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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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Monday, 23 June 14
INDONESIAN COAL SWAP FOR Q3 DELIVERY LOST 8.60% Y-O-Y;4.80% M-O-M
COALspot.com: Indonesian coal swaps for average Q3’ 2014 lost on day, week and on month according to AsiaClear OTC coal swap's reports re ...
Monday, 23 June 14
COAL SWAPS DROPS FURTHER MONTH ON MONTH ON WEAK DEMAND
COALspot.com: API 8 CFR South China Coal swaps for average Q3 14 deliveries lost 6.91 percent month on month and closed at US$ 69.00 per mt a ...
Sunday, 22 June 14
THE PANAMAX COAL FREIGHT FROM INDONESIA TO INDIA SLIPPED THIS WEEK
COALspot.com: The Baltic Exchange's main sea freight index, which tracks rates for ships carrying dry bulk commodities, fell slightly on Friday ...
Friday, 20 June 14
DRY BULK MARKET LOOKING FOR UPSIDE ON ROBUST SEABORNE IRON ORE TRADE - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The dry bulk market hasn’t been able to justify the heightened expectations this year. Yesterday, the Baltic Dry Index managed to inch forwar ...
Friday, 20 June 14
US WEEKLY COAL PRODUCTION DROPS 1.8% WEEK ON WEEK
COALspot.com – United States the world's second largest coal producer, produced approximately 18.3 million short tons (mmst) of coal in a ...
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- Planning Commission, India
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- Indian Energy Exchange, India
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- Edison Trading Spa - Italy
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- Ceylon Electricity Board - Sri Lanka
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- Ministry of Finance - Indonesia
- Maharashtra Electricity Regulatory Commission - India
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- Kumho Petrochemical, South Korea
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- Parliament of New Zealand
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- Goldman Sachs - Singapore
- Antam Resourcindo - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Standard Chartered Bank - UAE
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- Central Electricity Authority - India
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- Indogreen Group - Indonesia
- Bulk Trading Sa - Switzerland
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- Oldendorff Carriers - Singapore
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- South Luzon Thermal Energy Corporation
- Globalindo Alam Lestari - Indonesia
- IEA Clean Coal Centre - UK
- IHS Mccloskey Coal Group - USA
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- Eastern Coal Council - USA
- San Jose City I Power Corp, Philippines
- Kepco SPC Power Corporation, Philippines
- Coal and Oil Company - UAE
- Australian Coal Association
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- Vedanta Resources Plc - India
- Kartika Selabumi Mining - Indonesia
- Therma Luzon, Inc, Philippines
- The Treasury - Australian Government
- Cigading International Bulk Terminal - Indonesia
- Larsen & Toubro Limited - India
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- Altura Mining Limited, Indonesia
- SMG Consultants - Indonesia
- Economic Council, Georgia
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- Kapuas Tunggal Persada - Indonesia
- Australian Commodity Traders Exchange
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- Madhucon Powers Ltd - India
- Anglo American - United Kingdom
- Bukit Makmur.PT - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Wood Mackenzie - Singapore
- Chettinad Cement Corporation Ltd - India
- Straits Asia Resources Limited - Singapore
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- Neyveli Lignite Corporation Ltd, - India
- Savvy Resources Ltd - HongKong
- Offshore Bulk Terminal Pte Ltd, Singapore
- Indo Tambangraya Megah - Indonesia
- Makarim & Taira - Indonesia
- Petron Corporation, Philippines
- Borneo Indobara - Indonesia
- ASAPP Information Group - India
- Global Coal Blending Company Limited - Australia
- Electricity Authority, New Zealand
- Merrill Lynch Commodities Europe
- Coastal Gujarat Power Limited - India
- Barasentosa Lestari - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Marubeni Corporation - India
- Orica Mining Services - Indonesia
- Iligan Light & Power Inc, Philippines
- Directorate Of Revenue Intelligence - India
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- Asia Pacific Energy Resources Ventures Inc, Philippines
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- McConnell Dowell - Australia
- Gujarat Sidhee Cement - India
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- Formosa Plastics Group - Taiwan
- Medco Energi Mining Internasional
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- Binh Thuan Hamico - Vietnam
- Heidelberg Cement - Germany
- SMC Global Power, Philippines
- Chamber of Mines of South Africa
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- Videocon Industries ltd - India
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- Bukit Asam (Persero) Tbk - Indonesia
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- Mercuria Energy - Indonesia
- Agrawal Coal Company - India
- Power Finance Corporation Ltd., India
- Singapore Mercantile Exchange
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- Metalloyd Limited - United Kingdom
- TNB Fuel Sdn Bhd - Malaysia
- Global Business Power Corporation, Philippines
- Miang Besar Coal Terminal - Indonesia
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- CIMB Investment Bank - Malaysia
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- Georgia Ports Authority, United States
- Samtan Co., Ltd - South Korea
- Xindia Steels Limited - India
- Sakthi Sugars Limited - India
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- Indika Energy - Indonesia
- SN Aboitiz Power Inc, Philippines
- Minerals Council of Australia
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- Mintek Dendrill Indonesia
- Tamil Nadu electricity Board
- Sical Logistics Limited - India
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- GVK Power & Infra Limited - India
- Siam City Cement PLC, Thailand
- Trasteel International SA, Italy
- Thai Mozambique Logistica
- Indian Oil Corporation Limited
- Renaissance Capital - South Africa
- Meralco Power Generation, Philippines
- Manunggal Multi Energi - Indonesia
- Global Green Power PLC Corporation, Philippines
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- Bayan Resources Tbk. - Indonesia
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- Bangladesh Power Developement Board
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