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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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Tuesday, 27 October 20
PLN STILL REFUSING TO ADAPT, A MOVE WHICH WILL HURT INVESTORS, CONSUMERS, AND THE GOVERNMENT PURSE - IEEFA
Utility’s latest planning report locks PLN into the past
PLN would be better served restructuring its business to address the current en ...
Monday, 26 October 20
'LONG ASCENT' TO RECOVERY OF GLOBAL GROWTH - BALTIC EXCHANGE
The global economy has so far avoided a “financial catastrophe” but growth projections from the International Monetary Fund’s lat ...
Friday, 23 October 20
SHIPPING LOANS AND COLLATERAL DAMAGE - VICTOR ONYEGBADO, AKABOGU & ASSOCIATES
KNOWLEDGE TO ELEVATE
Shipping finance transactions are characterised by peculiar risk factors principally on account of the shipping asset&rsq ...
Friday, 23 October 20
WHAT WILL THE 2020 ELECTIONS MEAN FOR US ENERGY? - WOOD MACKENZIE
The 2020 elections present American voters with a choice between two radically different visions for the future of energy. President Donald Trump r ...
Wednesday, 21 October 20
BRAZIL EXPORTED 238.7 MLN TONNES OF IRON ORE IN THE FIRST 9 MONTHS OF 2020 - BANCHERO COSTA
Brazil’s iron ore exports have been gradually but steadily recovering following a disastrous winter period of 2019/2020. In the first 9 month ...
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- Neyveli Lignite Corporation Ltd, - India
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- Dong Bac Coal Mineral Investment Coporation - Vietnam
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- AsiaOL BioFuels Corp., Philippines
- Ambuja Cements Ltd - India
- PowerSource Philippines DevCo
- Electricity Generating Authority of Thailand
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Orica Australia Pty. Ltd.
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- Interocean Group of Companies - India
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- Goldman Sachs - Singapore
- Binh Thuan Hamico - Vietnam
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- Indian Oil Corporation Limited
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- Singapore Mercantile Exchange
- Ministry of Finance - Indonesia
- Eastern Energy - Thailand
- VISA Power Limited - India
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- Siam City Cement PLC, Thailand
- Indonesian Coal Mining Association
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- PetroVietnam Power Coal Import and Supply Company
- Larsen & Toubro Limited - India
- White Energy Company Limited
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- Electricity Authority, New Zealand
- Medco Energi Mining Internasional
- Directorate General of MIneral and Coal - Indonesia
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- The University of Queensland
- European Bulk Services B.V. - Netherlands
- Mintek Dendrill Indonesia
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- Kumho Petrochemical, South Korea
- Parry Sugars Refinery, India
- Indian Energy Exchange, India
- Pipit Mutiara Jaya. PT, Indonesia
- SN Aboitiz Power Inc, Philippines
- Gujarat Electricity Regulatory Commission - India
- GMR Energy Limited - India
- Bhoruka Overseas - Indonesia
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- Standard Chartered Bank - UAE
- Coastal Gujarat Power Limited - India
- Miang Besar Coal Terminal - Indonesia
- OPG Power Generation Pvt Ltd - India
- Africa Commodities Group - South Africa
- Chamber of Mines of South Africa
- London Commodity Brokers - England
- San Jose City I Power Corp, Philippines
- Heidelberg Cement - Germany
- New Zealand Coal & Carbon
- SMC Global Power, Philippines
- Sinarmas Energy and Mining - Indonesia
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- Ceylon Electricity Board - Sri Lanka
- Semirara Mining and Power Corporation, Philippines
- Madhucon Powers Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Manunggal Multi Energi - Indonesia
- Dalmia Cement Bharat India
- Chettinad Cement Corporation Ltd - India
- Petron Corporation, Philippines
- IHS Mccloskey Coal Group - USA
- Rashtriya Ispat Nigam Limited - India
- Mercuria Energy - Indonesia
- Romanian Commodities Exchange
- Xindia Steels Limited - India
- Kaltim Prima Coal - Indonesia
- Latin American Coal - Colombia
- Parliament of New Zealand
- TNB Fuel Sdn Bhd - Malaysia
- Malabar Cements Ltd - India
- LBH Netherlands Bv - Netherlands
- Economic Council, Georgia
- International Coal Ventures Pvt Ltd - India
- Merrill Lynch Commodities Europe
- Central Electricity Authority - India
- Krishnapatnam Port Company Ltd. - India
- Anglo American - United Kingdom
- Bank of Tokyo Mitsubishi UFJ Ltd
- Posco Energy - South Korea
- The State Trading Corporation of India Ltd
- Maharashtra Electricity Regulatory Commission - India
- Coal and Oil Company - UAE
- Independent Power Producers Association of India
- Borneo Indobara - Indonesia
- Indika Energy - Indonesia
- MS Steel International - UAE
- Essar Steel Hazira Ltd - India
- Bhatia International Limited - India
- Sojitz Corporation - Japan
- Samtan Co., Ltd - South Korea
- Metalloyd Limited - United Kingdom
- Australian Coal Association
- Jorong Barutama Greston.PT - Indonesia
- Banpu Public Company Limited - Thailand
- Mercator Lines Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Wood Mackenzie - Singapore
- Minerals Council of Australia
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- Bangladesh Power Developement Board
- Thai Mozambique Logistica
- Savvy Resources Ltd - HongKong
- Deloitte Consulting - India
- Energy Link Ltd, New Zealand
- Baramulti Group, Indonesia
- Billiton Holdings Pty Ltd - Australia
- Videocon Industries ltd - India
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- Bulk Trading Sa - Switzerland
- Thiess Contractors Indonesia
- ICICI Bank Limited - India
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- South Luzon Thermal Energy Corporation
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- Port Waratah Coal Services - Australia
- Sical Logistics Limited - India
- Commonwealth Bank - Australia
- Holcim Trading Pte Ltd - Singapore
- Trasteel International SA, Italy
- Bukit Makmur.PT - Indonesia
- Antam Resourcindo - Indonesia
- Therma Luzon, Inc, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Jindal Steel & Power Ltd - India
- Cement Manufacturers Association - India
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- Power Finance Corporation Ltd., India
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