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Tuesday, 22 July 14
INDONESIAN ELECTION RESULT ENCOURAGING FOR FOREIGN INVESTMENT IN ENERGY AND MINING SECTORS - WOOD MACKENZIE
 Joko Widodo-Jusuf Kalla has been announced as the official winner of Indonesia's presidential election. Joko Widodo, or Jokowi, is viewed as a more progressive and pragmatic choice for President than his opponent, Prawbowo Subianto.
Wood Mackenzie says that Jokowi's victory will generate short-term positivity for foreign companies looking to invest in Indonesia's energy and mining sectors. However, the new government's ability to implement reforms remains uncertain. A lack of a majority in the senate will weaken the government's ability to push through all reforms required to reinvigorate the investment environment and contribute to a revived Indonesian economy. The significance of this political development for the mining, upstream oil and gas, and fuel sectors are noted below.
Mining
Jokowi could shift the regulatory environment towards being more accommodating of foreign investment and mining in general. Wood Mackenzie's Senior Coal Analyst Rory Simington explains, "Mining-friendly regulatory change is possible, however it is likely to be incremental rather than exponential." Implications for the mining sector are:
- Current official policies are unlikely to be reversed. These include the ban on mineral exports, requirements for divesture of foreign ownership, and Coal Contracts of Work renegotiation.
- The previous DPI-P led government of Megawati Sukarnoputri from 2001 to 2004 showed a willingness to appoint people from industry instead of politicians to prominent positions in key ministries. If the Widodo led DPI-P coalition government appoints a competent administrator with industry experience to head the Department of Energy and Mineral Resources, this could result in mining friendly changes to the regulatory environment.
- Based on discussions with industry contacts in Indonesia, we believe that changes could include easing of foreign investment divesture requirements, and reducing minimum levels of purity that must be achieved for metals refining before export is allowed. Any changes are likely to be incremental rather than exponential.
Upstream oil and gas
Wood Mackenzie believes the wider implications of the election result will be felt more in the oil and gas sector. Wood Mackenzie's Senior Upstream Analyst, Andrew Harwood says, "At a time of growing domestic energy demand, declining indigenous production, and after several years of regulatory instability, the government's ability to implement Jokowi's proposed reforms will be key." Implications for the upstream sector are:
- Indonesia's crude output has fallen from over 1 million barrels per day in 2005 to currently just over 800,000. The domestic fuel subsidy bill is approaching US$21 billion (bn) in 2014, and regulatory uncertainty has stalled several major investment projects, such as Chevron's Indonesia Deepwater development, Inpex's Abadi FLNG and BP's Tangguh expansion.
- Jokowi has outlined plans to reduce Indonesia's reliance on oil imports by developing new gas infrastructure and accelerating the switch to gas. He aims to boost oil and gas output by providing enhanced fiscal terms for mature fields and exploration, and removing red-tape, which would also apply to the mining sector.
- A revision of the 2001 Oil and Gas Law and formalisation of the upstream regulator's role is a longer term objective that would enhance the investment environment by removing regulatory uncertainty. The sanction of Chevron's Indonesia Deepwater development, Inpex's Abadi FLNG and BP's Tangguh expansion could generate over US$30bn of new investment in Indonesia's oil and gas sector.
- While we would expect PERTAMINA to play a greater role in Indonesia's upstream sector under Jokowi, the new president also recognises the benefits of working with international investors to secure technological know-how as well as investment.
- Overall, Jokowi's victory will generate short-term positivity in the energy sector. However, the new government's ability to implement the proposed reforms remains uncertain.
Fuels market
Sushant Gupta, Head of Asia Pacific Downstream Research, says, "Subsidies are a huge burden to the government because around 60% of the total oil demand is subsidised. During the period of 2014-2020, we estimate the total fuel subsidy bill to be around US$120bn, assuming current domestic prices in Indonesia. This accounts for around three-percent of GDP and is therefore unsustainable." As a result, Wood Mackenzie expects Jokowi's government to make changes:
- The government is expected to push through further price reforms, which will impact near-term demand. However, the income-effect prevails in the medium term and will drive demand growth.
- If subsidies are sharply reduced, we could see a demand drop of around 60-70 thousand barrels per day (kb/d) in gasoline and 45-50 kb/d in diesel.
- The current market size of unsubsidised retail fuels (gasoline and diesel) is very small; however, there is a huge upside potential if the government fully deregulates the market. This would provide a good market opportunity to foreign players operating in the unsubsidised retail fuels market or new players looking to invest in refining and retail sectors in Indonesia.
Editor’s notes:
Wood Mackenzie is a global leader in commercial intelligence for the energy, metals and mining industries. We provide objective analysis and advice on assets, companies and markets, giving clients the insights they need to make better strategic decisions. For more information visit: www.woodmac.com
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Saturday, 30 August 14
INDIAN GOVERNMENT SHOULD TAKE NOTICE: THERMAL COAL IMPORT PRICES EXTREMELY LOW - COMMODORE RESEARCH
COALspot.com: Both Indonesian and Australian thermal coal prices are at the lowest levels seen this decade, with Indonesia's monthly benchmark ...
Saturday, 30 August 14
RECOVERY IN SIGHT FOR THE DRY BULK SHIPPING MARKET - DREWRY SHIPPING CONSULTANTS
Despite weak freight rates so far this year, Dry Bulk shipping earnings are forecast to recover as demand for both major and minor bulk commodities ...
Friday, 29 August 14
U.S. WEEKLY COAL PRODUCTION DROPS 1.3 PERCENT, EIA SAYS
COALspot.com – United States the world's second largest coal producer, produced approximately 19.40 million short tons (mmst) of coal in ...
Friday, 29 August 14
ADARO'S PROFITS SINK FURTHER AMID FALL IN COAL PRICES - JP
Adaro Energy, one of the country’s largest coal miners, has reported a 31 percent drop in net profit in the first half of this year as global ...
Friday, 29 August 14
CHINESE LIGNITE IMPORTS: QUANTITY OVER QUALITY? - CLARKSONS
In the first half of 2014, Chinese seaborne coal imports declined 0.4% y-o-y to 148mt, largely reflecting a 3.3% fall in imports of steam coal. Mea ...
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- Carbofer General Trading SA - India
- Medco Energi Mining Internasional
- Kideco Jaya Agung - Indonesia
- GAC Shipping (India) Pvt Ltd
- Independent Power Producers Association of India
- Intertek Mineral Services - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Bhoruka Overseas - Indonesia
- PTC India Limited - India
- Banpu Public Company Limited - Thailand
- Videocon Industries ltd - India
- Port Waratah Coal Services - Australia
- Energy Development Corp, Philippines
- Semirara Mining Corp, Philippines
- Toyota Tsusho Corporation, Japan
- LBH Netherlands Bv - Netherlands
- Electricity Authority, New Zealand
- Altura Mining Limited, Indonesia
- Ministry of Finance - Indonesia
- SMC Global Power, Philippines
- Kobexindo Tractors - Indoneisa
- Eastern Coal Council - USA
- Alfred C Toepfer International GmbH - Germany
- Kepco SPC Power Corporation, Philippines
- Marubeni Corporation - India
- Mercator Lines Limited - India
- GVK Power & Infra Limited - India
- AsiaOL BioFuels Corp., Philippines
- Indo Tambangraya Megah - Indonesia
- Oldendorff Carriers - Singapore
- Neyveli Lignite Corporation Ltd, - India
- Africa Commodities Group - South Africa
- PowerSource Philippines DevCo
- Power Finance Corporation Ltd., India
- Australian Commodity Traders Exchange
- Binh Thuan Hamico - Vietnam
- Standard Chartered Bank - UAE
- OPG Power Generation Pvt Ltd - India
- Bhatia International Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Petron Corporation, Philippines
- Posco Energy - South Korea
- Madhucon Powers Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Economic Council, Georgia
- Therma Luzon, Inc, Philippines
- Central Electricity Authority - India
- TNB Fuel Sdn Bhd - Malaysia
- Pendopo Energi Batubara - Indonesia
- Leighton Contractors Pty Ltd - Australia
- White Energy Company Limited
- Romanian Commodities Exchange
- Savvy Resources Ltd - HongKong
- Indian Energy Exchange, India
- Central Java Power - Indonesia
- Uttam Galva Steels Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Kapuas Tunggal Persada - Indonesia
- Dalmia Cement Bharat India
- Xindia Steels Limited - India
- Lanco Infratech Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bharathi Cement Corporation - India
- Cement Manufacturers Association - India
- Indika Energy - Indonesia
- Karaikal Port Pvt Ltd - India
- Global Green Power PLC Corporation, Philippines
- Ambuja Cements Ltd - India
- Straits Asia Resources Limited - Singapore
- Krishnapatnam Port Company Ltd. - India
- Vizag Seaport Private Limited - India
- Energy Link Ltd, New Zealand
- Gujarat Mineral Development Corp Ltd - India
- Coal and Oil Company - UAE
- Kalimantan Lumbung Energi - Indonesia
- Trasteel International SA, Italy
- Directorate General of MIneral and Coal - Indonesia
- Renaissance Capital - South Africa
- Sojitz Corporation - Japan
- Indogreen Group - Indonesia
- Wood Mackenzie - Singapore
- Orica Australia Pty. Ltd.
- Maheswari Brothers Coal Limited - India
- Sarangani Energy Corporation, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Anglo American - United Kingdom
- Directorate Of Revenue Intelligence - India
- Sical Logistics Limited - India
- Siam City Cement - Thailand
- Global Coal Blending Company Limited - Australia
- Kumho Petrochemical, South Korea
- MS Steel International - UAE
- Ind-Barath Power Infra Limited - India
- TeaM Sual Corporation - Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Manunggal Multi Energi - Indonesia
- Electricity Generating Authority of Thailand
- Cigading International Bulk Terminal - Indonesia
- Antam Resourcindo - Indonesia
- Chettinad Cement Corporation Ltd - India
- Orica Mining Services - Indonesia
- Bukit Baiduri Energy - Indonesia
- Global Business Power Corporation, Philippines
- Merrill Lynch Commodities Europe
- SMG Consultants - Indonesia
- The University of Queensland
- GMR Energy Limited - India
- Mjunction Services Limited - India
- Asmin Koalindo Tuhup - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Indian Oil Corporation Limited
- Goldman Sachs - Singapore
- Edison Trading Spa - Italy
- Formosa Plastics Group - Taiwan
- McConnell Dowell - Australia
- Georgia Ports Authority, United States
- Karbindo Abesyapradhi - Indoneisa
- Vijayanagar Sugar Pvt Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- New Zealand Coal & Carbon
- Vedanta Resources Plc - India
- SN Aboitiz Power Inc, Philippines
- Borneo Indobara - Indonesia
- International Coal Ventures Pvt Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- Wilmar Investment Holdings
- Riau Bara Harum - Indonesia
- Planning Commission, India
- Eastern Energy - Thailand
- Gujarat Sidhee Cement - India
- Mercuria Energy - Indonesia
- San Jose City I Power Corp, Philippines
- Baramulti Group, Indonesia
- Gujarat Electricity Regulatory Commission - India
- Barasentosa Lestari - Indonesia
- Chamber of Mines of South Africa
- Ceylon Electricity Board - Sri Lanka
- ASAPP Information Group - India
- Tata Chemicals Ltd - India
- Metalloyd Limited - United Kingdom
- Billiton Holdings Pty Ltd - Australia
- Kaltim Prima Coal - Indonesia
- Bangladesh Power Developement Board
- Interocean Group of Companies - India
- London Commodity Brokers - England
- Sinarmas Energy and Mining - Indonesia
- Aditya Birla Group - India
- India Bulls Power Limited - India
- Ministry of Mines - Canada
- Rashtriya Ispat Nigam Limited - India
- Iligan Light & Power Inc, Philippines
- Jaiprakash Power Ventures ltd
- Parry Sugars Refinery, India
- Bulk Trading Sa - Switzerland
- Bukit Makmur.PT - Indonesia
- VISA Power Limited - India
- Sakthi Sugars Limited - India
- Parliament of New Zealand
- Commonwealth Bank - Australia
- Holcim Trading Pte Ltd - Singapore
- Kohat Cement Company Ltd. - Pakistan
- Heidelberg Cement - Germany
- Simpson Spence & Young - Indonesia
- Agrawal Coal Company - India
- Miang Besar Coal Terminal - Indonesia
- Star Paper Mills Limited - India
- Larsen & Toubro Limited - India
- European Bulk Services B.V. - Netherlands
- CNBM International Corporation - China
- Siam City Cement PLC, Thailand
- Globalindo Alam Lestari - Indonesia
- Bhushan Steel Limited - India
- Sindya Power Generating Company Private Ltd
- Mintek Dendrill Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Makarim & Taira - Indonesia
- Meenaskhi Energy Private Limited - India
- IHS Mccloskey Coal Group - USA
- Indonesian Coal Mining Association
- Bayan Resources Tbk. - Indonesia
- PNOC Exploration Corporation - Philippines
- Rio Tinto Coal - Australia
- The State Trading Corporation of India Ltd
- CIMB Investment Bank - Malaysia
- Price Waterhouse Coopers - Russia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Aboitiz Power Corporation - Philippines
- ICICI Bank Limited - India
- Essar Steel Hazira Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Thiess Contractors Indonesia
- Semirara Mining and Power Corporation, Philippines
- Sree Jayajothi Cements Limited - India
- Minerals Council of Australia
- IEA Clean Coal Centre - UK
- Coastal Gujarat Power Limited - India
- Australian Coal Association
- Attock Cement Pakistan Limited
- Singapore Mercantile Exchange
- Ministry of Transport, Egypt
- Kartika Selabumi Mining - Indonesia
- Samtan Co., Ltd - South Korea
- South Luzon Thermal Energy Corporation
- Meralco Power Generation, Philippines
- The Treasury - Australian Government
- Deloitte Consulting - India
- Latin American Coal - Colombia
- Salva Resources Pvt Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Grasim Industreis Ltd - India
- Thai Mozambique Logistica
- Timah Investasi Mineral - Indoneisa
- Jindal Steel & Power Ltd - India
- Coalindo Energy - Indonesia
- Malabar Cements Ltd - India
- Tamil Nadu electricity Board
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