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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$120bn, assuming current domestic prices in Indonesia. This accounts for around three-percent of GDP and is therefore unsustainable." As a result, Wood Mackenzie expects Jokowi's government to make changes:
- The government is expected to push through further price reforms, which will impact near-term demand. However, the income-effect prevails in the medium term and will drive demand growth.
- If subsidies are sharply reduced, we could see a demand drop of around 60-70 thousand barrels per day (kb/d) in gasoline and 45-50 kb/d in diesel.
- The current market size of unsubsidised retail fuels (gasoline and diesel) is very small; however, there is a huge upside potential if the government fully deregulates the market. This would provide a good market opportunity to foreign players operating in the unsubsidised retail fuels market or new players looking to invest in refining and retail sectors in Indonesia.
Editor’s notes:
Wood Mackenzie is a global leader in commercial intelligence for the energy, metals and mining industries. We provide objective analysis and advice on assets, companies and markets, giving clients the insights they need to make better strategic decisions. For more information visit: www.woodmac.com
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Thursday, 31 July 14
RIO TINTO SELLS MOZAMBIQUE COAL ASSETS FOR US$ 50 MILLION TO INDIA'S ICVL
COALspot.com: Rio Tinto has agreed to sell its Mozambique coal assets for just US$ 50 million to International coal ventures Private limited of Ind ...
Wednesday, 30 July 14
CAPES SEEMED TO BE STRANDED AT THE SAME LEVELS; PANAMAXES MANAGED TO SLIGHTLY REVIVE - INTERMODAL
COALspot.com: The Dry Bulk market took a breath this past week, as both Panamaxes and Supras started to see a small influx of activity, which was j ...
Tuesday, 29 July 14
TOTAL SELLS ITS SOUTH AFRICAN COAL MINING ASSETS TO EXXARO
Total has signed an agreement with Exxaro Resources Ltd for the sale of its 100% stake in Total Coal South Africa (TCSA), its coal-producing affili ...
Tuesday, 29 July 14
GENCO: DRY BULK SHIPPING VALUATIONS NO LONGER ANCHORED TO DISCOUNTED CASH FLOW METHOD - WEIL
KNOWLEDGE TO ELEVATE
Discounted cash flow analysis is a mainstay among the valuation methodologies used by restructuring professionals and bank ...
Tuesday, 29 July 14
SHIP OWNERS' DEMAND OF NEW VESSELS DENTED AS A RESULT OF LOWER FREIGHT RATES - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The sharp downward direction of dry bulk freight rates has had a negative impact on investors’ secondhand buying appetite that wait to see th ...
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- Jindal Steel & Power Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Heidelberg Cement - Germany
- Electricity Authority, New Zealand
- Vijayanagar Sugar Pvt Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- Star Paper Mills Limited - India
- Ministry of Mines - Canada
- Rashtriya Ispat Nigam Limited - India
- Alfred C Toepfer International GmbH - Germany
- Economic Council, Georgia
- Salva Resources Pvt Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Indika Energy - Indonesia
- ASAPP Information Group - India
- Coalindo Energy - Indonesia
- Minerals Council of Australia
- GAC Shipping (India) Pvt Ltd
- Central Electricity Authority - India
- International Coal Ventures Pvt Ltd - India
- Independent Power Producers Association of India
- Central Java Power - Indonesia
- OPG Power Generation Pvt Ltd - India
- Bukit Makmur.PT - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Planning Commission, India
- South Luzon Thermal Energy Corporation
- PTC India Limited - India
- Meenaskhi Energy Private Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Globalindo Alam Lestari - Indonesia
- Edison Trading Spa - Italy
- Semirara Mining and Power Corporation, Philippines
- Coal and Oil Company - UAE
- Goldman Sachs - Singapore
- Maheswari Brothers Coal Limited - India
- Gujarat Sidhee Cement - India
- Eastern Coal Council - USA
- Sakthi Sugars Limited - India
- Larsen & Toubro Limited - India
- Ind-Barath Power Infra Limited - India
- Energy Development Corp, Philippines
- Malabar Cements Ltd - India
- Medco Energi Mining Internasional
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Essar Steel Hazira Ltd - India
- Mjunction Services Limited - India
- Manunggal Multi Energi - Indonesia
- Mintek Dendrill Indonesia
- SN Aboitiz Power Inc, Philippines
- VISA Power Limited - India
- Ministry of Transport, Egypt
- Electricity Generating Authority of Thailand
- Port Waratah Coal Services - Australia
- Cigading International Bulk Terminal - Indonesia
- Sindya Power Generating Company Private Ltd
- Australian Commodity Traders Exchange
- Mercator Lines Limited - India
- Antam Resourcindo - Indonesia
- Barasentosa Lestari - Indonesia
- Merrill Lynch Commodities Europe
- Kapuas Tunggal Persada - Indonesia
- The University of Queensland
- Bahari Cakrawala Sebuku - Indonesia
- Jaiprakash Power Ventures ltd
- Global Green Power PLC Corporation, Philippines
- GVK Power & Infra Limited - India
- CNBM International Corporation - China
- Savvy Resources Ltd - HongKong
- Vizag Seaport Private Limited - India
- Grasim Industreis Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Thiess Contractors Indonesia
- Sarangani Energy Corporation, Philippines
- PowerSource Philippines DevCo
- Aboitiz Power Corporation - Philippines
- Eastern Energy - Thailand
- Bhushan Steel Limited - India
- Ambuja Cements Ltd - India
- Kideco Jaya Agung - Indonesia
- Latin American Coal - Colombia
- Jorong Barutama Greston.PT - Indonesia
- Kartika Selabumi Mining - Indonesia
- Indo Tambangraya Megah - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Kumho Petrochemical, South Korea
- Sinarmas Energy and Mining - Indonesia
- Parliament of New Zealand
- Rio Tinto Coal - Australia
- IEA Clean Coal Centre - UK
- Xindia Steels Limited - India
- Metalloyd Limited - United Kingdom
- Aditya Birla Group - India
- Indonesian Coal Mining Association
- Uttam Galva Steels Limited - India
- London Commodity Brokers - England
- Riau Bara Harum - Indonesia
- Coastal Gujarat Power Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Intertek Mineral Services - Indonesia
- Agrawal Coal Company - India
- Bhatia International Limited - India
- Kobexindo Tractors - Indoneisa
- Bayan Resources Tbk. - Indonesia
- Formosa Plastics Group - Taiwan
- Pendopo Energi Batubara - Indonesia
- AsiaOL BioFuels Corp., Philippines
- San Jose City I Power Corp, Philippines
- Borneo Indobara - Indonesia
- Therma Luzon, Inc, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Dalmia Cement Bharat India
- PetroVietnam Power Coal Import and Supply Company
- White Energy Company Limited
- Lanco Infratech Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Interocean Group of Companies - India
- CIMB Investment Bank - Malaysia
- Neyveli Lignite Corporation Ltd, - India
- Meralco Power Generation, Philippines
- Carbofer General Trading SA - India
- Miang Besar Coal Terminal - Indonesia
- Global Business Power Corporation, Philippines
- LBH Netherlands Bv - Netherlands
- Karaikal Port Pvt Ltd - India
- Iligan Light & Power Inc, Philippines
- Makarim & Taira - Indonesia
- The Treasury - Australian Government
- Petrochimia International Co. Ltd.- Taiwan
- Deloitte Consulting - India
- Energy Link Ltd, New Zealand
- Timah Investasi Mineral - Indoneisa
- Singapore Mercantile Exchange
- Vedanta Resources Plc - India
- Renaissance Capital - South Africa
- Indian Oil Corporation Limited
- Gujarat Electricity Regulatory Commission - India
- Videocon Industries ltd - India
- Semirara Mining Corp, Philippines
- Thai Mozambique Logistica
- Orica Australia Pty. Ltd.
- Mercuria Energy - Indonesia
- Banpu Public Company Limited - Thailand
- Siam City Cement PLC, Thailand
- Sojitz Corporation - Japan
- Attock Cement Pakistan Limited
- Pipit Mutiara Jaya. PT, Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Indian Energy Exchange, India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Sical Logistics Limited - India
- GMR Energy Limited - India
- Sree Jayajothi Cements Limited - India
- IHS Mccloskey Coal Group - USA
- Tamil Nadu electricity Board
- Bukit Baiduri Energy - Indonesia
- Toyota Tsusho Corporation, Japan
- Oldendorff Carriers - Singapore
- Power Finance Corporation Ltd., India
- Marubeni Corporation - India
- Australian Coal Association
- MS Steel International - UAE
- PNOC Exploration Corporation - Philippines
- Bangladesh Power Developement Board
- Baramulti Group, Indonesia
- Billiton Holdings Pty Ltd - Australia
- Bharathi Cement Corporation - India
- Directorate Of Revenue Intelligence - India
- Indogreen Group - Indonesia
- Anglo American - United Kingdom
- Simpson Spence & Young - Indonesia
- Romanian Commodities Exchange
- Madhucon Powers Ltd - India
- Tata Chemicals Ltd - India
- Orica Mining Services - Indonesia
- SMG Consultants - Indonesia
- Standard Chartered Bank - UAE
- Karbindo Abesyapradhi - Indoneisa
- European Bulk Services B.V. - Netherlands
- Kalimantan Lumbung Energi - Indonesia
- Petron Corporation, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Posco Energy - South Korea
- SMC Global Power, Philippines
- Siam City Cement - Thailand
- TNB Fuel Sdn Bhd - Malaysia
- Straits Asia Resources Limited - Singapore
- TeaM Sual Corporation - Philippines
- Chettinad Cement Corporation Ltd - India
- New Zealand Coal & Carbon
- Bulk Trading Sa - Switzerland
- Commonwealth Bank - Australia
- Trasteel International SA, Italy
- Chamber of Mines of South Africa
- Africa Commodities Group - South Africa
- Bhoruka Overseas - Indonesia
- Kaltim Prima Coal - Indonesia
- Binh Thuan Hamico - Vietnam
- Krishnapatnam Port Company Ltd. - India
- Altura Mining Limited, Indonesia
- ICICI Bank Limited - India
- Price Waterhouse Coopers - Russia
- Georgia Ports Authority, United States
- Parry Sugars Refinery, India
- India Bulls Power Limited - India
- Global Coal Blending Company Limited - Australia
- Ministry of Finance - Indonesia
- The State Trading Corporation of India Ltd
- Leighton Contractors Pty Ltd - Australia
- Cement Manufacturers Association - India
- Samtan Co., Ltd - South Korea
- Wood Mackenzie - Singapore
- Kepco SPC Power Corporation, Philippines
- Wilmar Investment Holdings
- McConnell Dowell - Australia
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