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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, 25 July 14
U.S WEEKLY COAL PRODUCTION UP AROUND 3.5% WEEK ENDED JULY 19
COALspot.com – United States the world's second largest coal producer, produced approximately 19.00 million short tons (mmst) of coal in ...
Thursday, 24 July 14
INDONESIA'S JUNE 2014 COAL EXPORT VOLUME DOWN 6.82%; AVERAGE SELLING PRICE DOWN
COALspot.com: Indonesia, one of the world's largest coal producer and the global leading multi grade coal exporter shipped around $1.70* ...
Thursday, 24 July 14
HANDY: SOUTH AFRICA SOFTENED A BIT, HERE RATES ARE AT AROUND 8K +150K BB FOR TRIPS EAST - FEARNLEYS AS
Handy
The handy market in the Atlantic is going sideways and a tick down on low activity. Levels hoovering around USD 5k on Supras. The SMX marke ...
Thursday, 24 July 14
INDONESIAN COAL EXPORTERS ARE REQUIRED TO OBTAIN ET-BATUBARA UNDER LATEST TRADE MINISTRY'S NEW REGULATION
COALspot.com: Indonesia's trade ministry has issued regulation No. 39/M-DAG/PER/7/2014 which is requires exporters of power plant coal as ...
Wednesday, 23 July 14
PANAMAXES WERE BACK ON A DOWNWARD COURSE; CAPES WERE FEELING THE MOST PRESSURE - INTERMODAL
COALspot.com: The Dry Bulk market was on a downward spiral this week, with the BDI noting another week-on-week decline of the magnitude of 10% this ...
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- London Commodity Brokers - England
- Electricity Generating Authority of Thailand
- Mercuria Energy - Indonesia
- Interocean Group of Companies - India
- Kideco Jaya Agung - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Vedanta Resources Plc - India
- Globalindo Alam Lestari - Indonesia
- Power Finance Corporation Ltd., India
- Star Paper Mills Limited - India
- Goldman Sachs - Singapore
- Mercator Lines Limited - India
- Baramulti Group, Indonesia
- Marubeni Corporation - India
- Sinarmas Energy and Mining - Indonesia
- Orica Mining Services - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Bulk Trading Sa - Switzerland
- Bhatia International Limited - India
- Agrawal Coal Company - India
- Australian Coal Association
- Maharashtra Electricity Regulatory Commission - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Karaikal Port Pvt Ltd - India
- Ministry of Mines - Canada
- Bahari Cakrawala Sebuku - Indonesia
- Intertek Mineral Services - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Indian Energy Exchange, India
- Bhushan Steel Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Siam City Cement - Thailand
- Georgia Ports Authority, United States
- Timah Investasi Mineral - Indoneisa
- Vizag Seaport Private Limited - India
- Chettinad Cement Corporation Ltd - India
- Bharathi Cement Corporation - India
- Bukit Asam (Persero) Tbk - Indonesia
- Coastal Gujarat Power Limited - India
- IEA Clean Coal Centre - UK
- VISA Power Limited - India
- Anglo American - United Kingdom
- Edison Trading Spa - Italy
- Billiton Holdings Pty Ltd - Australia
- Kalimantan Lumbung Energi - Indonesia
- Mjunction Services Limited - India
- Manunggal Multi Energi - Indonesia
- Kumho Petrochemical, South Korea
- Heidelberg Cement - Germany
- Lanco Infratech Ltd - India
- Indian Oil Corporation Limited
- SMC Global Power, Philippines
- European Bulk Services B.V. - Netherlands
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Thiess Contractors Indonesia
- IHS Mccloskey Coal Group - USA
- Savvy Resources Ltd - HongKong
- Coalindo Energy - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Bukit Baiduri Energy - Indonesia
- Borneo Indobara - Indonesia
- Global Coal Blending Company Limited - Australia
- New Zealand Coal & Carbon
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Samtan Co., Ltd - South Korea
- CNBM International Corporation - China
- Energy Development Corp, Philippines
- Singapore Mercantile Exchange
- Energy Link Ltd, New Zealand
- Sindya Power Generating Company Private Ltd
- GVK Power & Infra Limited - India
- Dalmia Cement Bharat India
- Salva Resources Pvt Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- Latin American Coal - Colombia
- Minerals Council of Australia
- GMR Energy Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Pipit Mutiara Jaya. PT, Indonesia
- MS Steel International - UAE
- The Treasury - Australian Government
- PowerSource Philippines DevCo
- Semirara Mining Corp, Philippines
- Sical Logistics Limited - India
- Holcim Trading Pte Ltd - Singapore
- Kobexindo Tractors - Indoneisa
- Carbofer General Trading SA - India
- Gujarat Electricity Regulatory Commission - India
- Cement Manufacturers Association - India
- Ministry of Finance - Indonesia
- Siam City Cement PLC, Thailand
- Indo Tambangraya Megah - Indonesia
- Wilmar Investment Holdings
- Larsen & Toubro Limited - India
- Formosa Plastics Group - Taiwan
- Ministry of Transport, Egypt
- ASAPP Information Group - India
- Thai Mozambique Logistica
- Commonwealth Bank - Australia
- Maheswari Brothers Coal Limited - India
- The University of Queensland
- Aditya Birla Group - India
- Essar Steel Hazira Ltd - India
- White Energy Company Limited
- Toyota Tsusho Corporation, Japan
- Meenaskhi Energy Private Limited - India
- Jindal Steel & Power Ltd - India
- Africa Commodities Group - South Africa
- Central Electricity Authority - India
- Meralco Power Generation, Philippines
- Barasentosa Lestari - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Wood Mackenzie - Singapore
- Bukit Makmur.PT - Indonesia
- Posco Energy - South Korea
- Leighton Contractors Pty Ltd - Australia
- Kartika Selabumi Mining - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Global Green Power PLC Corporation, Philippines
- Coal and Oil Company - UAE
- Sakthi Sugars Limited - India
- Banpu Public Company Limited - Thailand
- Eastern Energy - Thailand
- GN Power Mariveles Coal Plant, Philippines
- LBH Netherlands Bv - Netherlands
- Iligan Light & Power Inc, Philippines
- Indika Energy - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Planning Commission, India
- Binh Thuan Hamico - Vietnam
- Directorate Of Revenue Intelligence - India
- Kapuas Tunggal Persada - Indonesia
- Makarim & Taira - Indonesia
- South Luzon Thermal Energy Corporation
- Krishnapatnam Port Company Ltd. - India
- Simpson Spence & Young - Indonesia
- Malabar Cements Ltd - India
- Aboitiz Power Corporation - Philippines
- Sarangani Energy Corporation, Philippines
- Kaltim Prima Coal - Indonesia
- Videocon Industries ltd - India
- Economic Council, Georgia
- Cigading International Bulk Terminal - Indonesia
- Rio Tinto Coal - Australia
- Australian Commodity Traders Exchange
- SN Aboitiz Power Inc, Philippines
- Mintek Dendrill Indonesia
- Petron Corporation, Philippines
- Oldendorff Carriers - Singapore
- Miang Besar Coal Terminal - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Indonesian Coal Mining Association
- Chamber of Mines of South Africa
- Jaiprakash Power Ventures ltd
- Sree Jayajothi Cements Limited - India
- Orica Australia Pty. Ltd.
- Grasim Industreis Ltd - India
- Tata Chemicals Ltd - India
- The State Trading Corporation of India Ltd
- Medco Energi Mining Internasional
- ICICI Bank Limited - India
- Metalloyd Limited - United Kingdom
- Standard Chartered Bank - UAE
- Global Business Power Corporation, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Romanian Commodities Exchange
- OPG Power Generation Pvt Ltd - India
- Bangladesh Power Developement Board
- Karbindo Abesyapradhi - Indoneisa
- GAC Shipping (India) Pvt Ltd
- Asmin Koalindo Tuhup - Indonesia
- Gujarat Sidhee Cement - India
- Electricity Authority, New Zealand
- Altura Mining Limited, Indonesia
- Antam Resourcindo - Indonesia
- Attock Cement Pakistan Limited
- Ceylon Electricity Board - Sri Lanka
- PNOC Exploration Corporation - Philippines
- PetroVietnam Power Coal Import and Supply Company
- TeaM Sual Corporation - Philippines
- Independent Power Producers Association of India
- Therma Luzon, Inc, Philippines
- Uttam Galva Steels Limited - India
- Riau Bara Harum - Indonesia
- Parry Sugars Refinery, India
- Renaissance Capital - South Africa
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Port Waratah Coal Services - Australia
- Central Java Power - Indonesia
- Bhoruka Overseas - Indonesia
- India Bulls Power Limited - India
- CIMB Investment Bank - Malaysia
- Madhucon Powers Ltd - India
- International Coal Ventures Pvt Ltd - India
- San Jose City I Power Corp, Philippines
- Deloitte Consulting - India
- Eastern Coal Council - USA
- Jorong Barutama Greston.PT - Indonesia
- Bayan Resources Tbk. - Indonesia
- Price Waterhouse Coopers - Russia
- Indogreen Group - Indonesia
- Pendopo Energi Batubara - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Kepco SPC Power Corporation, Philippines
- Sojitz Corporation - Japan
- McConnell Dowell - Australia
- Xindia Steels Limited - India
- Trasteel International SA, Italy
- Ind-Barath Power Infra Limited - India
- Ambuja Cements Ltd - India
- Merrill Lynch Commodities Europe
- Straits Asia Resources Limited - Singapore
- Parliament of New Zealand
- Tamil Nadu electricity Board
- SMG Consultants - Indonesia
- PTC India Limited - India
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