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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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Tuesday, 22 July 14
ASIAN SUB-BITUMINOUS COAL USERS' GROUP CONFERENCE
Press Release: Registration Open for Fourth Annual Asian Sub-Bituminous Coal Users’ Group Conference
Register today for this year&r ...
Monday, 21 July 14
25% OF INDIA'S POWER PLANTS WERE HAVING SUPER CRITICAL COAL STOCK - COAL AND POWER MINISTER
25% of India’s power plants were having super critical coal stock; power utilities have also been advised to enhance the import of coal - Coa ...
Monday, 21 July 14
INDONESIA'S STATE CONTROLLED COAL MINER BUKIT ASAM ENJOYED HIGHER SELLING PRICE DURING THIS STORMY MARKET
COALspot.com: PT Bukit Asam, the Indonesian government controlled coal miner announced today that, the company has produced 7.70 million tons of co ...
Monday, 21 July 14
CFR SOUTH CHINA COAL Q3 DELIVERY SWAPS LOST 16% SINCE JANUARY 17, 2014
COALspot.com: Coal price falling is continues as the impact oversupply and lower demand. Market is not showing any positive trend in near future.
...
Sunday, 20 July 14
THE FREIGHT MARKET CONTINUED ITS DOWNWARD TREND
COALspot.com: The market continued its downward trend this week as all segments were down compared to last week. The Cape and Panamax indices being ...
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- Asia Pacific Energy Resources Ventures Inc, Philippines
- Interocean Group of Companies - India
- Makarim & Taira - Indonesia
- Sree Jayajothi Cements Limited - India
- Energy Development Corp, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Rashtriya Ispat Nigam Limited - India
- Attock Cement Pakistan Limited
- Binh Thuan Hamico - Vietnam
- Maharashtra Electricity Regulatory Commission - India
- GN Power Mariveles Coal Plant, Philippines
- CIMB Investment Bank - Malaysia
- Mjunction Services Limited - India
- Parliament of New Zealand
- Latin American Coal - Colombia
- Jorong Barutama Greston.PT - Indonesia
- Malabar Cements Ltd - India
- Barasentosa Lestari - Indonesia
- Ministry of Mines - Canada
- Indogreen Group - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Indo Tambangraya Megah - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- MS Steel International - UAE
- Merrill Lynch Commodities Europe
- Carbofer General Trading SA - India
- Xindia Steels Limited - India
- Salva Resources Pvt Ltd - India
- Cement Manufacturers Association - India
- Bukit Baiduri Energy - Indonesia
- Ambuja Cements Ltd - India
- Sical Logistics Limited - India
- Globalindo Alam Lestari - Indonesia
- Sojitz Corporation - Japan
- Power Finance Corporation Ltd., India
- Price Waterhouse Coopers - Russia
- Commonwealth Bank - Australia
- Pendopo Energi Batubara - Indonesia
- Essar Steel Hazira Ltd - India
- Electricity Authority, New Zealand
- Vedanta Resources Plc - India
- LBH Netherlands Bv - Netherlands
- Larsen & Toubro Limited - India
- Planning Commission, India
- GAC Shipping (India) Pvt Ltd
- Deloitte Consulting - India
- Wood Mackenzie - Singapore
- Posco Energy - South Korea
- TeaM Sual Corporation - Philippines
- Cigading International Bulk Terminal - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Directorate General of MIneral and Coal - Indonesia
- Grasim Industreis Ltd - India
- Bukit Makmur.PT - Indonesia
- Minerals Council of Australia
- Siam City Cement - Thailand
- McConnell Dowell - Australia
- Kapuas Tunggal Persada - Indonesia
- Australian Commodity Traders Exchange
- Directorate Of Revenue Intelligence - India
- Coastal Gujarat Power Limited - India
- Mercuria Energy - Indonesia
- Manunggal Multi Energi - Indonesia
- GMR Energy Limited - India
- Bulk Trading Sa - Switzerland
- ASAPP Information Group - India
- Karbindo Abesyapradhi - Indoneisa
- Meenaskhi Energy Private Limited - India
- Bangladesh Power Developement Board
- Star Paper Mills Limited - India
- Holcim Trading Pte Ltd - Singapore
- Bahari Cakrawala Sebuku - Indonesia
- Bhatia International Limited - India
- Medco Energi Mining Internasional
- Formosa Plastics Group - Taiwan
- Bhushan Steel Limited - India
- Gujarat Electricity Regulatory Commission - India
- Independent Power Producers Association of India
- Orica Australia Pty. Ltd.
- PowerSource Philippines DevCo
- The Treasury - Australian Government
- Marubeni Corporation - India
- Kideco Jaya Agung - Indonesia
- London Commodity Brokers - England
- Madhucon Powers Ltd - India
- Leighton Contractors Pty Ltd - Australia
- New Zealand Coal & Carbon
- India Bulls Power Limited - India
- Coal and Oil Company - UAE
- SMG Consultants - Indonesia
- International Coal Ventures Pvt Ltd - India
- Indika Energy - Indonesia
- ICICI Bank Limited - India
- Jindal Steel & Power Ltd - India
- Global Green Power PLC Corporation, Philippines
- Kalimantan Lumbung Energi - Indonesia
- SMC Global Power, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Kumho Petrochemical, South Korea
- Mercator Lines Limited - India
- Renaissance Capital - South Africa
- Meralco Power Generation, Philippines
- Goldman Sachs - Singapore
- Trasteel International SA, Italy
- Africa Commodities Group - South Africa
- Sarangani Energy Corporation, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Kobexindo Tractors - Indoneisa
- OPG Power Generation Pvt Ltd - India
- Global Business Power Corporation, Philippines
- Sakthi Sugars Limited - India
- Standard Chartered Bank - UAE
- Anglo American - United Kingdom
- Thiess Contractors Indonesia
- Jaiprakash Power Ventures ltd
- SN Aboitiz Power Inc, Philippines
- Singapore Mercantile Exchange
- Alfred C Toepfer International GmbH - Germany
- Savvy Resources Ltd - HongKong
- Ceylon Electricity Board - Sri Lanka
- Indonesian Coal Mining Association
- Tata Chemicals Ltd - India
- CNBM International Corporation - China
- Australian Coal Association
- Lanco Infratech Ltd - India
- Energy Link Ltd, New Zealand
- Samtan Co., Ltd - South Korea
- Mintek Dendrill Indonesia
- Bharathi Cement Corporation - India
- Karaikal Port Pvt Ltd - India
- South Luzon Thermal Energy Corporation
- Asmin Koalindo Tuhup - Indonesia
- IEA Clean Coal Centre - UK
- Miang Besar Coal Terminal - Indonesia
- The State Trading Corporation of India Ltd
- Riau Bara Harum - Indonesia
- Maheswari Brothers Coal Limited - India
- Billiton Holdings Pty Ltd - Australia
- Altura Mining Limited, Indonesia
- VISA Power Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Borneo Indobara - Indonesia
- Toyota Tsusho Corporation, Japan
- Therma Luzon, Inc, Philippines
- Port Waratah Coal Services - Australia
- Central Electricity Authority - India
- Intertek Mineral Services - Indonesia
- Kartika Selabumi Mining - Indonesia
- Chettinad Cement Corporation Ltd - India
- Central Java Power - Indonesia
- Uttam Galva Steels Limited - India
- White Energy Company Limited
- Semirara Mining and Power Corporation, Philippines
- Eastern Coal Council - USA
- Dalmia Cement Bharat India
- European Bulk Services B.V. - Netherlands
- The University of Queensland
- Krishnapatnam Port Company Ltd. - India
- Gujarat Mineral Development Corp Ltd - India
- Wilmar Investment Holdings
- Antam Resourcindo - Indonesia
- Oldendorff Carriers - Singapore
- PNOC Exploration Corporation - Philippines
- Baramulti Group, Indonesia
- Kepco SPC Power Corporation, Philippines
- GVK Power & Infra Limited - India
- Tamil Nadu electricity Board
- Sindya Power Generating Company Private Ltd
- Economic Council, Georgia
- Thai Mozambique Logistica
- Ministry of Transport, Egypt
- Eastern Energy - Thailand
- Bukit Asam (Persero) Tbk - Indonesia
- Vizag Seaport Private Limited - India
- Banpu Public Company Limited - Thailand
- TNB Fuel Sdn Bhd - Malaysia
- PTC India Limited - India
- Edison Trading Spa - Italy
- Chamber of Mines of South Africa
- Sinarmas Energy and Mining - Indonesia
- Rio Tinto Coal - Australia
- Coalindo Energy - Indonesia
- Georgia Ports Authority, United States
- Videocon Industries ltd - India
- Ind-Barath Power Infra Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Aditya Birla Group - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Bhoruka Overseas - Indonesia
- Metalloyd Limited - United Kingdom
- PetroVietnam Power Coal Import and Supply Company
- Neyveli Lignite Corporation Ltd, - India
- Bayan Resources Tbk. - Indonesia
- Semirara Mining Corp, Philippines
- Heidelberg Cement - Germany
- Timah Investasi Mineral - Indoneisa
- Electricity Generating Authority of Thailand
- Vijayanagar Sugar Pvt Ltd - India
- Romanian Commodities Exchange
- Kaltim Prima Coal - Indonesia
- Parry Sugars Refinery, India
- Indian Energy Exchange, India
- Orica Mining Services - Indonesia
- Indian Oil Corporation Limited
- Agrawal Coal Company - India
- Aboitiz Power Corporation - Philippines
- Gujarat Sidhee Cement - India
- Siam City Cement PLC, Thailand
- IHS Mccloskey Coal Group - USA
- Straits Asia Resources Limited - Singapore
- Ministry of Finance - Indonesia
- Iligan Light & Power Inc, Philippines
- Simpson Spence & Young - Indonesia
- Petron Corporation, Philippines
- San Jose City I Power Corp, Philippines
- Global Coal Blending Company Limited - Australia
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