco Power Generation, Philippines
- The Treasury - Australian Government
- Metalloyd Limited - United Kingdom
- Indogreen Group - Indonesia
- Edison Trading Spa - Italy
- Indika Energy - Indonesia
- Aboitiz Power Corporation - Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- The University of Queensland
- Interocean Group of Companies - India
- Toyota Tsusho Corporation, Japan
- Australian Commodity Traders Exchange
- Chamber of Mines of South Africa
- Posco Energy - South Korea
- Planning Commission, India
- Karaikal Port Pvt Ltd - India
- Indo Tambangraya Megah - Indonesia
- TeaM Sual Corporation - Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Vedanta Resources Plc - India
- Central Electricity Authority - India
- Directorate General of MIneral and Coal - Indonesia
- Wood Mackenzie - Singapore
- Karbindo Abesyapradhi - Indoneisa
- Wilmar Investment Holdings
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Sinarmas Energy and Mining - Indonesia
- Meenaskhi Energy Private Limited - India
- Essar Steel Hazira Ltd - India
- Thai Mozambique Logistica
- Ministry of Mines - Canada
- Jaiprakash Power Ventures ltd
- Maheswari Brothers Coal Limited - India
- Kumho Petrochemical, South Korea
- Kaltim Prima Coal - Indonesia
- Electricity Authority, New Zealand
- Sojitz Corporation - Japan
- Timah Investasi Mineral - Indoneisa
- Orica Mining Services - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Tamil Nadu electricity Board
- VISA Power Limited - India
- MS Steel International - UAE
- Star Paper Mills Limited - India
- Simpson Spence & Young - Indonesia
- Makarim & Taira - Indonesia
- Directorate Of Revenue Intelligence - India
- Bhatia International Limited - India
- Antam Resourcindo - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Larsen & Toubro Limited - India
- Sree Jayajothi Cements Limited - India
- Manunggal Multi Energi - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Videocon Industries ltd - India
- Petron Corporation, Philippines
- CIMB Investment Bank - Malaysia
- India Bulls Power Limited - India
- Pendopo Energi Batubara - Indonesia
- McConnell Dowell - Australia
- PTC India Limited - India
- Semirara Mining and Power Corporation, Philippines
- Madhucon Powers Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Merrill Lynch Commodities Europe
- Georgia Ports Authority, United States
- Maharashtra Electricity Regulatory Commission - India
- Jorong Barutama Greston.PT - Indonesia
- London Commodity Brokers - England
- Coalindo Energy - Indonesia
- Binh Thuan Hamico - Vietnam
- Global Green Power PLC Corporation, Philippines
- Barasentosa Lestari - Indonesia
- PowerSource Philippines DevCo
- Goldman Sachs - Singapore
- Vizag Seaport Private Limited - India
- Mercuria Energy - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Kobexindo Tractors - Indoneisa
- Oldendorff Carriers - Singapore
- Electricity Generating Authority of Thailand
- European Bulk Services B.V. - Netherlands
- Baramulti Group, Indonesia
- White Energy Company Limited
- Banpu Public Company Limited - Thailand
- Uttam Galva Steels Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Lanco Infratech Ltd - India
- Aditya Birla Group - India
- Global Coal Blending Company Limited - Australia
- AsiaOL BioFuels Corp., Philippines
- Ceylon Electricity Board - Sri Lanka
- Miang Besar Coal Terminal - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Semirara Mining Corp, Philippines
- Savvy Resources Ltd - HongKong
- Billiton Holdings Pty Ltd - Australia
- Bulk Trading Sa - Switzerland
- SMC Global Power, Philippines
- Eastern Energy - Thailand
- Siam City Cement - Thailand
- Kartika Selabumi Mining - Indonesia
- Standard Chartered Bank - UAE
- Ministry of Finance - Indonesia
- Intertek Mineral Services - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- SMG Consultants - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Bangladesh Power Developement Board
- Trasteel International SA, Italy
- Sakthi Sugars Limited - India
- Commonwealth Bank - Australia
- Heidelberg Cement - Germany
- Altura Mining Limited, Indonesia
- OPG Power Generation Pvt Ltd - India
- Australian Coal Association
- Ambuja Cements Ltd - India
- New Zealand Coal & Carbon
- Parry Sugars Refinery, India
- Rashtriya Ispat Nigam Limited - India
- Attock Cement Pakistan Limited
- IEA Clean Coal Centre - UK
- Bukit Baiduri Energy - Indonesia
- Riau Bara Harum - Indonesia
- Africa Commodities Group - South Africa
- SN Aboitiz Power Inc, Philippines
- GN Power Mariveles Coal Plant, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Gujarat Sidhee Cement - India
- Cement Manufacturers Association - India
- International Coal Ventures Pvt Ltd - India
- Rio Tinto Coal - Australia
- Romanian Commodities Exchange
- IHS Mccloskey Coal Group - USA
- PNOC Exploration Corporation - Philippines
- Mercator Lines Limited - India
- Singapore Mercantile Exchange
- Tata Chemicals Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Therma Luzon, Inc, Philippines
- Medco Energi Mining Internasional
- Asmin Koalindo Tuhup - Indonesia
- Straits Asia Resources Limited - Singapore
- Indian Oil Corporation Limited
- Orica Australia Pty. Ltd.
- Neyveli Lignite Corporation Ltd, - India
- Samtan Co., Ltd - South Korea
- GAC Shipping (India) Pvt Ltd
- Krishnapatnam Port Company Ltd. - India
- Formosa Plastics Group - Taiwan
- Energy Development Corp, Philippines
- Central Java Power - Indonesia
- Latin American Coal - Colombia
- Deloitte Consulting - India
- ICICI Bank Limited - India
- Alfred C Toepfer International GmbH - Germany
- Price Waterhouse Coopers - Russia
- TNB Fuel Sdn Bhd - Malaysia
- Independent Power Producers Association of India
- Thiess Contractors Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Economic Council, Georgia
- Coastal Gujarat Power Limited - India
- Cigading International Bulk Terminal - Indonesia
- Malabar Cements Ltd - India
- Bukit Makmur.PT - Indonesia
- Bayan Resources Tbk. - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Bharathi Cement Corporation - India
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