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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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Friday, 22 August 14
U.S WEEKLY COAL PRODUCTION UP 2.4% WEEK OVER WEEK
COALspot.com – United States the world's second largest coal producer, produced approximately 19.60 million short tons (mmst) of coal in ...
Thursday, 21 August 14
PREDICTIONS FROM VARIOUS SHIPPERS AND MINING INDUSTRY FOR 2ND HALF YEAR AND ESPECIALLY Q4 IS POSITIVE
Handy
The activity has increased in both hemispheres this week and we see rates edging up on all trades. TA´s are now paying around 8k whic ...
Thursday, 21 August 14
SHIP OWNERS KEEP SHYING AWAY FOR NEW SHIP INVESTMENTS, OVERALL TREND IS DOWN - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
Ship owners have remained in the sidelines of the Sale & Purchasing market for second hand vessels, during most of August, while they also slow ...
Wednesday, 20 August 14
DRY BULK MARKET TO REBOUND IN THE FOURTH QUARTER, OR NOT....- NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The projected rebound of the dry bulk market is still an elusive trend and shipbrokers and analysts are looking to identify the timing of the loomi ...
Monday, 18 August 14
CAPESIZE RATES TO RISE TO MUCH HIGHER LEVELS THIS YEAR - JEFFREY LANDSBERG
COALspot.com: Capesize rates ended last week at $15,561/day, which marked a week-on-week increase of $6,167 (66%). Capesize rates have been a ...
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- Metalloyd Limited - United Kingdom
- Indian Oil Corporation Limited
- International Coal Ventures Pvt Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Coalindo Energy - Indonesia
- Wilmar Investment Holdings
- Cement Manufacturers Association - India
- Anglo American - United Kingdom
- Tata Chemicals Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Baramulti Group, Indonesia
- Kumho Petrochemical, South Korea
- Rashtriya Ispat Nigam Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Therma Luzon, Inc, Philippines
- Latin American Coal - Colombia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Gujarat Sidhee Cement - India
- Gujarat Electricity Regulatory Commission - India
- Indogreen Group - Indonesia
- Minerals Council of Australia
- Marubeni Corporation - India
- Oldendorff Carriers - Singapore
- Lanco Infratech Ltd - India
- Ministry of Finance - Indonesia
- Globalindo Alam Lestari - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Coastal Gujarat Power Limited - India
- Sinarmas Energy and Mining - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Chettinad Cement Corporation Ltd - India
- Tamil Nadu electricity Board
- Georgia Ports Authority, United States
- Aditya Birla Group - India
- Bukit Makmur.PT - Indonesia
- Chamber of Mines of South Africa
- Energy Development Corp, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Electricity Authority, New Zealand
- Dalmia Cement Bharat India
- Global Business Power Corporation, Philippines
- Semirara Mining Corp, Philippines
- Meenaskhi Energy Private Limited - India
- Australian Commodity Traders Exchange
- Port Waratah Coal Services - Australia
- Samtan Co., Ltd - South Korea
- Merrill Lynch Commodities Europe
- Indonesian Coal Mining Association
- Barasentosa Lestari - Indonesia
- Jindal Steel & Power Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- Independent Power Producers Association of India
- Bhushan Steel Limited - India
- Global Green Power PLC Corporation, Philippines
- Siam City Cement PLC, Thailand
- Banpu Public Company Limited - Thailand
- Sakthi Sugars Limited - India
- IHS Mccloskey Coal Group - USA
- Star Paper Mills Limited - India
- Romanian Commodities Exchange
- Renaissance Capital - South Africa
- Pendopo Energi Batubara - Indonesia
- Antam Resourcindo - Indonesia
- Interocean Group of Companies - India
- LBH Netherlands Bv - Netherlands
- Videocon Industries ltd - India
- India Bulls Power Limited - India
- SMC Global Power, Philippines
- Mercuria Energy - Indonesia
- GAC Shipping (India) Pvt Ltd
- Medco Energi Mining Internasional
- Bayan Resources Tbk. - Indonesia
- Global Coal Blending Company Limited - Australia
- Commonwealth Bank - Australia
- SN Aboitiz Power Inc, Philippines
- Mjunction Services Limited - India
- Eastern Coal Council - USA
- Carbofer General Trading SA - India
- Ministry of Mines - Canada
- Krishnapatnam Port Company Ltd. - India
- Sojitz Corporation - Japan
- VISA Power Limited - India
- ASAPP Information Group - India
- SMG Consultants - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Bulk Trading Sa - Switzerland
- Gujarat Mineral Development Corp Ltd - India
- Parliament of New Zealand
- Straits Asia Resources Limited - Singapore
- GMR Energy Limited - India
- Heidelberg Cement - Germany
- Asia Pacific Energy Resources Ventures Inc, Philippines
- TeaM Sual Corporation - Philippines
- Siam City Cement - Thailand
- IEA Clean Coal Centre - UK
- Directorate General of MIneral and Coal - Indonesia
- Sree Jayajothi Cements Limited - India
- Ind-Barath Power Infra Limited - India
- Petron Corporation, Philippines
- McConnell Dowell - Australia
- OPG Power Generation Pvt Ltd - India
- Manunggal Multi Energi - Indonesia
- Malabar Cements Ltd - India
- Cigading International Bulk Terminal - Indonesia
- Coal and Oil Company - UAE
- Posco Energy - South Korea
- Mercator Lines Limited - India
- Uttam Galva Steels Limited - India
- Central Electricity Authority - India
- PNOC Exploration Corporation - Philippines
- GN Power Mariveles Coal Plant, Philippines
- European Bulk Services B.V. - Netherlands
- San Jose City I Power Corp, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Ambuja Cements Ltd - India
- Timah Investasi Mineral - Indoneisa
- Wood Mackenzie - Singapore
- Aboitiz Power Corporation - Philippines
- Kobexindo Tractors - Indoneisa
- Indo Tambangraya Megah - Indonesia
- Toyota Tsusho Corporation, Japan
- Electricity Generating Authority of Thailand
- Bukit Baiduri Energy - Indonesia
- Binh Thuan Hamico - Vietnam
- Jorong Barutama Greston.PT - Indonesia
- Meralco Power Generation, Philippines
- Kapuas Tunggal Persada - Indonesia
- Larsen & Toubro Limited - India
- Kideco Jaya Agung - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Xindia Steels Limited - India
- Energy Link Ltd, New Zealand
- Salva Resources Pvt Ltd - India
- GVK Power & Infra Limited - India
- MS Steel International - UAE
- Eastern Energy - Thailand
- Savvy Resources Ltd - HongKong
- Grasim Industreis Ltd - India
- Makarim & Taira - Indonesia
- Sical Logistics Limited - India
- The State Trading Corporation of India Ltd
- Singapore Mercantile Exchange
- Bangladesh Power Developement Board
- Power Finance Corporation Ltd., India
- Billiton Holdings Pty Ltd - Australia
- Iligan Light & Power Inc, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Bhoruka Overseas - Indonesia
- Standard Chartered Bank - UAE
- ICICI Bank Limited - India
- Kepco SPC Power Corporation, Philippines
- Bhatia International Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Borneo Indobara - Indonesia
- Price Waterhouse Coopers - Russia
- Jaiprakash Power Ventures ltd
- The University of Queensland
- Formosa Plastics Group - Taiwan
- CNBM International Corporation - China
- AsiaOL BioFuels Corp., Philippines
- Kalimantan Lumbung Energi - Indonesia
- Planning Commission, India
- Sarangani Energy Corporation, Philippines
- Vedanta Resources Plc - India
- CIMB Investment Bank - Malaysia
- Sindya Power Generating Company Private Ltd
- Indian Energy Exchange, India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Semirara Mining and Power Corporation, Philippines
- Asmin Koalindo Tuhup - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Altura Mining Limited, Indonesia
- Essar Steel Hazira Ltd - India
- Rio Tinto Coal - Australia
- Economic Council, Georgia
- Orica Australia Pty. Ltd.
- Kohat Cement Company Ltd. - Pakistan
- Agrawal Coal Company - India
- White Energy Company Limited
- TNB Fuel Sdn Bhd - Malaysia
- South Luzon Thermal Energy Corporation
- London Commodity Brokers - England
- Directorate Of Revenue Intelligence - India
- Thai Mozambique Logistica
- Orica Mining Services - Indonesia
- Mintek Dendrill Indonesia
- Simpson Spence & Young - Indonesia
- Indika Energy - Indonesia
- PTC India Limited - India
- Australian Coal Association
- Karaikal Port Pvt Ltd - India
- Africa Commodities Group - South Africa
- Thiess Contractors Indonesia
- Parry Sugars Refinery, India
- Maheswari Brothers Coal Limited - India
- Maharashtra Electricity Regulatory Commission - India
- The Treasury - Australian Government
- Goldman Sachs - Singapore
- PowerSource Philippines DevCo
- Vizag Seaport Private Limited - India
- Attock Cement Pakistan Limited
- Trasteel International SA, Italy
- Central Java Power - Indonesia
- Kartika Selabumi Mining - Indonesia
- Bharathi Cement Corporation - India
- Riau Bara Harum - Indonesia
- Kaltim Prima Coal - Indonesia
- Ministry of Transport, Egypt
- Intertek Mineral Services - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Alfred C Toepfer International GmbH - Germany
- Deloitte Consulting - India
- New Zealand Coal & Carbon
- Madhucon Powers Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- Edison Trading Spa - Italy
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