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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, 28 July 14
Q3' 14, SUB-BIT FOB INDONESIA COAL SWAP GAINED $ 0.08 DAY ON DAY AND $ 0.68 WEEK ON WEEK
COALspot.com: Indonesian coal swaps for average Q3’ 2014 increased by just US$ 0.08 day on day and US$ 0.68 week on week. The swap was lost U ...
Monday, 28 July 14
S. KOREA'S KOSPO SEEKS 148K T OF 4700 NAR COAL
COALspot.com: Korea Southern Power Co Ltd (KOSPO) is seeking 148,000 tonnes of 4,700 kcal/kg NCV steaming coal for shipment between October to Nove ...
Monday, 28 July 14
CFR SOUTH CHINA COAL SWAP SLIGHTLY UP WEEK ON WEEK
COALspot.com: Coal price falling is continues as the impact oversupply and lower demand. The swap for Q3, Q4 and Q1 2015 showing slight improvement ...
Sunday, 27 July 14
RAMADAN HOLIDAYS IN INDONESIA PUTTING PRESSURE ON CHARTER RATES FROM INDONESIA - VISTAAR INDIA
COALspot.com: The freight rates were almost steady as very slight improvement in BDI by about 1 pct. The BDI was at 739 points after improvin ...
Saturday, 26 July 14
COAL MINING COMPANIES CLOSED TEMPORARILY - THE JAKARTA POST
The Sarolangun regency administration in Jambi has suspended the operations of 10 coal mining companies in line with a circular issued by Regent Ce ...
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- Leighton Contractors Pty Ltd - Australia
- Siam City Cement PLC, Thailand
- Energy Link Ltd, New Zealand
- Merrill Lynch Commodities Europe
- Central Electricity Authority - India
- Metalloyd Limited - United Kingdom
- Interocean Group of Companies - India
- ASAPP Information Group - India
- Baramulti Group, Indonesia
- SN Aboitiz Power Inc, Philippines
- Port Waratah Coal Services - Australia
- Toyota Tsusho Corporation, Japan
- Wood Mackenzie - Singapore
- Marubeni Corporation - India
- TNB Fuel Sdn Bhd - Malaysia
- India Bulls Power Limited - India
- Oldendorff Carriers - Singapore
- Riau Bara Harum - Indonesia
- Ambuja Cements Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Posco Energy - South Korea
- Economic Council, Georgia
- Indo Tambangraya Megah - Indonesia
- Sinarmas Energy and Mining - Indonesia
- ICICI Bank Limited - India
- Barasentosa Lestari - Indonesia
- Aboitiz Power Corporation - Philippines
- Bayan Resources Tbk. - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Formosa Plastics Group - Taiwan
- Semirara Mining and Power Corporation, Philippines
- South Luzon Thermal Energy Corporation
- Indika Energy - Indonesia
- Makarim & Taira - Indonesia
- Eastern Coal Council - USA
- Iligan Light & Power Inc, Philippines
- Xindia Steels Limited - India
- Georgia Ports Authority, United States
- Heidelberg Cement - Germany
- Neyveli Lignite Corporation Ltd, - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Borneo Indobara - Indonesia
- Coastal Gujarat Power Limited - India
- Manunggal Multi Energi - Indonesia
- CNBM International Corporation - China
- Sree Jayajothi Cements Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Videocon Industries ltd - India
- London Commodity Brokers - England
- Salva Resources Pvt Ltd - India
- Savvy Resources Ltd - HongKong
- Australian Commodity Traders Exchange
- Power Finance Corporation Ltd., India
- Medco Energi Mining Internasional
- Mercuria Energy - Indonesia
- The Treasury - Australian Government
- Altura Mining Limited, Indonesia
- Global Coal Blending Company Limited - Australia
- Standard Chartered Bank - UAE
- Lanco Infratech Ltd - India
- Coal and Oil Company - UAE
- Orica Mining Services - Indonesia
- Bhushan Steel Limited - India
- Madhucon Powers Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Electricity Authority, New Zealand
- MS Steel International - UAE
- Siam City Cement - Thailand
- Australian Coal Association
- Central Java Power - Indonesia
- Thiess Contractors Indonesia
- International Coal Ventures Pvt Ltd - India
- PTC India Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- New Zealand Coal & Carbon
- PowerSource Philippines DevCo
- Indogreen Group - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Renaissance Capital - South Africa
- Indonesian Coal Mining Association
- Meralco Power Generation, Philippines
- Electricity Generating Authority of Thailand
- Billiton Holdings Pty Ltd - Australia
- Trasteel International SA, Italy
- PetroVietnam Power Coal Import and Supply Company
- Minerals Council of Australia
- Karbindo Abesyapradhi - Indoneisa
- Miang Besar Coal Terminal - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- IHS Mccloskey Coal Group - USA
- Simpson Spence & Young - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Ministry of Mines - Canada
- Mercator Lines Limited - India
- Sindya Power Generating Company Private Ltd
- Petron Corporation, Philippines
- Planning Commission, India
- GAC Shipping (India) Pvt Ltd
- Tamil Nadu electricity Board
- Global Green Power PLC Corporation, Philippines
- Wilmar Investment Holdings
- CIMB Investment Bank - Malaysia
- Tata Chemicals Ltd - India
- Malabar Cements Ltd - India
- Gujarat Sidhee Cement - India
- Chettinad Cement Corporation Ltd - India
- Rio Tinto Coal - Australia
- Bahari Cakrawala Sebuku - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Maheswari Brothers Coal Limited - India
- Ind-Barath Power Infra Limited - India
- Sical Logistics Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Eastern Energy - Thailand
- Essar Steel Hazira Ltd - India
- Parry Sugars Refinery, India
- McConnell Dowell - Australia
- Banpu Public Company Limited - Thailand
- AsiaOL BioFuels Corp., Philippines
- Chamber of Mines of South Africa
- VISA Power Limited - India
- Star Paper Mills Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Vedanta Resources Plc - India
- Commonwealth Bank - Australia
- Orica Australia Pty. Ltd.
- GMR Energy Limited - India
- Independent Power Producers Association of India
- Goldman Sachs - Singapore
- SMG Consultants - Indonesia
- Jaiprakash Power Ventures ltd
- Therma Luzon, Inc, Philippines
- Intertek Mineral Services - Indonesia
- The University of Queensland
- Sojitz Corporation - Japan
- San Jose City I Power Corp, Philippines
- Singapore Mercantile Exchange
- Jorong Barutama Greston.PT - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Asia Pacific Energy Resources Ventures Inc, Philippines
- European Bulk Services B.V. - Netherlands
- Timah Investasi Mineral - Indoneisa
- Indian Energy Exchange, India
- GN Power Mariveles Coal Plant, Philippines
- Kepco SPC Power Corporation, Philippines
- LBH Netherlands Bv - Netherlands
- Bukit Baiduri Energy - Indonesia
- Anglo American - United Kingdom
- TeaM Sual Corporation - Philippines
- Ministry of Transport, Egypt
- The State Trading Corporation of India Ltd
- Pendopo Energi Batubara - Indonesia
- Bhoruka Overseas - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Ceylon Electricity Board - Sri Lanka
- Agrawal Coal Company - India
- Bhatia International Limited - India
- Global Business Power Corporation, Philippines
- Aditya Birla Group - India
- Thai Mozambique Logistica
- Directorate Of Revenue Intelligence - India
- Deloitte Consulting - India
- Larsen & Toubro Limited - India
- Globalindo Alam Lestari - Indonesia
- Mjunction Services Limited - India
- Parliament of New Zealand
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Bukit Asam (Persero) Tbk - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Energy Development Corp, Philippines
- Bukit Makmur.PT - Indonesia
- Semirara Mining Corp, Philippines
- Africa Commodities Group - South Africa
- Mintek Dendrill Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Cigading International Bulk Terminal - Indonesia
- Sakthi Sugars Limited - India
- Kaltim Prima Coal - Indonesia
- Cement Manufacturers Association - India
- Straits Asia Resources Limited - Singapore
- Romanian Commodities Exchange
- Latin American Coal - Colombia
- Uttam Galva Steels Limited - India
- SMC Global Power, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Edison Trading Spa - Italy
- Carbofer General Trading SA - India
- Grasim Industreis Ltd - India
- PNOC Exploration Corporation - Philippines
- Jindal Steel & Power Ltd - India
- Kumho Petrochemical, South Korea
- Indian Oil Corporation Limited
- IEA Clean Coal Centre - UK
- Sarangani Energy Corporation, Philippines
- White Energy Company Limited
- Vizag Seaport Private Limited - India
- Alfred C Toepfer International GmbH - Germany
- Bharathi Cement Corporation - India
- Kobexindo Tractors - Indoneisa
- Binh Thuan Hamico - Vietnam
- Kideco Jaya Agung - Indonesia
- Price Waterhouse Coopers - Russia
- Attock Cement Pakistan Limited
- Bulk Trading Sa - Switzerland
- Antam Resourcindo - Indonesia
- Karaikal Port Pvt Ltd - India
- Samtan Co., Ltd - South Korea
- OPG Power Generation Pvt Ltd - India
- Bangladesh Power Developement Board
- Dalmia Cement Bharat India
- Ministry of Finance - Indonesia
- GVK Power & Infra Limited - India
- Coalindo Energy - Indonesia
- Meenaskhi Energy Private Limited - India
- Kartika Selabumi Mining - Indonesia
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