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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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- Miang Besar Coal Terminal - Indonesia
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- Georgia Ports Authority, United States
- Independent Power Producers Association of India
- Parry Sugars Refinery, India
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- Interocean Group of Companies - India
- Savvy Resources Ltd - HongKong
- IEA Clean Coal Centre - UK
- Eastern Coal Council - USA
- Maharashtra Electricity Regulatory Commission - India
- Kumho Petrochemical, South Korea
- MS Steel International - UAE
- PetroVietnam Power Coal Import and Supply Company
- GAC Shipping (India) Pvt Ltd
- Tamil Nadu electricity Board
- Bahari Cakrawala Sebuku - Indonesia
- Gujarat Electricity Regulatory Commission - India
- CNBM International Corporation - China
- Vizag Seaport Private Limited - India
- Uttam Galva Steels Limited - India
- Australian Commodity Traders Exchange
- Star Paper Mills Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Indo Tambangraya Megah - Indonesia
- Global Business Power Corporation, Philippines
- Samtan Co., Ltd - South Korea
- ICICI Bank Limited - India
- Ministry of Finance - Indonesia
- Merrill Lynch Commodities Europe
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- Straits Asia Resources Limited - Singapore
- Kohat Cement Company Ltd. - Pakistan
- Leighton Contractors Pty Ltd - Australia
- Bukit Baiduri Energy - Indonesia
- Essar Steel Hazira Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Timah Investasi Mineral - Indoneisa
- Bangladesh Power Developement Board
- Meenaskhi Energy Private Limited - India
- CIMB Investment Bank - Malaysia
- Cigading International Bulk Terminal - Indonesia
- Banpu Public Company Limited - Thailand
- Sarangani Energy Corporation, Philippines
- Mercuria Energy - Indonesia
- Karbindo Abesyapradhi - Indoneisa
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- Antam Resourcindo - Indonesia
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- PTC India Limited - India
- PNOC Exploration Corporation - Philippines
- Bhatia International Limited - India
- Indonesian Coal Mining Association
- VISA Power Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
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- Mercator Lines Limited - India
- Energy Development Corp, Philippines
- Power Finance Corporation Ltd., India
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- Indian Energy Exchange, India
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- Neyveli Lignite Corporation Ltd, - India
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- White Energy Company Limited
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- Trasteel International SA, Italy
- Semirara Mining and Power Corporation, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Coastal Gujarat Power Limited - India
- GVK Power & Infra Limited - India
- SMG Consultants - Indonesia
- Deloitte Consulting - India
- Madhucon Powers Ltd - India
- International Coal Ventures Pvt Ltd - India
- Renaissance Capital - South Africa
- Heidelberg Cement - Germany
- Intertek Mineral Services - Indonesia
- IHS Mccloskey Coal Group - USA
- Carbofer General Trading SA - India
- Mintek Dendrill Indonesia
- Agrawal Coal Company - India
- Australian Coal Association
- Oldendorff Carriers - Singapore
- Binh Thuan Hamico - Vietnam
- Jindal Steel & Power Ltd - India
- Indian Oil Corporation Limited
- Ind-Barath Power Infra Limited - India
- Formosa Plastics Group - Taiwan
- Anglo American - United Kingdom
- Sinarmas Energy and Mining - Indonesia
- Medco Energi Mining Internasional
- Petron Corporation, Philippines
- Kepco SPC Power Corporation, Philippines
- SN Aboitiz Power Inc, Philippines
- Asmin Koalindo Tuhup - Indonesia
- London Commodity Brokers - England
- ASAPP Information Group - India
- Salva Resources Pvt Ltd - India
- Global Coal Blending Company Limited - Australia
- Indogreen Group - Indonesia
- Iligan Light & Power Inc, Philippines
- Kartika Selabumi Mining - Indonesia
- Central Java Power - Indonesia
- Attock Cement Pakistan Limited
- Price Waterhouse Coopers - Russia
- European Bulk Services B.V. - Netherlands
- Marubeni Corporation - India
- Jaiprakash Power Ventures ltd
- Borneo Indobara - Indonesia
- Bayan Resources Tbk. - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Therma Luzon, Inc, Philippines
- Rashtriya Ispat Nigam Limited - India
- Parliament of New Zealand
- Larsen & Toubro Limited - India
- Latin American Coal - Colombia
- Rio Tinto Coal - Australia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Energy Link Ltd, New Zealand
- PowerSource Philippines DevCo
- Coalindo Energy - Indonesia
- Sical Logistics Limited - India
- Billiton Holdings Pty Ltd - Australia
- Coal and Oil Company - UAE
- Metalloyd Limited - United Kingdom
- Malabar Cements Ltd - India
- South Luzon Thermal Energy Corporation
- Wood Mackenzie - Singapore
- Cement Manufacturers Association - India
- OPG Power Generation Pvt Ltd - India
- Simpson Spence & Young - Indonesia
- Sree Jayajothi Cements Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Barasentosa Lestari - Indonesia
- Africa Commodities Group - South Africa
- Commonwealth Bank - Australia
- TeaM Sual Corporation - Philippines
- Electricity Authority, New Zealand
- Grasim Industreis Ltd - India
- Dalmia Cement Bharat India
- GN Power Mariveles Coal Plant, Philippines
- Maheswari Brothers Coal Limited - India
- Semirara Mining Corp, Philippines
- GMR Energy Limited - India
- Romanian Commodities Exchange
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- Thai Mozambique Logistica
- Wilmar Investment Holdings
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- Electricity Generating Authority of Thailand
- New Zealand Coal & Carbon
- Kobexindo Tractors - Indoneisa
- Posco Energy - South Korea
- Siam City Cement - Thailand
- Bhoruka Overseas - Indonesia
- Sakthi Sugars Limited - India
- Directorate Of Revenue Intelligence - India
- Bukit Makmur.PT - Indonesia
- San Jose City I Power Corp, Philippines
- Xindia Steels Limited - India
- Videocon Industries ltd - India
- Holcim Trading Pte Ltd - Singapore
- LBH Netherlands Bv - Netherlands
- The State Trading Corporation of India Ltd
- Directorate General of MIneral and Coal - Indonesia
- Baramulti Group, Indonesia
- Indika Energy - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Gujarat Mineral Development Corp Ltd - India
- Jorong Barutama Greston.PT - Indonesia
- Goldman Sachs - Singapore
- The Treasury - Australian Government
- Alfred C Toepfer International GmbH - Germany
- Aboitiz Power Corporation - Philippines
- Standard Chartered Bank - UAE
- Vedanta Resources Plc - India
- The University of Queensland
- Central Electricity Authority - India
- Bhushan Steel Limited - India
- Eastern Energy - Thailand
- Pendopo Energi Batubara - Indonesia
- Manunggal Multi Energi - Indonesia
- McConnell Dowell - Australia
- Karaikal Port Pvt Ltd - India
- Orica Australia Pty. Ltd.
- Bharathi Cement Corporation - India
- India Bulls Power Limited - India
- Minerals Council of Australia
- Thiess Contractors Indonesia
- Singapore Mercantile Exchange
- Mjunction Services Limited - India
- Meralco Power Generation, Philippines
- Planning Commission, India
- Makarim & Taira - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Chamber of Mines of South Africa
- Bulk Trading Sa - Switzerland
- Kideco Jaya Agung - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Sojitz Corporation - Japan
- Siam City Cement PLC, Thailand
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Ministry of Transport, Egypt
- SMC Global Power, Philippines
- Ceylon Electricity Board - Sri Lanka
- Edison Trading Spa - Italy
- Economic Council, Georgia
- Ambuja Cements Ltd - India
- Gujarat Sidhee Cement - India
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