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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, 23 July 14
WEEKLY SHIPPING MARKET INSIGHT - INTERMODAL
In Australia, the world’s largest mining group, BHP Billiton, will beat the iron ore export target of more than 220 million tonnes for 2014. ...
Wednesday, 23 July 14
HARD COAL 2013: THE WORLD'S SECOND-MOST IMPORTANT ENERGY SOURCE AND GUARANTOR FOR THE SECURITY OF ENERGY SUPPLIES DURING TIMES OF CRISIS
Hard coal is again in 2013 the fastest-growing fossil primary energy source in the world. As shown in the BP Statistical Review 2014, it covered ab ...
Tuesday, 22 July 14
THE CURRENT COAL PRICES ARE UNPROFITABLE FOR MINERS; COAL PRICES WILL GRADUALLY INCREASE - FITCH
COALspot.com: The Fitch Ratings expect the benchmark Newcastle coal prices (currently at about USD70/MT) to gradually increase.
Fitch's la ...
Tuesday, 22 July 14
SUB-BIT FOB INDONESIA COAL Q3' 14 DOWN 5.21%; Q4' 14 DOWN 3.56%; Q1' 15 DOWN 4.75% M-O-M
COALspot.com: Indonesian coal swaps for average Q3’ 2014 flat on day, weak week on week and on month according to AsiaClear OTC coal swap' ...
Tuesday, 22 July 14
INDONESIA'S MINERAL EXPORT BAN: CHINA UNDER PRESSURE? - CLARKSONS
In January 2014, Indonesia introduced new regulations on exports of unprocessed minerals. Exports of some minerals have been heavily taxed, whilst ...
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- Maharashtra Electricity Regulatory Commission - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Renaissance Capital - South Africa
- The Treasury - Australian Government
- Oldendorff Carriers - Singapore
- Mercator Lines Limited - India
- Uttam Galva Steels Limited - India
- The State Trading Corporation of India Ltd
- Rashtriya Ispat Nigam Limited - India
- Ind-Barath Power Infra Limited - India
- Coal and Oil Company - UAE
- Kalimantan Lumbung Energi - Indonesia
- Cement Manufacturers Association - India
- Central Java Power - Indonesia
- Singapore Mercantile Exchange
- Antam Resourcindo - Indonesia
- Manunggal Multi Energi - Indonesia
- ASAPP Information Group - India
- Makarim & Taira - Indonesia
- Sarangani Energy Corporation, Philippines
- Electricity Generating Authority of Thailand
- Malabar Cements Ltd - India
- Bhushan Steel Limited - India
- Energy Development Corp, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Maheswari Brothers Coal Limited - India
- IHS Mccloskey Coal Group - USA
- Riau Bara Harum - Indonesia
- Toyota Tsusho Corporation, Japan
- Gujarat Sidhee Cement - India
- Straits Asia Resources Limited - Singapore
- Kobexindo Tractors - Indoneisa
- Goldman Sachs - Singapore
- Binh Thuan Hamico - Vietnam
- Planning Commission, India
- Vedanta Resources Plc - India
- San Jose City I Power Corp, Philippines
- Standard Chartered Bank - UAE
- VISA Power Limited - India
- Sojitz Corporation - Japan
- Directorate General of MIneral and Coal - Indonesia
- ICICI Bank Limited - India
- White Energy Company Limited
- Commonwealth Bank - Australia
- Baramulti Group, Indonesia
- New Zealand Coal & Carbon
- Bhatia International Limited - India
- Borneo Indobara - Indonesia
- Global Coal Blending Company Limited - Australia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Edison Trading Spa - Italy
- Leighton Contractors Pty Ltd - Australia
- Holcim Trading Pte Ltd - Singapore
- Price Waterhouse Coopers - Russia
- Sinarmas Energy and Mining - Indonesia
- Xindia Steels Limited - India
- Indo Tambangraya Megah - Indonesia
- Altura Mining Limited, Indonesia
- Lanco Infratech Ltd - India
- Economic Council, Georgia
- Mintek Dendrill Indonesia
- Ambuja Cements Ltd - India
- Meenaskhi Energy Private Limited - India
- PNOC Exploration Corporation - Philippines
- Georgia Ports Authority, United States
- Bangladesh Power Developement Board
- South Luzon Thermal Energy Corporation
- Aditya Birla Group - India
- Samtan Co., Ltd - South Korea
- PowerSource Philippines DevCo
- Larsen & Toubro Limited - India
- Star Paper Mills Limited - India
- Salva Resources Pvt Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- Ministry of Finance - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Trasteel International SA, Italy
- Semirara Mining Corp, Philippines
- Africa Commodities Group - South Africa
- Banpu Public Company Limited - Thailand
- Coastal Gujarat Power Limited - India
- Jaiprakash Power Ventures ltd
- GVK Power & Infra Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Karaikal Port Pvt Ltd - India
- AsiaOL BioFuels Corp., Philippines
- Attock Cement Pakistan Limited
- Iligan Light & Power Inc, Philippines
- CIMB Investment Bank - Malaysia
- International Coal Ventures Pvt Ltd - India
- Posco Energy - South Korea
- Indonesian Coal Mining Association
- Miang Besar Coal Terminal - Indonesia
- Electricity Authority, New Zealand
- SMC Global Power, Philippines
- Marubeni Corporation - India
- Indogreen Group - Indonesia
- Bulk Trading Sa - Switzerland
- Siam City Cement PLC, Thailand
- CNBM International Corporation - China
- Jorong Barutama Greston.PT - Indonesia
- Coalindo Energy - Indonesia
- Bharathi Cement Corporation - India
- Kartika Selabumi Mining - Indonesia
- Tata Chemicals Ltd - India
- Simpson Spence & Young - Indonesia
- Alfred C Toepfer International GmbH - Germany
- GMR Energy Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Mjunction Services Limited - India
- Chamber of Mines of South Africa
- Jindal Steel & Power Ltd - India
- Global Business Power Corporation, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- PetroVietnam Power Coal Import and Supply Company
- MS Steel International - UAE
- Energy Link Ltd, New Zealand
- Anglo American - United Kingdom
- Power Finance Corporation Ltd., India
- Bayan Resources Tbk. - Indonesia
- Intertek Mineral Services - Indonesia
- Indian Oil Corporation Limited
- Savvy Resources Ltd - HongKong
- McConnell Dowell - Australia
- Global Green Power PLC Corporation, Philippines
- GN Power Mariveles Coal Plant, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Minerals Council of Australia
- Wood Mackenzie - Singapore
- Kepco SPC Power Corporation, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Metalloyd Limited - United Kingdom
- Kumho Petrochemical, South Korea
- Bukit Makmur.PT - Indonesia
- Vizag Seaport Private Limited - India
- Globalindo Alam Lestari - Indonesia
- The University of Queensland
- Parry Sugars Refinery, India
- London Commodity Brokers - England
- Meralco Power Generation, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Timah Investasi Mineral - Indoneisa
- Rio Tinto Coal - Australia
- Kideco Jaya Agung - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Gujarat Mineral Development Corp Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Videocon Industries ltd - India
- Merrill Lynch Commodities Europe
- TNB Fuel Sdn Bhd - Malaysia
- Kapuas Tunggal Persada - Indonesia
- Parliament of New Zealand
- Formosa Plastics Group - Taiwan
- Pipit Mutiara Jaya. PT, Indonesia
- TeaM Sual Corporation - Philippines
- Bhoruka Overseas - Indonesia
- Mercuria Energy - Indonesia
- Madhucon Powers Ltd - India
- Orica Mining Services - Indonesia
- Indian Energy Exchange, India
- Cigading International Bulk Terminal - Indonesia
- Australian Coal Association
- Bukit Baiduri Energy - Indonesia
- Kaltim Prima Coal - Indonesia
- Aboitiz Power Corporation - Philippines
- Medco Energi Mining Internasional
- Heidelberg Cement - Germany
- Ministry of Transport, Egypt
- PTC India Limited - India
- Sical Logistics Limited - India
- Port Waratah Coal Services - Australia
- Krishnapatnam Port Company Ltd. - India
- European Bulk Services B.V. - Netherlands
- Chettinad Cement Corporation Ltd - India
- Grasim Industreis Ltd - India
- Indika Energy - Indonesia
- LBH Netherlands Bv - Netherlands
- SN Aboitiz Power Inc, Philippines
- Carbofer General Trading SA - India
- Central Electricity Authority - India
- Therma Luzon, Inc, Philippines
- Orica Australia Pty. Ltd.
- India Bulls Power Limited - India
- Agrawal Coal Company - India
- Eastern Coal Council - USA
- Sakthi Sugars Limited - India
- Gujarat Electricity Regulatory Commission - India
- Siam City Cement - Thailand
- Interocean Group of Companies - India
- Ceylon Electricity Board - Sri Lanka
- Dalmia Cement Bharat India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Independent Power Producers Association of India
- Thai Mozambique Logistica
- GAC Shipping (India) Pvt Ltd
- Romanian Commodities Exchange
- IEA Clean Coal Centre - UK
- Sree Jayajothi Cements Limited - India
- SMG Consultants - Indonesia
- Pendopo Energi Batubara - Indonesia
- Ministry of Mines - Canada
- Deloitte Consulting - India
- Sindya Power Generating Company Private Ltd
- Barasentosa Lestari - Indonesia
- Directorate Of Revenue Intelligence - India
- Tamil Nadu electricity Board
- Petron Corporation, Philippines
- Wilmar Investment Holdings
- Essar Steel Hazira Ltd - India
- Latin American Coal - Colombia
- Thiess Contractors Indonesia
- Eastern Energy - Thailand
- Australian Commodity Traders Exchange
- OPG Power Generation Pvt Ltd - India
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