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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, 18 August 14
SUB-BIT FOB INDONESIA COAL SWAP CLOSED AT $58.60 FOR SEPTEMBER 2015; UP $4 FROM SEPTEMBER 2014 CLOSING
COALspot.com: Indonesian coal swaps for average September 2014 decreased US$ 0.15 (-0.27%) day on day and US$ 0.75 (-1.36%) per mt week on week. Th ...
Monday, 18 August 14
CFR SOUTH CHINA COAL SWAP PERFORMED WELL THIS PAST WEEK
COALspot.com: API 8 CFR South China Coal swap for delivery in September 2014 increased US$ 0.45 (+0.66%) day on day and US$ 0.30 (+0.44%)&nbs ...
Saturday, 16 August 14
HIGH DEMAND OF IRON ORE SHIPMENTS PUSHED CAPE INDEX UPWARDS
COALspot.com: This week's freight market was buoyant with Cape and panamax index seeing a big jump pushing the BDI above 1,000 points week on c ...
Friday, 15 August 14
5TH ANNUAL POWER AND ELECTRICITY INDONESIA
5TH ANNUAL POWER AND ELECTRICITY INDONESIA
13-16 October 2014
Grand Hyatt Jakarta, Indonesia
Web Site
The country’s definitive ...
Thursday, 14 August 14
U.S. STEAM COAL IMPORTS REMAIN DOWN SHARPLY FROM HISTORIC HIGH IN 2007, SAYS EIA
COALspot.com: U.S. steam coal imports at power plants have fallen significantly from their peak level of more than 30 million tons in 2007 to less ...
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- Altura Mining Limited, Indonesia
- LBH Netherlands Bv - Netherlands
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Alfred C Toepfer International GmbH - Germany
- Kepco SPC Power Corporation, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Bulk Trading Sa - Switzerland
- Videocon Industries ltd - India
- Deloitte Consulting - India
- AsiaOL BioFuels Corp., Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Attock Cement Pakistan Limited
- Ceylon Electricity Board - Sri Lanka
- Parry Sugars Refinery, India
- Vijayanagar Sugar Pvt Ltd - India
- Binh Thuan Hamico - Vietnam
- Simpson Spence & Young - Indonesia
- Globalindo Alam Lestari - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Goldman Sachs - Singapore
- Heidelberg Cement - Germany
- Singapore Mercantile Exchange
- Baramulti Group, Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Kumho Petrochemical, South Korea
- PTC India Limited - India
- Australian Commodity Traders Exchange
- Price Waterhouse Coopers - Russia
- Offshore Bulk Terminal Pte Ltd, Singapore
- SMG Consultants - Indonesia
- ASAPP Information Group - India
- SN Aboitiz Power Inc, Philippines
- Star Paper Mills Limited - India
- SMC Global Power, Philippines
- Sakthi Sugars Limited - India
- Coastal Gujarat Power Limited - India
- White Energy Company Limited
- GMR Energy Limited - India
- South Luzon Thermal Energy Corporation
- Mjunction Services Limited - India
- Vedanta Resources Plc - India
- Riau Bara Harum - Indonesia
- Mercator Lines Limited - India
- Eastern Energy - Thailand
- Dalmia Cement Bharat India
- Central Electricity Authority - India
- Sinarmas Energy and Mining - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Minerals Council of Australia
- Karaikal Port Pvt Ltd - India
- Cigading International Bulk Terminal - Indonesia
- Antam Resourcindo - Indonesia
- Medco Energi Mining Internasional
- Mercuria Energy - Indonesia
- Thai Mozambique Logistica
- GAC Shipping (India) Pvt Ltd
- MS Steel International - UAE
- CIMB Investment Bank - Malaysia
- Oldendorff Carriers - Singapore
- Timah Investasi Mineral - Indoneisa
- Kartika Selabumi Mining - Indonesia
- Coal and Oil Company - UAE
- Bangladesh Power Developement Board
- Intertek Mineral Services - Indonesia
- Indian Energy Exchange, India
- Kobexindo Tractors - Indoneisa
- Global Coal Blending Company Limited - Australia
- Gujarat Mineral Development Corp Ltd - India
- Australian Coal Association
- GVK Power & Infra Limited - India
- PNOC Exploration Corporation - Philippines
- Manunggal Multi Energi - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- OPG Power Generation Pvt Ltd - India
- Miang Besar Coal Terminal - Indonesia
- London Commodity Brokers - England
- Marubeni Corporation - India
- Rashtriya Ispat Nigam Limited - India
- The State Trading Corporation of India Ltd
- Agrawal Coal Company - India
- Asmin Koalindo Tuhup - Indonesia
- Borneo Indobara - Indonesia
- Bharathi Cement Corporation - India
- Billiton Holdings Pty Ltd - Australia
- Jindal Steel & Power Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Africa Commodities Group - South Africa
- Tata Chemicals Ltd - India
- Sojitz Corporation - Japan
- European Bulk Services B.V. - Netherlands
- ICICI Bank Limited - India
- Wood Mackenzie - Singapore
- Coalindo Energy - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Energy Link Ltd, New Zealand
- Latin American Coal - Colombia
- Sarangani Energy Corporation, Philippines
- Salva Resources Pvt Ltd - India
- San Jose City I Power Corp, Philippines
- Carbofer General Trading SA - India
- Independent Power Producers Association of India
- Krishnapatnam Port Company Ltd. - India
- Indo Tambangraya Megah - Indonesia
- Formosa Plastics Group - Taiwan
- Chamber of Mines of South Africa
- PowerSource Philippines DevCo
- Thiess Contractors Indonesia
- Global Business Power Corporation, Philippines
- Bayan Resources Tbk. - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Electricity Generating Authority of Thailand
- Indika Energy - Indonesia
- Indogreen Group - Indonesia
- Power Finance Corporation Ltd., India
- Semirara Mining Corp, Philippines
- Metalloyd Limited - United Kingdom
- Cement Manufacturers Association - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Meenaskhi Energy Private Limited - India
- Wilmar Investment Holdings
- Central Java Power - Indonesia
- Iligan Light & Power Inc, Philippines
- Barasentosa Lestari - Indonesia
- Sree Jayajothi Cements Limited - India
- Essar Steel Hazira Ltd - India
- Directorate Of Revenue Intelligence - India
- Rio Tinto Coal - Australia
- Petron Corporation, Philippines
- Ministry of Finance - Indonesia
- Sindya Power Generating Company Private Ltd
- Siam City Cement PLC, Thailand
- Posco Energy - South Korea
- Mintek Dendrill Indonesia
- VISA Power Limited - India
- Edison Trading Spa - Italy
- Merrill Lynch Commodities Europe
- Uttam Galva Steels Limited - India
- Kideco Jaya Agung - Indonesia
- Ministry of Transport, Egypt
- Bhatia International Limited - India
- Planning Commission, India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Lanco Infratech Ltd - India
- Aboitiz Power Corporation - Philippines
- Jaiprakash Power Ventures ltd
- Straits Asia Resources Limited - Singapore
- The University of Queensland
- Semirara Mining and Power Corporation, Philippines
- Ambuja Cements Ltd - India
- Standard Chartered Bank - UAE
- Anglo American - United Kingdom
- CNBM International Corporation - China
- Georgia Ports Authority, United States
- Therma Luzon, Inc, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Pendopo Energi Batubara - Indonesia
- Interocean Group of Companies - India
- Malabar Cements Ltd - India
- Maheswari Brothers Coal Limited - India
- Sical Logistics Limited - India
- Savvy Resources Ltd - HongKong
- Banpu Public Company Limited - Thailand
- IEA Clean Coal Centre - UK
- Renaissance Capital - South Africa
- Trasteel International SA, Italy
- New Zealand Coal & Carbon
- Kaltim Prima Coal - Indonesia
- India Bulls Power Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Indian Oil Corporation Limited
- Tamil Nadu electricity Board
- Bukit Makmur.PT - Indonesia
- TeaM Sual Corporation - Philippines
- Eastern Coal Council - USA
- GN Power Mariveles Coal Plant, Philippines
- Global Green Power PLC Corporation, Philippines
- Madhucon Powers Ltd - India
- McConnell Dowell - Australia
- International Coal Ventures Pvt Ltd - India
- Jorong Barutama Greston.PT - Indonesia
- Toyota Tsusho Corporation, Japan
- IHS Mccloskey Coal Group - USA
- Bukit Asam (Persero) Tbk - Indonesia
- Port Waratah Coal Services - Australia
- Directorate General of MIneral and Coal - Indonesia
- Orica Mining Services - Indonesia
- Ind-Barath Power Infra Limited - India
- Gujarat Electricity Regulatory Commission - India
- Orica Australia Pty. Ltd.
- The Treasury - Australian Government
- Gujarat Sidhee Cement - India
- PetroVietnam Power Coal Import and Supply Company
- Xindia Steels Limited - India
- Siam City Cement - Thailand
- Aditya Birla Group - India
- Bukit Baiduri Energy - Indonesia
- Electricity Authority, New Zealand
- Kapuas Tunggal Persada - Indonesia
- Energy Development Corp, Philippines
- Grasim Industreis Ltd - India
- Meralco Power Generation, Philippines
- Economic Council, Georgia
- Romanian Commodities Exchange
- Samtan Co., Ltd - South Korea
- Bhushan Steel Limited - India
- Chettinad Cement Corporation Ltd - India
- Vizag Seaport Private Limited - India
- Bhoruka Overseas - Indonesia
- Ministry of Mines - Canada
- Commonwealth Bank - Australia
- Indonesian Coal Mining Association
- Larsen & Toubro Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Makarim & Taira - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Parliament of New Zealand
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