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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, 08 August 14
CAPESIZE RATES ARE REMAINING MORE OR LESS UNCHANGED AT BOTTOM LOW LEVELS - FEARNLEYS AS
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An improving sentiment with stronger rates and fair demand for prompt tonnage in the Atlantic, both on the Continent and in the Med for the ...
Friday, 08 August 14
U.S PRODUCED 35.80 MMST OF COAL IN JULY; UP 7.89 MONTH OVER MONTH
COALspot.com – United States the world's second largest coal producer, produced approximately 19.50 million short tons (mmst) of coal in ...
Friday, 08 August 14
PORT OF NEWCASTLE SHIPPED 19.52% MORE COAL IN JULY FROM LAST MONTH
COALspot.com: The Port of Newcastle, Australia’s major trading ports and the world’s largest coal export port, has shipped 14,036,947 t ...
Thursday, 07 August 14
SHORT-TERM COAL OUTLOOK IMPROVES - SAM QUEST
With demand for and supply of coal to grow in the near future, prices are expected to rebound in the short term; the long-term prospects, however, ...
Thursday, 07 August 14
BULKING UP IN AFRICA: CHINA INFLATES SEABORNE MINERALS EXPORT TRADE - RICHARD SCOTT
Africa’s profile as an exporter of dry bulk commodities is rising. Responding to growing import demand from China, India and other buyers in ...
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- Directorate General of MIneral and Coal - Indonesia
- Eastern Energy - Thailand
- Sinarmas Energy and Mining - Indonesia
- New Zealand Coal & Carbon
- CNBM International Corporation - China
- Australian Coal Association
- Wilmar Investment Holdings
- Offshore Bulk Terminal Pte Ltd, Singapore
- Bahari Cakrawala Sebuku - Indonesia
- Antam Resourcindo - Indonesia
- Banpu Public Company Limited - Thailand
- Asia Pacific Energy Resources Ventures Inc, Philippines
- PTC India Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Intertek Mineral Services - Indonesia
- Anglo American - United Kingdom
- Bukit Baiduri Energy - Indonesia
- Goldman Sachs - Singapore
- International Coal Ventures Pvt Ltd - India
- Sakthi Sugars Limited - India
- IEA Clean Coal Centre - UK
- Wood Mackenzie - Singapore
- Eastern Coal Council - USA
- Indonesian Coal Mining Association
- Xindia Steels Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Sojitz Corporation - Japan
- GN Power Mariveles Coal Plant, Philippines
- GVK Power & Infra Limited - India
- Price Waterhouse Coopers - Russia
- Interocean Group of Companies - India
- Mercuria Energy - Indonesia
- Singapore Mercantile Exchange
- Siam City Cement PLC, Thailand
- Tata Chemicals Ltd - India
- Toyota Tsusho Corporation, Japan
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Barasentosa Lestari - Indonesia
- Planning Commission, India
- Electricity Authority, New Zealand
- Kepco SPC Power Corporation, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Metalloyd Limited - United Kingdom
- The State Trading Corporation of India Ltd
- Commonwealth Bank - Australia
- Thai Mozambique Logistica
- Kumho Petrochemical, South Korea
- Indian Oil Corporation Limited
- Semirara Mining Corp, Philippines
- Bhushan Steel Limited - India
- Parliament of New Zealand
- Miang Besar Coal Terminal - Indonesia
- Central Electricity Authority - India
- Indika Energy - Indonesia
- Jaiprakash Power Ventures ltd
- LBH Netherlands Bv - Netherlands
- Attock Cement Pakistan Limited
- ASAPP Information Group - India
- Jindal Steel & Power Ltd - India
- Posco Energy - South Korea
- MS Steel International - UAE
- Malabar Cements Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Marubeni Corporation - India
- Altura Mining Limited, Indonesia
- Simpson Spence & Young - Indonesia
- European Bulk Services B.V. - Netherlands
- GAC Shipping (India) Pvt Ltd
- CIMB Investment Bank - Malaysia
- Straits Asia Resources Limited - Singapore
- Bukit Makmur.PT - Indonesia
- Sical Logistics Limited - India
- Petron Corporation, Philippines
- Salva Resources Pvt Ltd - India
- Riau Bara Harum - Indonesia
- Global Business Power Corporation, Philippines
- Rashtriya Ispat Nigam Limited - India
- Binh Thuan Hamico - Vietnam
- Kalimantan Lumbung Energi - Indonesia
- Australian Commodity Traders Exchange
- Billiton Holdings Pty Ltd - Australia
- Manunggal Multi Energi - Indonesia
- Vizag Seaport Private Limited - India
- Baramulti Group, Indonesia
- Maheswari Brothers Coal Limited - India
- Independent Power Producers Association of India
- Oldendorff Carriers - Singapore
- Neyveli Lignite Corporation Ltd, - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Borneo Indobara - Indonesia
- Savvy Resources Ltd - HongKong
- Orica Australia Pty. Ltd.
- Aditya Birla Group - India
- Krishnapatnam Port Company Ltd. - India
- Electricity Generating Authority of Thailand
- Formosa Plastics Group - Taiwan
- Orica Mining Services - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Samtan Co., Ltd - South Korea
- Cement Manufacturers Association - India
- Indo Tambangraya Megah - Indonesia
- Ceylon Electricity Board - Sri Lanka
- SMC Global Power, Philippines
- Latin American Coal - Colombia
- Siam City Cement - Thailand
- Leighton Contractors Pty Ltd - Australia
- Energy Link Ltd, New Zealand
- Meenaskhi Energy Private Limited - India
- McConnell Dowell - Australia
- Global Green Power PLC Corporation, Philippines
- Therma Luzon, Inc, Philippines
- Madhucon Powers Ltd - India
- Heidelberg Cement - Germany
- Sree Jayajothi Cements Limited - India
- Aboitiz Power Corporation - Philippines
- Mjunction Services Limited - India
- Thiess Contractors Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Global Coal Blending Company Limited - Australia
- Directorate Of Revenue Intelligence - India
- The Treasury - Australian Government
- OPG Power Generation Pvt Ltd - India
- Kartika Selabumi Mining - Indonesia
- Lanco Infratech Ltd - India
- Kideco Jaya Agung - Indonesia
- Bharathi Cement Corporation - India
- Ambuja Cements Ltd - India
- Coalindo Energy - Indonesia
- Bhoruka Overseas - Indonesia
- Bangladesh Power Developement Board
- Merrill Lynch Commodities Europe
- Power Finance Corporation Ltd., India
- Uttam Galva Steels Limited - India
- London Commodity Brokers - England
- Pendopo Energi Batubara - Indonesia
- Ind-Barath Power Infra Limited - India
- Essar Steel Hazira Ltd - India
- India Bulls Power Limited - India
- Grasim Industreis Ltd - India
- Gujarat Sidhee Cement - India
- Ministry of Finance - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Georgia Ports Authority, United States
- Mintek Dendrill Indonesia
- SMG Consultants - Indonesia
- Cigading International Bulk Terminal - Indonesia
- The University of Queensland
- Globalindo Alam Lestari - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Ministry of Transport, Egypt
- Renaissance Capital - South Africa
- Ministry of Mines - Canada
- Carbofer General Trading SA - India
- Kobexindo Tractors - Indoneisa
- Trasteel International SA, Italy
- Asmin Koalindo Tuhup - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Romanian Commodities Exchange
- Vedanta Resources Plc - India
- Karaikal Port Pvt Ltd - India
- Makarim & Taira - Indonesia
- Sindya Power Generating Company Private Ltd
- Meralco Power Generation, Philippines
- Agrawal Coal Company - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- GMR Energy Limited - India
- Edison Trading Spa - Italy
- Kapuas Tunggal Persada - Indonesia
- Coal and Oil Company - UAE
- Iligan Light & Power Inc, Philippines
- VISA Power Limited - India
- SN Aboitiz Power Inc, Philippines
- Alfred C Toepfer International GmbH - Germany
- Mercator Lines Limited - India
- Holcim Trading Pte Ltd - Singapore
- Videocon Industries ltd - India
- PNOC Exploration Corporation - Philippines
- Indogreen Group - Indonesia
- Star Paper Mills Limited - India
- IHS Mccloskey Coal Group - USA
- Semirara Mining and Power Corporation, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Parry Sugars Refinery, India
- Rio Tinto Coal - Australia
- Jorong Barutama Greston.PT - Indonesia
- Tamil Nadu electricity Board
- Energy Development Corp, Philippines
- PowerSource Philippines DevCo
- Bhatia International Limited - India
- Indian Energy Exchange, India
- White Energy Company Limited
- Standard Chartered Bank - UAE
- Bayan Resources Tbk. - Indonesia
- Coastal Gujarat Power Limited - India
- TeaM Sual Corporation - Philippines
- PetroVietnam Power Coal Import and Supply Company
- Medco Energi Mining Internasional
- San Jose City I Power Corp, Philippines
- Timah Investasi Mineral - Indoneisa
- Port Waratah Coal Services - Australia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Dalmia Cement Bharat India
- TNB Fuel Sdn Bhd - Malaysia
- ICICI Bank Limited - India
- Chamber of Mines of South Africa
- Minerals Council of Australia
- Chettinad Cement Corporation Ltd - India
- Deloitte Consulting - India
- Central Java Power - Indonesia
- Kaltim Prima Coal - Indonesia
- Larsen & Toubro Limited - India
- South Luzon Thermal Energy Corporation
- Economic Council, Georgia
- AsiaOL BioFuels Corp., Philippines
- Sarangani Energy Corporation, Philippines
- Africa Commodities Group - South Africa
- Bulk Trading Sa - Switzerland
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