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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$120bn, assuming current domestic prices in Indonesia. This accounts for around three-percent of GDP and is therefore unsustainable." As a result, Wood Mackenzie expects Jokowi's government to make changes:
- The government is expected to push through further price reforms, which will impact near-term demand. However, the income-effect prevails in the medium term and will drive demand growth.
- If subsidies are sharply reduced, we could see a demand drop of around 60-70 thousand barrels per day (kb/d) in gasoline and 45-50 kb/d in diesel.
- The current market size of unsubsidised retail fuels (gasoline and diesel) is very small; however, there is a huge upside potential if the government fully deregulates the market. This would provide a good market opportunity to foreign players operating in the unsubsidised retail fuels market or new players looking to invest in refining and retail sectors in Indonesia.
Editor’s notes:
Wood Mackenzie is a global leader in commercial intelligence for the energy, metals and mining industries. We provide objective analysis and advice on assets, companies and markets, giving clients the insights they need to make better strategic decisions. For more information visit: www.woodmac.com
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Monday, 25 August 14
API 8 CFR SOUTH CHINA COAL SWAP GAINED DAY OVER DAY AND MONTH OVER MONTH
COALspot.com: API 8 CFR South China Coal swap for delivery in September 2014 increased US$ 0.30 (+0.44%) day on day and decreased US$ 0.20 (- ...
Sunday, 24 August 14
SEA FREIGHT MARKETS STARTING TO LOOK POSITIVE; CAPES DRIVE FREIGHTS HIGHER
COALspot.com: The freight market has strengthen further this week with BDI up 7.19 pct week on week. The BDI was closed at 1,088 points while the B ...
Friday, 22 August 14
INDIAN IRON ORE ROYALTY RISE NOT LIKELY TO HURT STEELMAKERS' MARGINS - FITCH
Fitch Ratings does not expect an increase in India's iron ore royalty rates to have a major impact on the profitability of steel producers in t ...
Friday, 22 August 14
ARBITRATION CLAUSE IN LOU HELD TO REPLACE CHARTERPARTY ARBITRATION CLAUSE
KNOWLEDGE TO ELEVATE
The Claimants had claims for cargo damage against the vessel Owners arising under four bills of lading. The vessel was th ...
Friday, 22 August 14
ICAP ENERGY LAUNCHES GLOBAL COKING COAL DERIVATIVES TRADING
First contract completed and cleared on CME
COALspot.com: ICAP Energy, the energy business of ICAP plc, announces today that it has successful ...
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- Energy Link Ltd, New Zealand
- Ceylon Electricity Board - Sri Lanka
- Global Green Power PLC Corporation, Philippines
- India Bulls Power Limited - India
- Kumho Petrochemical, South Korea
- Medco Energi Mining Internasional
- Sical Logistics Limited - India
- Chettinad Cement Corporation Ltd - India
- Edison Trading Spa - Italy
- Bharathi Cement Corporation - India
- Agrawal Coal Company - India
- Independent Power Producers Association of India
- Romanian Commodities Exchange
- McConnell Dowell - Australia
- IEA Clean Coal Centre - UK
- Orica Mining Services - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Simpson Spence & Young - Indonesia
- GAC Shipping (India) Pvt Ltd
- Jorong Barutama Greston.PT - Indonesia
- Coal and Oil Company - UAE
- Cigading International Bulk Terminal - Indonesia
- Savvy Resources Ltd - HongKong
- PowerSource Philippines DevCo
- Petron Corporation, Philippines
- Thai Mozambique Logistica
- Bank of Tokyo Mitsubishi UFJ Ltd
- Standard Chartered Bank - UAE
- Kideco Jaya Agung - Indonesia
- Jindal Steel & Power Ltd - India
- The State Trading Corporation of India Ltd
- Bahari Cakrawala Sebuku - Indonesia
- Borneo Indobara - Indonesia
- The Treasury - Australian Government
- Kaltim Prima Coal - Indonesia
- Parliament of New Zealand
- Cement Manufacturers Association - India
- Baramulti Group, Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Globalindo Alam Lestari - Indonesia
- Bhoruka Overseas - Indonesia
- Oldendorff Carriers - Singapore
- ASAPP Information Group - India
- Planning Commission, India
- Ministry of Transport, Egypt
- Tamil Nadu electricity Board
- Banpu Public Company Limited - Thailand
- Bukit Makmur.PT - Indonesia
- PNOC Exploration Corporation - Philippines
- Siam City Cement PLC, Thailand
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- SN Aboitiz Power Inc, Philippines
- Kartika Selabumi Mining - Indonesia
- Manunggal Multi Energi - Indonesia
- Sinarmas Energy and Mining - Indonesia
- TeaM Sual Corporation - Philippines
- Rio Tinto Coal - Australia
- Metalloyd Limited - United Kingdom
- Wilmar Investment Holdings
- Pipit Mutiara Jaya. PT, Indonesia
- Anglo American - United Kingdom
- Siam City Cement - Thailand
- Eastern Energy - Thailand
- Riau Bara Harum - Indonesia
- Posco Energy - South Korea
- Economic Council, Georgia
- Interocean Group of Companies - India
- Heidelberg Cement - Germany
- Offshore Bulk Terminal Pte Ltd, Singapore
- Indonesian Coal Mining Association
- Sree Jayajothi Cements Limited - India
- Tata Chemicals Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Deloitte Consulting - India
- Gujarat Electricity Regulatory Commission - India
- Electricity Authority, New Zealand
- Maheswari Brothers Coal Limited - India
- Antam Resourcindo - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Binh Thuan Hamico - Vietnam
- Ambuja Cements Ltd - India
- Larsen & Toubro Limited - India
- Mercuria Energy - Indonesia
- Price Waterhouse Coopers - Russia
- Trasteel International SA, Italy
- Merrill Lynch Commodities Europe
- Marubeni Corporation - India
- The University of Queensland
- SMG Consultants - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Renaissance Capital - South Africa
- European Bulk Services B.V. - Netherlands
- London Commodity Brokers - England
- Samtan Co., Ltd - South Korea
- Iligan Light & Power Inc, Philippines
- Indogreen Group - Indonesia
- Chamber of Mines of South Africa
- Malabar Cements Ltd - India
- Bhatia International Limited - India
- Indika Energy - Indonesia
- Salva Resources Pvt Ltd - India
- South Luzon Thermal Energy Corporation
- Sarangani Energy Corporation, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Sindya Power Generating Company Private Ltd
- Meenaskhi Energy Private Limited - India
- Energy Development Corp, Philippines
- Semirara Mining Corp, Philippines
- Grasim Industreis Ltd - India
- Parry Sugars Refinery, India
- Wood Mackenzie - Singapore
- Ministry of Finance - Indonesia
- Indo Tambangraya Megah - Indonesia
- Kobexindo Tractors - Indoneisa
- Electricity Generating Authority of Thailand
- Australian Commodity Traders Exchange
- Videocon Industries ltd - India
- CIMB Investment Bank - Malaysia
- Mjunction Services Limited - India
- Aboitiz Power Corporation - Philippines
- Central Java Power - Indonesia
- Central Electricity Authority - India
- White Energy Company Limited
- Bukit Baiduri Energy - Indonesia
- Bangladesh Power Developement Board
- Xindia Steels Limited - India
- Coalindo Energy - Indonesia
- Straits Asia Resources Limited - Singapore
- Uttam Galva Steels Limited - India
- Sakthi Sugars Limited - India
- LBH Netherlands Bv - Netherlands
- PTC India Limited - India
- Therma Luzon, Inc, Philippines
- Power Finance Corporation Ltd., India
- Bhushan Steel Limited - India
- Global Business Power Corporation, Philippines
- New Zealand Coal & Carbon
- Karbindo Abesyapradhi - Indoneisa
- Africa Commodities Group - South Africa
- Leighton Contractors Pty Ltd - Australia
- MS Steel International - UAE
- VISA Power Limited - India
- Vedanta Resources Plc - India
- Neyveli Lignite Corporation Ltd, - India
- Semirara Mining and Power Corporation, Philippines
- Toyota Tsusho Corporation, Japan
- Vizag Seaport Private Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Bulk Trading Sa - Switzerland
- International Coal Ventures Pvt Ltd - India
- Aditya Birla Group - India
- Kapuas Tunggal Persada - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Georgia Ports Authority, United States
- Mintek Dendrill Indonesia
- Dalmia Cement Bharat India
- Ind-Barath Power Infra Limited - India
- Pendopo Energi Batubara - Indonesia
- Global Coal Blending Company Limited - Australia
- Jaiprakash Power Ventures ltd
- Australian Coal Association
- OPG Power Generation Pvt Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Indian Energy Exchange, India
- Barasentosa Lestari - Indonesia
- Carbofer General Trading SA - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Kohat Cement Company Ltd. - Pakistan
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Directorate General of MIneral and Coal - Indonesia
- San Jose City I Power Corp, Philippines
- Directorate Of Revenue Intelligence - India
- Minerals Council of Australia
- Maharashtra Electricity Regulatory Commission - India
- Commonwealth Bank - Australia
- ICICI Bank Limited - India
- CNBM International Corporation - China
- Singapore Mercantile Exchange
- GN Power Mariveles Coal Plant, Philippines
- Essar Steel Hazira Ltd - India
- Attock Cement Pakistan Limited
- Ministry of Mines - Canada
- Kepco SPC Power Corporation, Philippines
- Lanco Infratech Ltd - India
- Latin American Coal - Colombia
- Port Waratah Coal Services - Australia
- IHS Mccloskey Coal Group - USA
- GVK Power & Infra Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Intertek Mineral Services - Indonesia
- Eastern Coal Council - USA
- Miang Besar Coal Terminal - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Thiess Contractors Indonesia
- Sojitz Corporation - Japan
- Mercator Lines Limited - India
- Coastal Gujarat Power Limited - India
- Meralco Power Generation, Philippines
- Holcim Trading Pte Ltd - Singapore
- Madhucon Powers Ltd - India
- Gujarat Sidhee Cement - India
- Timah Investasi Mineral - Indoneisa
- Makarim & Taira - Indonesia
- Karaikal Port Pvt Ltd - India
- GMR Energy Limited - India
- Indian Oil Corporation Limited
- AsiaOL BioFuels Corp., Philippines
- Formosa Plastics Group - Taiwan
- TNB Fuel Sdn Bhd - Malaysia
- Bayan Resources Tbk. - Indonesia
- Orica Australia Pty. Ltd.
- Altura Mining Limited, Indonesia
- Star Paper Mills Limited - India
- SMC Global Power, Philippines
- Goldman Sachs - Singapore
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