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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, 16 July 14
WEEKLY SHIPPING MARKET INSIGHT - INTERMODAL
Wake me up when September ends - Theodore Ntalakos
Since last September most thought that the worst was behind us. It looks like the market de ...
Tuesday, 15 July 14
INDONESIA'S TOTAL COAL PRODUCTION REACHED ANOTHER HIGH DURING THE FIRST SIX MONTHS; GOVERNMENT EXPECTED TO RAISE ROYALTIES
COALspot.com: Indonesia's total coal production reached 213 million tons during January through June, up by 7.6 percent y-o-y. Coal output in I ...
Monday, 14 July 14
THE END OF THE ERA OF HEAVY FUEL OIL IN MARITIME SHIPPING - ICCT
KNOWLEDGE TO ELEVATE
Since the 1960s, heavy fuel oil (HFO) has been the king of marine fuels. Viscous, dirty, yet inexpensive and widely avail ...
Monday, 14 July 14
SGX SUB-BIT FOB INDONESIA COAL SWAP FOR Q4' 14 DELIVERY CLOSED AT $ 54.80
COALspot.com: Indonesian coal swaps for average Q3’ 2014 lost on day, week and on month according to AsiaClear OTC coal swap's reports re ...
Monday, 14 July 14
SGX CFR SOUTH CHINA COAL SWAP FOR Q3' 14 LOST 17.29% SINCE EARLY JANUARY 2014
COALspot.com: Coal price falling is continues as the impact oversupply and lower demand. API 8 CFR South China Coal swap for delivery in Q3 drops U ...
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- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Carbofer General Trading SA - India
- London Commodity Brokers - England
- San Jose City I Power Corp, Philippines
- Cement Manufacturers Association - India
- Mercator Lines Limited - India
- TeaM Sual Corporation - Philippines
- MS Steel International - UAE
- Price Waterhouse Coopers - Russia
- Planning Commission, India
- Kohat Cement Company Ltd. - Pakistan
- Baramulti Group, Indonesia
- Sakthi Sugars Limited - India
- Romanian Commodities Exchange
- Mintek Dendrill Indonesia
- Globalindo Alam Lestari - Indonesia
- South Luzon Thermal Energy Corporation
- Miang Besar Coal Terminal - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Xindia Steels Limited - India
- India Bulls Power Limited - India
- Karaikal Port Pvt Ltd - India
- Essar Steel Hazira Ltd - India
- Thiess Contractors Indonesia
- Singapore Mercantile Exchange
- Merrill Lynch Commodities Europe
- Straits Asia Resources Limited - Singapore
- Gujarat Sidhee Cement - India
- Indian Oil Corporation Limited
- Gujarat Electricity Regulatory Commission - India
- Bukit Asam (Persero) Tbk - Indonesia
- Coalindo Energy - Indonesia
- Altura Mining Limited, Indonesia
- Salva Resources Pvt Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- Bukit Makmur.PT - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Bhatia International Limited - India
- Formosa Plastics Group - Taiwan
- International Coal Ventures Pvt Ltd - India
- Indogreen Group - Indonesia
- Semirara Mining Corp, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Energy Development Corp, Philippines
- ICICI Bank Limited - India
- Eastern Energy - Thailand
- OPG Power Generation Pvt Ltd - India
- Simpson Spence & Young - Indonesia
- Siam City Cement - Thailand
- Offshore Bulk Terminal Pte Ltd, Singapore
- Bayan Resources Tbk. - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Billiton Holdings Pty Ltd - Australia
- Rio Tinto Coal - Australia
- The University of Queensland
- IHS Mccloskey Coal Group - USA
- Bulk Trading Sa - Switzerland
- Pendopo Energi Batubara - Indonesia
- Central Electricity Authority - India
- Tamil Nadu electricity Board
- Leighton Contractors Pty Ltd - Australia
- Wilmar Investment Holdings
- Metalloyd Limited - United Kingdom
- PTC India Limited - India
- Orica Australia Pty. Ltd.
- Samtan Co., Ltd - South Korea
- Jindal Steel & Power Ltd - India
- Energy Link Ltd, New Zealand
- Medco Energi Mining Internasional
- Indika Energy - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- The State Trading Corporation of India Ltd
- Star Paper Mills Limited - India
- Grasim Industreis Ltd - India
- Orica Mining Services - Indonesia
- Mjunction Services Limited - India
- GVK Power & Infra Limited - India
- Bangladesh Power Developement Board
- Bank of Tokyo Mitsubishi UFJ Ltd
- IEA Clean Coal Centre - UK
- Vijayanagar Sugar Pvt Ltd - India
- Ministry of Mines - Canada
- Aditya Birla Group - India
- CNBM International Corporation - China
- Bukit Baiduri Energy - Indonesia
- Coastal Gujarat Power Limited - India
- Manunggal Multi Energi - Indonesia
- Wood Mackenzie - Singapore
- Sical Logistics Limited - India
- Indonesian Coal Mining Association
- Edison Trading Spa - Italy
- Therma Luzon, Inc, Philippines
- Indo Tambangraya Megah - Indonesia
- New Zealand Coal & Carbon
- Chettinad Cement Corporation Ltd - India
- Rashtriya Ispat Nigam Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Agrawal Coal Company - India
- Kepco SPC Power Corporation, Philippines
- Ministry of Finance - Indonesia
- Kartika Selabumi Mining - Indonesia
- PNOC Exploration Corporation - Philippines
- Sojitz Corporation - Japan
- Toyota Tsusho Corporation, Japan
- Ceylon Electricity Board - Sri Lanka
- Videocon Industries ltd - India
- Directorate Of Revenue Intelligence - India
- The Treasury - Australian Government
- Mercuria Energy - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Heidelberg Cement - Germany
- Barasentosa Lestari - Indonesia
- Parry Sugars Refinery, India
- GMR Energy Limited - India
- Africa Commodities Group - South Africa
- Petron Corporation, Philippines
- Parliament of New Zealand
- Eastern Coal Council - USA
- Binh Thuan Hamico - Vietnam
- Maheswari Brothers Coal Limited - India
- Vedanta Resources Plc - India
- Sinarmas Energy and Mining - Indonesia
- Borneo Indobara - Indonesia
- GAC Shipping (India) Pvt Ltd
- Sindya Power Generating Company Private Ltd
- Ministry of Transport, Egypt
- Independent Power Producers Association of India
- Directorate General of MIneral and Coal - Indonesia
- Minerals Council of Australia
- Anglo American - United Kingdom
- Siam City Cement PLC, Thailand
- Aboitiz Power Corporation - Philippines
- Australian Coal Association
- Dalmia Cement Bharat India
- Gujarat Mineral Development Corp Ltd - India
- Ambuja Cements Ltd - India
- Global Green Power PLC Corporation, Philippines
- Sree Jayajothi Cements Limited - India
- Tata Chemicals Ltd - India
- Madhucon Powers Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Global Business Power Corporation, Philippines
- Krishnapatnam Port Company Ltd. - India
- Timah Investasi Mineral - Indoneisa
- Chamber of Mines of South Africa
- Maharashtra Electricity Regulatory Commission - India
- Meralco Power Generation, Philippines
- ASAPP Information Group - India
- VISA Power Limited - India
- European Bulk Services B.V. - Netherlands
- Commonwealth Bank - Australia
- Port Waratah Coal Services - Australia
- Kobexindo Tractors - Indoneisa
- Kumho Petrochemical, South Korea
- Power Finance Corporation Ltd., India
- Indian Energy Exchange, India
- Malabar Cements Ltd - India
- Banpu Public Company Limited - Thailand
- Renaissance Capital - South Africa
- Standard Chartered Bank - UAE
- Australian Commodity Traders Exchange
- Deloitte Consulting - India
- Electricity Generating Authority of Thailand
- Economic Council, Georgia
- White Energy Company Limited
- Kaltim Prima Coal - Indonesia
- Marubeni Corporation - India
- Savvy Resources Ltd - HongKong
- Kideco Jaya Agung - Indonesia
- CIMB Investment Bank - Malaysia
- SMG Consultants - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Thai Mozambique Logistica
- Interocean Group of Companies - India
- Alfred C Toepfer International GmbH - Germany
- Lanco Infratech Ltd - India
- Makarim & Taira - Indonesia
- Bhushan Steel Limited - India
- Sarangani Energy Corporation, Philippines
- Coal and Oil Company - UAE
- TNB Fuel Sdn Bhd - Malaysia
- Bhoruka Overseas - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Riau Bara Harum - Indonesia
- McConnell Dowell - Australia
- Oldendorff Carriers - Singapore
- GN Power Mariveles Coal Plant, Philippines
- Posco Energy - South Korea
- Global Coal Blending Company Limited - Australia
- Trasteel International SA, Italy
- Attock Cement Pakistan Limited
- Latin American Coal - Colombia
- Asmin Koalindo Tuhup - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Antam Resourcindo - Indonesia
- Electricity Authority, New Zealand
- Goldman Sachs - Singapore
- SMC Global Power, Philippines
- Larsen & Toubro Limited - India
- Meenaskhi Energy Private Limited - India
- Central Java Power - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Jaiprakash Power Ventures ltd
- Bharathi Cement Corporation - India
- SN Aboitiz Power Inc, Philippines
- Ind-Barath Power Infra Limited - India
- Georgia Ports Authority, United States
- Vizag Seaport Private Limited - India
- Intertek Mineral Services - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Iligan Light & Power Inc, Philippines
- LBH Netherlands Bv - Netherlands
- Pipit Mutiara Jaya. PT, Indonesia
- AsiaOL BioFuels Corp., Philippines
- Uttam Galva Steels Limited - India
- PowerSource Philippines DevCo
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