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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$120bn, assuming current domestic prices in Indonesia. This accounts for around three-percent of GDP and is therefore unsustainable." As a result, Wood Mackenzie expects Jokowi's government to make changes:
- The government is expected to push through further price reforms, which will impact near-term demand. However, the income-effect prevails in the medium term and will drive demand growth.
- If subsidies are sharply reduced, we could see a demand drop of around 60-70 thousand barrels per day (kb/d) in gasoline and 45-50 kb/d in diesel.
- The current market size of unsubsidised retail fuels (gasoline and diesel) is very small; however, there is a huge upside potential if the government fully deregulates the market. This would provide a good market opportunity to foreign players operating in the unsubsidised retail fuels market or new players looking to invest in refining and retail sectors in Indonesia.
Editor’s notes:
Wood Mackenzie is a global leader in commercial intelligence for the energy, metals and mining industries. We provide objective analysis and advice on assets, companies and markets, giving clients the insights they need to make better strategic decisions. For more information visit: www.woodmac.com
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Thursday, 28 August 14
PANAMAX: OWNERS CAN GET AROUND USD 16000 FOR A FRONTHAUL; PERIOD MARKET - VERY QUIET - FEARNLEYS
Handy
The activity and sentiment is improving in the Atlantic with the general TA rate is up about US$ 800 w-o-w. We see more South American carg ...
Thursday, 28 August 14
BANPU REPORTS HIGHER FIRST-HALF YEAR RESULTS FOR 2014
COALspot.com: Banpu Public Company Limited (BANPU) reports higher first half-year financial results for 2014 having its gross profit increasing 3 p ...
Wednesday, 27 August 14
FREIGHT MARKET: IS THE MARKET IN A RECOVERY MOOD? - GEORGE ILIOPOULOS
Is the market in a recovery mood?
August is typically a time when the shipping industry takes it easy… charter-ers book their requireme ...
Tuesday, 26 August 14
4TH ANNUAL ASIA NICKEL
4th Annual Asia Nickel
19-20 Nov 2014
Grand Hyatt Jakarta, Indonesia
Web Site
Asia’s Premier Nickel Conference
Regulation in ...
Tuesday, 26 August 14
DESPITE LOW DRY BULK RATES, BULKER PRICES ARE STILL HIGH - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
Traditionally, August tends to be a month of slow activity in the sale and purchasing market and this year has been no exception. However, as shipb ...
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- Carbofer General Trading SA - India
- Indogreen Group - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Ministry of Transport, Egypt
- Planning Commission, India
- Toyota Tsusho Corporation, Japan
- Bhoruka Overseas - Indonesia
- Antam Resourcindo - Indonesia
- Minerals Council of Australia
- Mercator Lines Limited - India
- Malabar Cements Ltd - India
- Timah Investasi Mineral - Indoneisa
- TeaM Sual Corporation - Philippines
- Port Waratah Coal Services - Australia
- Indo Tambangraya Megah - Indonesia
- Therma Luzon, Inc, Philippines
- Siam City Cement - Thailand
- Australian Commodity Traders Exchange
- Sarangani Energy Corporation, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Meenaskhi Energy Private Limited - India
- Kideco Jaya Agung - Indonesia
- Salva Resources Pvt Ltd - India
- Riau Bara Harum - Indonesia
- MS Steel International - UAE
- Bank of Tokyo Mitsubishi UFJ Ltd
- Kepco SPC Power Corporation, Philippines
- Alfred C Toepfer International GmbH - Germany
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Metalloyd Limited - United Kingdom
- Bhatia International Limited - India
- Central Java Power - Indonesia
- Sindya Power Generating Company Private Ltd
- Sinarmas Energy and Mining - Indonesia
- Commonwealth Bank - Australia
- Romanian Commodities Exchange
- Star Paper Mills Limited - India
- Energy Development Corp, Philippines
- Altura Mining Limited, Indonesia
- Trasteel International SA, Italy
- Kaltim Prima Coal - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Kumho Petrochemical, South Korea
- Karaikal Port Pvt Ltd - India
- Binh Thuan Hamico - Vietnam
- Kohat Cement Company Ltd. - Pakistan
- Directorate General of MIneral and Coal - Indonesia
- ICICI Bank Limited - India
- Sojitz Corporation - Japan
- Wood Mackenzie - Singapore
- Barasentosa Lestari - Indonesia
- Indonesian Coal Mining Association
- Parry Sugars Refinery, India
- SMG Consultants - Indonesia
- Marubeni Corporation - India
- Anglo American - United Kingdom
- Aboitiz Power Corporation - Philippines
- Deloitte Consulting - India
- Global Coal Blending Company Limited - Australia
- Independent Power Producers Association of India
- Petron Corporation, Philippines
- Miang Besar Coal Terminal - Indonesia
- Orica Australia Pty. Ltd.
- GN Power Mariveles Coal Plant, Philippines
- Indian Energy Exchange, India
- Xindia Steels Limited - India
- Thiess Contractors Indonesia
- IEA Clean Coal Centre - UK
- Mercuria Energy - Indonesia
- Kartika Selabumi Mining - Indonesia
- The University of Queensland
- PetroVietnam Power Coal Import and Supply Company
- Bukit Asam (Persero) Tbk - Indonesia
- Georgia Ports Authority, United States
- TNB Fuel Sdn Bhd - Malaysia
- Heidelberg Cement - Germany
- Simpson Spence & Young - Indonesia
- Standard Chartered Bank - UAE
- Maheswari Brothers Coal Limited - India
- Attock Cement Pakistan Limited
- Posco Energy - South Korea
- Karbindo Abesyapradhi - Indoneisa
- Sree Jayajothi Cements Limited - India
- LBH Netherlands Bv - Netherlands
- ASAPP Information Group - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- White Energy Company Limited
- CNBM International Corporation - China
- Billiton Holdings Pty Ltd - Australia
- Kobexindo Tractors - Indoneisa
- European Bulk Services B.V. - Netherlands
- Makarim & Taira - Indonesia
- Vizag Seaport Private Limited - India
- Gujarat Sidhee Cement - India
- CIMB Investment Bank - Malaysia
- PTC India Limited - India
- Eastern Energy - Thailand
- Latin American Coal - Colombia
- Merrill Lynch Commodities Europe
- Global Green Power PLC Corporation, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Savvy Resources Ltd - HongKong
- South Luzon Thermal Energy Corporation
- Larsen & Toubro Limited - India
- The State Trading Corporation of India Ltd
- Sical Logistics Limited - India
- Coalindo Energy - Indonesia
- Oldendorff Carriers - Singapore
- Manunggal Multi Energi - Indonesia
- PNOC Exploration Corporation - Philippines
- GAC Shipping (India) Pvt Ltd
- The Treasury - Australian Government
- Bharathi Cement Corporation - India
- Kapuas Tunggal Persada - Indonesia
- SN Aboitiz Power Inc, Philippines
- International Coal Ventures Pvt Ltd - India
- Power Finance Corporation Ltd., India
- Global Business Power Corporation, Philippines
- GVK Power & Infra Limited - India
- Essar Steel Hazira Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Siam City Cement PLC, Thailand
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Indika Energy - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- New Zealand Coal & Carbon
- Goldman Sachs - Singapore
- Leighton Contractors Pty Ltd - Australia
- Electricity Authority, New Zealand
- Electricity Generating Authority of Thailand
- Tamil Nadu electricity Board
- Asmin Koalindo Tuhup - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Bulk Trading Sa - Switzerland
- SMC Global Power, Philippines
- Medco Energi Mining Internasional
- Petrochimia International Co. Ltd.- Taiwan
- Indian Oil Corporation Limited
- McConnell Dowell - Australia
- Directorate Of Revenue Intelligence - India
- Wilmar Investment Holdings
- Chettinad Cement Corporation Ltd - India
- Uttam Galva Steels Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- IHS Mccloskey Coal Group - USA
- Coal and Oil Company - UAE
- Lanco Infratech Ltd - India
- Cigading International Bulk Terminal - Indonesia
- Cement Manufacturers Association - India
- Central Electricity Authority - India
- Tata Chemicals Ltd - India
- Jindal Steel & Power Ltd - India
- Globalindo Alam Lestari - Indonesia
- Price Waterhouse Coopers - Russia
- Krishnapatnam Port Company Ltd. - India
- Bukit Baiduri Energy - Indonesia
- Straits Asia Resources Limited - Singapore
- India Bulls Power Limited - India
- Ceylon Electricity Board - Sri Lanka
- Ind-Barath Power Infra Limited - India
- Ministry of Mines - Canada
- Eastern Coal Council - USA
- Borneo Indobara - Indonesia
- Videocon Industries ltd - India
- Banpu Public Company Limited - Thailand
- Bangladesh Power Developement Board
- San Jose City I Power Corp, Philippines
- Coastal Gujarat Power Limited - India
- Singapore Mercantile Exchange
- Economic Council, Georgia
- Bhushan Steel Limited - India
- Madhucon Powers Ltd - India
- PowerSource Philippines DevCo
- Bukit Makmur.PT - Indonesia
- London Commodity Brokers - England
- Ministry of Finance - Indonesia
- Sakthi Sugars Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Formosa Plastics Group - Taiwan
- Semirara Mining Corp, Philippines
- Dalmia Cement Bharat India
- GMR Energy Limited - India
- Pendopo Energi Batubara - Indonesia
- Renaissance Capital - South Africa
- Jorong Barutama Greston.PT - Indonesia
- Interocean Group of Companies - India
- Baramulti Group, Indonesia
- Australian Coal Association
- Rashtriya Ispat Nigam Limited - India
- Parliament of New Zealand
- Mintek Dendrill Indonesia
- Aditya Birla Group - India
- Samtan Co., Ltd - South Korea
- Thai Mozambique Logistica
- Maharashtra Electricity Regulatory Commission - India
- Bayan Resources Tbk. - Indonesia
- Africa Commodities Group - South Africa
- Meralco Power Generation, Philippines
- Iligan Light & Power Inc, Philippines
- Ambuja Cements Ltd - India
- Agrawal Coal Company - India
- Orica Mining Services - Indonesia
- Jaiprakash Power Ventures ltd
- VISA Power Limited - India
- Chamber of Mines of South Africa
- Energy Link Ltd, New Zealand
- Vedanta Resources Plc - India
- Neyveli Lignite Corporation Ltd, - India
- Rio Tinto Coal - Australia
- Edison Trading Spa - Italy
- AsiaOL BioFuels Corp., Philippines
- OPG Power Generation Pvt Ltd - India
- Mjunction Services Limited - India
- Grasim Industreis Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Holcim Trading Pte Ltd - Singapore
- Intertek Mineral Services - Indonesia
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