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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$120bn, assuming current domestic prices in Indonesia. This accounts for around three-percent of GDP and is therefore unsustainable." As a result, Wood Mackenzie expects Jokowi's government to make changes:
- The government is expected to push through further price reforms, which will impact near-term demand. However, the income-effect prevails in the medium term and will drive demand growth.
- If subsidies are sharply reduced, we could see a demand drop of around 60-70 thousand barrels per day (kb/d) in gasoline and 45-50 kb/d in diesel.
- The current market size of unsubsidised retail fuels (gasoline and diesel) is very small; however, there is a huge upside potential if the government fully deregulates the market. This would provide a good market opportunity to foreign players operating in the unsubsidised retail fuels market or new players looking to invest in refining and retail sectors in Indonesia.
Editor’s notes:
Wood Mackenzie is a global leader in commercial intelligence for the energy, metals and mining industries. We provide objective analysis and advice on assets, companies and markets, giving clients the insights they need to make better strategic decisions. For more information visit: www.woodmac.com
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Monday, 11 August 14
INDONESIAN THERMAL COAL SWAPS SEEING SOME POSITIVE TREND
COALspot.com: Indonesian coal swaps for average September 2014 increased US$ 0.20 (+0.36%) day on day and US$ 1.30 (+2.41%) per mt week on week. Th ...
Monday, 11 August 14
SGX CFR SOUTH CHINA COAL SWAPS DIRECTION HEADING TO NORTH
COALspot.com: API 8 CFR South China Coal swap for delivery in September 2014 increased US$ 0.50 (+0.74%) day on day and US$ 1.55 (+2.33%)&nbs ...
Monday, 11 August 14
A TALE OF TWO TRADES - EVA TZIMA
COALspot.com: It has without a doubt been “a cruel, cruel summer” for the Dry Bulk market so far and with second hand values still stan ...
Sunday, 10 August 14
FREIGHT RATES FROM INDONESIA TO INDIA IS EXPECTED TO BE STEADY NEXT WEEK - VISTAAR
COALspot.com: This week the BDI and other segments saw some improvements. The BDI increased by 3.46 pct week on week and closed at 777 points.
...
Friday, 08 August 14
MINING DISPUTE IS CRIPPLING LOCAL ECONOMIES IN EASTERN INDONESIA - JG
- By Iwan Harsono -
It seems as if there’s no end in sight to the series of negotiations between the government and mining companies about ...
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- CIMB Investment Bank - Malaysia
- Pendopo Energi Batubara - Indonesia
- The University of Queensland
- Heidelberg Cement - Germany
- Indogreen Group - Indonesia
- Anglo American - United Kingdom
- Karbindo Abesyapradhi - Indoneisa
- SMC Global Power, Philippines
- Economic Council, Georgia
- Chettinad Cement Corporation Ltd - India
- Orica Mining Services - Indonesia
- Coastal Gujarat Power Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Renaissance Capital - South Africa
- Marubeni Corporation - India
- Price Waterhouse Coopers - Russia
- Essar Steel Hazira Ltd - India
- Uttam Galva Steels Limited - India
- Simpson Spence & Young - Indonesia
- Central Electricity Authority - India
- Petrochimia International Co. Ltd.- Taiwan
- Tamil Nadu electricity Board
- OPG Power Generation Pvt Ltd - India
- Mercuria Energy - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- TeaM Sual Corporation - Philippines
- Aditya Birla Group - India
- Kohat Cement Company Ltd. - Pakistan
- Kaltim Prima Coal - Indonesia
- Ambuja Cements Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- Leighton Contractors Pty Ltd - Australia
- PTC India Limited - India
- Ministry of Finance - Indonesia
- Savvy Resources Ltd - HongKong
- Energy Development Corp, Philippines
- Bayan Resources Tbk. - Indonesia
- IEA Clean Coal Centre - UK
- Bulk Trading Sa - Switzerland
- Kapuas Tunggal Persada - Indonesia
- Africa Commodities Group - South Africa
- Parliament of New Zealand
- Kideco Jaya Agung - Indonesia
- New Zealand Coal & Carbon
- Interocean Group of Companies - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Global Green Power PLC Corporation, Philippines
- Formosa Plastics Group - Taiwan
- Edison Trading Spa - Italy
- Sakthi Sugars Limited - India
- Siam City Cement - Thailand
- Sojitz Corporation - Japan
- International Coal Ventures Pvt Ltd - India
- Holcim Trading Pte Ltd - Singapore
- Latin American Coal - Colombia
- Sree Jayajothi Cements Limited - India
- Eastern Energy - Thailand
- Meralco Power Generation, Philippines
- European Bulk Services B.V. - Netherlands
- Videocon Industries ltd - India
- India Bulls Power Limited - India
- Thiess Contractors Indonesia
- SMG Consultants - Indonesia
- Gujarat Sidhee Cement - India
- Jindal Steel & Power Ltd - India
- Central Java Power - Indonesia
- The State Trading Corporation of India Ltd
- Billiton Holdings Pty Ltd - Australia
- Kepco SPC Power Corporation, Philippines
- Standard Chartered Bank - UAE
- Bangladesh Power Developement Board
- San Jose City I Power Corp, Philippines
- Mjunction Services Limited - India
- Sical Logistics Limited - India
- Coalindo Energy - Indonesia
- Singapore Mercantile Exchange
- Petron Corporation, Philippines
- Manunggal Multi Energi - Indonesia
- Tata Chemicals Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Ministry of Transport, Egypt
- Ind-Barath Power Infra Limited - India
- Bharathi Cement Corporation - India
- Port Waratah Coal Services - Australia
- LBH Netherlands Bv - Netherlands
- Mintek Dendrill Indonesia
- The Treasury - Australian Government
- Asmin Koalindo Tuhup - Indonesia
- Planning Commission, India
- Cigading International Bulk Terminal - Indonesia
- Coal and Oil Company - UAE
- McConnell Dowell - Australia
- Indian Energy Exchange, India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Neyveli Lignite Corporation Ltd, - India
- Bhushan Steel Limited - India
- Power Finance Corporation Ltd., India
- Directorate Of Revenue Intelligence - India
- Globalindo Alam Lestari - Indonesia
- Goldman Sachs - Singapore
- Sarangani Energy Corporation, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Timah Investasi Mineral - Indoneisa
- Altura Mining Limited, Indonesia
- Krishnapatnam Port Company Ltd. - India
- London Commodity Brokers - England
- Barasentosa Lestari - Indonesia
- Vedanta Resources Plc - India
- Minerals Council of Australia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Karaikal Port Pvt Ltd - India
- White Energy Company Limited
- Agrawal Coal Company - India
- Parry Sugars Refinery, India
- TNB Fuel Sdn Bhd - Malaysia
- Pipit Mutiara Jaya. PT, Indonesia
- Romanian Commodities Exchange
- Metalloyd Limited - United Kingdom
- Commonwealth Bank - Australia
- Trasteel International SA, Italy
- Dalmia Cement Bharat India
- Borneo Indobara - Indonesia
- AsiaOL BioFuels Corp., Philippines
- South Luzon Thermal Energy Corporation
- Indonesian Coal Mining Association
- Posco Energy - South Korea
- Kartika Selabumi Mining - Indonesia
- Makarim & Taira - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Madhucon Powers Ltd - India
- Sindya Power Generating Company Private Ltd
- PNOC Exploration Corporation - Philippines
- Therma Luzon, Inc, Philippines
- Baramulti Group, Indonesia
- Grasim Industreis Ltd - India
- Samtan Co., Ltd - South Korea
- Jorong Barutama Greston.PT - Indonesia
- Indo Tambangraya Megah - Indonesia
- Chamber of Mines of South Africa
- GAC Shipping (India) Pvt Ltd
- Georgia Ports Authority, United States
- Semirara Mining and Power Corporation, Philippines
- ICICI Bank Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Eastern Coal Council - USA
- Vijayanagar Sugar Pvt Ltd - India
- Rashtriya Ispat Nigam Limited - India
- Semirara Mining Corp, Philippines
- Electricity Generating Authority of Thailand
- Ceylon Electricity Board - Sri Lanka
- Bukit Baiduri Energy - Indonesia
- Salva Resources Pvt Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Carbofer General Trading SA - India
- Ministry of Mines - Canada
- CNBM International Corporation - China
- Vizag Seaport Private Limited - India
- Bukit Makmur.PT - Indonesia
- Maheswari Brothers Coal Limited - India
- Orica Australia Pty. Ltd.
- SN Aboitiz Power Inc, Philippines
- Banpu Public Company Limited - Thailand
- Bhoruka Overseas - Indonesia
- Global Business Power Corporation, Philippines
- ASAPP Information Group - India
- Iligan Light & Power Inc, Philippines
- Lanco Infratech Ltd - India
- PetroVietnam Power Coal Import and Supply Company
- Bhatia International Limited - India
- Deloitte Consulting - India
- Medco Energi Mining Internasional
- Xindia Steels Limited - India
- Siam City Cement PLC, Thailand
- Toyota Tsusho Corporation, Japan
- GMR Energy Limited - India
- Miang Besar Coal Terminal - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Riau Bara Harum - Indonesia
- Global Coal Blending Company Limited - Australia
- GVK Power & Infra Limited - India
- Kumho Petrochemical, South Korea
- Merrill Lynch Commodities Europe
- Aboitiz Power Corporation - Philippines
- Attock Cement Pakistan Limited
- Thai Mozambique Logistica
- Sinarmas Energy and Mining - Indonesia
- Malabar Cements Ltd - India
- MS Steel International - UAE
- Gujarat Mineral Development Corp Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Jaiprakash Power Ventures ltd
- IHS Mccloskey Coal Group - USA
- Independent Power Producers Association of India
- Rio Tinto Coal - Australia
- Mercator Lines Limited - India
- Binh Thuan Hamico - Vietnam
- Cement Manufacturers Association - India
- Intertek Mineral Services - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Oldendorff Carriers - Singapore
- Australian Commodity Traders Exchange
- VISA Power Limited - India
- Straits Asia Resources Limited - Singapore
- Wilmar Investment Holdings
- Larsen & Toubro Limited - India
- Electricity Authority, New Zealand
- Antam Resourcindo - Indonesia
- PowerSource Philippines DevCo
- Indika Energy - Indonesia
- Wood Mackenzie - Singapore
- Indian Oil Corporation Limited
- Energy Link Ltd, New Zealand
- Kobexindo Tractors - Indoneisa
- Star Paper Mills Limited - India
- Australian Coal Association
- Meenaskhi Energy Private Limited - India
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