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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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Wednesday, 06 August 14
CAPES: BUSINESS INTEREST REMAINS SOFT; CURRENTLY NO SIGNS OF IMPROVEMENT - INTERMODAL
COALspot.com: Despite the considerable pressure witnessed in the freight market for most of the size segments, the Dry Bulk Index was able to note ...
Wednesday, 06 August 14
SHIPPING MARKET INSIGHT - EVA TZIMA
Recent reports that Indonesia’s ban on exports of metal ore concentrates was lifted for the first time in six months for two of its biggest m ...
Wednesday, 06 August 14
SGX SUCCESSFULLY LAUNCHED NEW SGX COAL PRODUCTS
COALspot.com: Singapore Exchange (‘SGX’) has announced that, the exchange has successfully launched its new Coking and Thermal Coal pro ...
Monday, 04 August 14
ANNUAL SECOND HALF SURGE IN BRAZILIAN IRON ORE EXPORTS ABOUT TO BEGIN - JEFFREY LANDSBERG
COALspot.com: Great strength in the capesize market has all along been set to occur during the second half of this year, as that is when Brazilian ...
Monday, 04 August 14
SUB-BIT FOB INDONESIA COAL SWAP INCHES UP DESPITE LOW DEMAND
COALspot.com: Indonesian coal swaps for average Q4’ 2014 increased US$ 0.15 day on day and US$ 0.13 per mt week on week. But, the swap was lo ...
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- Madhucon Powers Ltd - India
- Minerals Council of Australia
- GMR Energy Limited - India
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- Mintek Dendrill Indonesia
- Samtan Co., Ltd - South Korea
- Bhoruka Overseas - Indonesia
- Wilmar Investment Holdings
- Formosa Plastics Group - Taiwan
- Goldman Sachs - Singapore
- Trasteel International SA, Italy
- Bahari Cakrawala Sebuku - Indonesia
- Sindya Power Generating Company Private Ltd
- Price Waterhouse Coopers - Russia
- ASAPP Information Group - India
- Aboitiz Power Corporation - Philippines
- Rio Tinto Coal - Australia
- Pendopo Energi Batubara - Indonesia
- Bangladesh Power Developement Board
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- Holcim Trading Pte Ltd - Singapore
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- Offshore Bulk Terminal Pte Ltd, Singapore
- LBH Netherlands Bv - Netherlands
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- Australian Coal Association
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- San Jose City I Power Corp, Philippines
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- Therma Luzon, Inc, Philippines
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- Economic Council, Georgia
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- Wood Mackenzie - Singapore
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- Kaltim Prima Coal - Indonesia
- The Treasury - Australian Government
- Mercuria Energy - Indonesia
- Ministry of Mines - Canada
- London Commodity Brokers - England
- Deloitte Consulting - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
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- Tamil Nadu electricity Board
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- Renaissance Capital - South Africa
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- Petron Corporation, Philippines
- Aditya Birla Group - India
- Directorate General of MIneral and Coal - Indonesia
- Energy Link Ltd, New Zealand
- Ministry of Finance - Indonesia
- Standard Chartered Bank - UAE
- Indo Tambangraya Megah - Indonesia
- Savvy Resources Ltd - HongKong
- Power Finance Corporation Ltd., India
- PNOC Exploration Corporation - Philippines
- Xindia Steels Limited - India
- Agrawal Coal Company - India
- Maheswari Brothers Coal Limited - India
- European Bulk Services B.V. - Netherlands
- Bukit Makmur.PT - Indonesia
- Indonesian Coal Mining Association
- Asmin Koalindo Tuhup - Indonesia
- Port Waratah Coal Services - Australia
- Electricity Authority, New Zealand
- Metalloyd Limited - United Kingdom
- Chamber of Mines of South Africa
- Miang Besar Coal Terminal - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Tata Chemicals Ltd - India
- Romanian Commodities Exchange
- ICICI Bank Limited - India
- The State Trading Corporation of India Ltd
- Kartika Selabumi Mining - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Parry Sugars Refinery, India
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- Salva Resources Pvt Ltd - India
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- Indian Oil Corporation Limited
- Lanco Infratech Ltd - India
- Energy Development Corp, Philippines
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- Kohat Cement Company Ltd. - Pakistan
- Orica Mining Services - Indonesia
- Bharathi Cement Corporation - India
- SMG Consultants - Indonesia
- IHS Mccloskey Coal Group - USA
- Interocean Group of Companies - India
- Vijayanagar Sugar Pvt Ltd - India
- GVK Power & Infra Limited - India
- Karaikal Port Pvt Ltd - India
- Thai Mozambique Logistica
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- SMC Global Power, Philippines
- Meenaskhi Energy Private Limited - India
- Makarim & Taira - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Star Paper Mills Limited - India
- Indika Energy - Indonesia
- Bulk Trading Sa - Switzerland
- Kobexindo Tractors - Indoneisa
- White Energy Company Limited
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- Bank of Tokyo Mitsubishi UFJ Ltd
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- PowerSource Philippines DevCo
- Karbindo Abesyapradhi - Indoneisa
- GN Power Mariveles Coal Plant, Philippines
- Siam City Cement - Thailand
- Merrill Lynch Commodities Europe
- CIMB Investment Bank - Malaysia
- Simpson Spence & Young - Indonesia
- Edison Trading Spa - Italy
- Eastern Energy - Thailand
- Latin American Coal - Colombia
- Essar Steel Hazira Ltd - India
- Anglo American - United Kingdom
- Leighton Contractors Pty Ltd - Australia
- Africa Commodities Group - South Africa
- New Zealand Coal & Carbon
- Borneo Indobara - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Bhatia International Limited - India
- Australian Commodity Traders Exchange
- CNBM International Corporation - China
- Coastal Gujarat Power Limited - India
- Barasentosa Lestari - Indonesia
- SN Aboitiz Power Inc, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Oldendorff Carriers - Singapore
- Kalimantan Lumbung Energi - Indonesia
- Independent Power Producers Association of India
- Global Green Power PLC Corporation, Philippines
- Parliament of New Zealand
- Vizag Seaport Private Limited - India
- Alfred C Toepfer International GmbH - Germany
- Straits Asia Resources Limited - Singapore
- Kideco Jaya Agung - Indonesia
- Singapore Mercantile Exchange
- Riau Bara Harum - Indonesia
- Jaiprakash Power Ventures ltd
- Sojitz Corporation - Japan
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- Georgia Ports Authority, United States
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- The University of Queensland
- AsiaOL BioFuels Corp., Philippines
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- Siam City Cement PLC, Thailand
- Bayan Resources Tbk. - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Commonwealth Bank - Australia
- Global Coal Blending Company Limited - Australia
- Binh Thuan Hamico - Vietnam
- Manunggal Multi Energi - Indonesia
- Planning Commission, India
- Eastern Coal Council - USA
- Sakthi Sugars Limited - India
- Bhushan Steel Limited - India
- Iligan Light & Power Inc, Philippines
- Coal and Oil Company - UAE
- VISA Power Limited - India
- Sical Logistics Limited - India
- Vedanta Resources Plc - India
- McConnell Dowell - Australia
- Larsen & Toubro Limited - India
- Videocon Industries ltd - India
- Coalindo Energy - Indonesia
- Grasim Industreis Ltd - India
- Orica Australia Pty. Ltd.
- Billiton Holdings Pty Ltd - Australia
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- Kepco SPC Power Corporation, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Banpu Public Company Limited - Thailand
- Medco Energi Mining Internasional
- Antam Resourcindo - Indonesia
- Altura Mining Limited, Indonesia
- Mjunction Services Limited - India
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