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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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Friday, 17 July 09
THE NEW LAW OF MINERAL AND COAL MINING NO 4/2009 CREATE CONDUCIVE CLIMATE OF INVESTMENT IN INDONESIA
COALspot.com (Indonesia): The new Law of Mineral and Coal Mining No 4/2009, which replaces the old mining law No. 11/1967 has been signed by the Pre ...
Friday, 17 July 09
INDIA COAL TRADERS MUST OWN POWER, MINES - C&O BOSS
· Coal traders need to diversify to grow
· Coastal Energen to build first merchant power plant
· Tamil Nadu to see st ...
Friday, 17 July 09
CHINA SHENHUA ENERGY'S COAL OUTPUT SWELLS 17.6% IN H1
China Knowledge reported that, China Shenhua Energy Co Ltd, which is engaged in the coal mining, power generation and transportation businesses, on ...
Thursday, 16 July 09
CHINA ISSUES SECOND BATCH OF '09 EXPORT QUOTAS
China has issued 25 million tonnes of coal export quotas for the second batch this year, the National Development and Reform Commission said Wednesd ...
Thursday, 16 July 09
NTPC TO ENGAGE BANKERS TO ACQUIRE OVERSEAS COAL MINES
The Hindu reported that, State-run power generation company NTPC said it would appoint merchant bankers next month for acquiring coal mines identifi ...
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- Commonwealth Bank - Australia
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- Bhoruka Overseas - Indonesia
- Price Waterhouse Coopers - Russia
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- Dalmia Cement Bharat India
- Bulk Trading Sa - Switzerland
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- Georgia Ports Authority, United States
- New Zealand Coal & Carbon
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- IHS Mccloskey Coal Group - USA
- Karbindo Abesyapradhi - Indoneisa
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- The State Trading Corporation of India Ltd
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- Trasteel International SA, Italy
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- IEA Clean Coal Centre - UK
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- GAC Shipping (India) Pvt Ltd
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- Indo Tambangraya Megah - Indonesia
- The University of Queensland
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- Singapore Mercantile Exchange
- Straits Asia Resources Limited - Singapore
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- Africa Commodities Group - South Africa
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- San Jose City I Power Corp, Philippines
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- TNB Fuel Sdn Bhd - Malaysia
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- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Minerals Council of Australia
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- Attock Cement Pakistan Limited
- Electricity Generating Authority of Thailand
- SN Aboitiz Power Inc, Philippines
- The Treasury - Australian Government
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- Australian Coal Association
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- Alfred C Toepfer International GmbH - Germany
- OPG Power Generation Pvt Ltd - India
- Planning Commission, India
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- Mercuria Energy - Indonesia
- Metalloyd Limited - United Kingdom
- Indonesian Coal Mining Association
- Edison Trading Spa - Italy
- Timah Investasi Mineral - Indoneisa
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- Simpson Spence & Young - Indonesia
- PTC India Limited - India
- Ceylon Electricity Board - Sri Lanka
- Marubeni Corporation - India
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- Savvy Resources Ltd - HongKong
- Samtan Co., Ltd - South Korea
- Gujarat Electricity Regulatory Commission - India
- CNBM International Corporation - China
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- Meralco Power Generation, Philippines
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- Economic Council, Georgia
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- GVK Power & Infra Limited - India
- MS Steel International - UAE
- Gujarat Sidhee Cement - India
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- Eastern Coal Council - USA
- Malabar Cements Ltd - India
- Chamber of Mines of South Africa
- Energy Development Corp, Philippines
- Independent Power Producers Association of India
- Global Business Power Corporation, Philippines
- London Commodity Brokers - England
- Petrochimia International Co. Ltd.- Taiwan
- Jaiprakash Power Ventures ltd
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- PetroVietnam Power Coal Import and Supply Company
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- SMG Consultants - Indonesia
- ICICI Bank Limited - India
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- Parliament of New Zealand
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- GMR Energy Limited - India
- Directorate Of Revenue Intelligence - India
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- Goldman Sachs - Singapore
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- Altura Mining Limited, Indonesia
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- Thai Mozambique Logistica
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- Standard Chartered Bank - UAE
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- Rio Tinto Coal - Australia
- Sarangani Energy Corporation, Philippines
- Kohat Cement Company Ltd. - Pakistan
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- Romanian Commodities Exchange
- Mintek Dendrill Indonesia
- Cigading International Bulk Terminal - Indonesia
- Toyota Tsusho Corporation, Japan
- Banpu Public Company Limited - Thailand
- Posco Energy - South Korea
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Anglo American - United Kingdom
- Chettinad Cement Corporation Ltd - India
- Ministry of Mines - Canada
- Antam Resourcindo - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Bukit Baiduri Energy - Indonesia
- European Bulk Services B.V. - Netherlands
- Cement Manufacturers Association - India
- Bharathi Cement Corporation - India
- Heidelberg Cement - Germany
- International Coal Ventures Pvt Ltd - India
- Barasentosa Lestari - Indonesia
- Latin American Coal - Colombia
- Indian Oil Corporation Limited
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- Kaltim Prima Coal - Indonesia
- Medco Energi Mining Internasional
- Kumho Petrochemical, South Korea
- Sinarmas Energy and Mining - Indonesia
- Bukit Makmur.PT - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Orica Australia Pty. Ltd.
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- Power Finance Corporation Ltd., India
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- Gujarat Mineral Development Corp Ltd - India
- McConnell Dowell - Australia
- Bhushan Steel Limited - India
- Siam City Cement PLC, Thailand
- Sindya Power Generating Company Private Ltd
- Petron Corporation, Philippines
- Wilmar Investment Holdings
- Port Waratah Coal Services - Australia
- Binh Thuan Hamico - Vietnam
- Offshore Bulk Terminal Pte Ltd, Singapore
- Orica Mining Services - Indonesia
- PowerSource Philippines DevCo
- Thiess Contractors Indonesia
- VISA Power Limited - India
- Sakthi Sugars Limited - India
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