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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, 07 July 14
SOUTH AFRICA'S RICHARDS BAY COAL TERMINAL SHIPPED 12% LESS COAL IN JUNE COMPARED TO MAY EXPORTS
COALspot.com: South Africa's Richards Bay Coal Terminal (RBCT) the world’s single largest export coal terminal, shipped 4.91 million tons ...
Monday, 07 July 14
INDONESIAN SUB-BIT COAL SWAPS FOR Q3 DELIVERY CRASHES THROUGH $ 54.50
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, 07 July 14
API 8 CFR SOUTH CHINA COAL SWAPS SHOW A DOWNWARD TREND THIS PAST WEEK
COALspot.com: API 8 CFR South China Coal swap for delivery in Q3 drops US$ 5.47 month on month on Friday, dipping under $68 a ton. The CFR South Ch ...
Sunday, 06 July 14
PANAMAX INDEX BEING THE BIGGEST GAINER THIS WEEK; UP 52.75% W-O-W
COALspot.com: This week there was some positive signs in all the sectors. The Panamax index being the biggest gainer this week after losing for sev ...
Friday, 04 July 14
US: WEEKLY COAL PRODUCTION SLIGHTLY UP W-O-W
COALspot.com – United States the world's second largest coal producer, produced approximately 19.4 million short tons (mmst) of coa ...
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- Power Finance Corporation Ltd., India
- Central Electricity Authority - India
- Sinarmas Energy and Mining - Indonesia
- Barasentosa Lestari - Indonesia
- Planning Commission, India
- Global Green Power PLC Corporation, Philippines
- Intertek Mineral Services - Indonesia
- Malabar Cements Ltd - India
- Bukit Baiduri Energy - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Gujarat Mineral Development Corp Ltd - India
- Sree Jayajothi Cements Limited - India
- Parliament of New Zealand
- Coastal Gujarat Power Limited - India
- CIMB Investment Bank - Malaysia
- PetroVietnam Power Coal Import and Supply Company
- Borneo Indobara - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- ICICI Bank Limited - India
- MS Steel International - UAE
- Eastern Energy - Thailand
- Simpson Spence & Young - Indonesia
- Savvy Resources Ltd - HongKong
- Ind-Barath Power Infra Limited - India
- Energy Link Ltd, New Zealand
- White Energy Company Limited
- Alfred C Toepfer International GmbH - Germany
- Uttam Galva Steels Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Antam Resourcindo - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Aboitiz Power Corporation - Philippines
- The State Trading Corporation of India Ltd
- Vijayanagar Sugar Pvt Ltd - India
- Grasim Industreis Ltd - India
- CNBM International Corporation - China
- Manunggal Multi Energi - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Heidelberg Cement - Germany
- Commonwealth Bank - Australia
- Bukit Asam (Persero) Tbk - Indonesia
- Africa Commodities Group - South Africa
- Vizag Seaport Private Limited - India
- Pendopo Energi Batubara - Indonesia
- Toyota Tsusho Corporation, Japan
- Eastern Coal Council - USA
- Petron Corporation, Philippines
- Siam City Cement - Thailand
- Samtan Co., Ltd - South Korea
- Pipit Mutiara Jaya. PT, Indonesia
- Ambuja Cements Ltd - India
- Indo Tambangraya Megah - Indonesia
- Bharathi Cement Corporation - India
- Electricity Authority, New Zealand
- South Luzon Thermal Energy Corporation
- London Commodity Brokers - England
- Sindya Power Generating Company Private Ltd
- Indonesian Coal Mining Association
- Parry Sugars Refinery, India
- Mintek Dendrill Indonesia
- Carbofer General Trading SA - India
- Global Business Power Corporation, Philippines
- Videocon Industries ltd - India
- Jaiprakash Power Ventures ltd
- Vedanta Resources Plc - India
- Deloitte Consulting - India
- LBH Netherlands Bv - Netherlands
- Bhushan Steel Limited - India
- Formosa Plastics Group - Taiwan
- Makarim & Taira - Indonesia
- Central Java Power - Indonesia
- Australian Coal Association
- Ministry of Mines - Canada
- Tamil Nadu electricity Board
- Salva Resources Pvt Ltd - India
- Thai Mozambique Logistica
- Ceylon Electricity Board - Sri Lanka
- GN Power Mariveles Coal Plant, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Altura Mining Limited, Indonesia
- Latin American Coal - Colombia
- Orica Australia Pty. Ltd.
- Kaltim Prima Coal - Indonesia
- Meralco Power Generation, Philippines
- Chettinad Cement Corporation Ltd - India
- Attock Cement Pakistan Limited
- Gujarat Electricity Regulatory Commission - India
- Banpu Public Company Limited - Thailand
- Sarangani Energy Corporation, Philippines
- Sakthi Sugars Limited - India
- The Treasury - Australian Government
- Offshore Bulk Terminal Pte Ltd, Singapore
- PowerSource Philippines DevCo
- Jindal Steel & Power Ltd - India
- Electricity Generating Authority of Thailand
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Mjunction Services Limited - India
- Rashtriya Ispat Nigam Limited - India
- Trasteel International SA, Italy
- Straits Asia Resources Limited - Singapore
- Global Coal Blending Company Limited - Australia
- Bukit Makmur.PT - Indonesia
- Directorate Of Revenue Intelligence - India
- AsiaOL BioFuels Corp., Philippines
- Kobexindo Tractors - Indoneisa
- Semirara Mining Corp, Philippines
- Agrawal Coal Company - India
- Australian Commodity Traders Exchange
- ASAPP Information Group - India
- Asmin Koalindo Tuhup - Indonesia
- Wood Mackenzie - Singapore
- Georgia Ports Authority, United States
- Lanco Infratech Ltd - India
- Posco Energy - South Korea
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- SMC Global Power, Philippines
- Indika Energy - Indonesia
- McConnell Dowell - Australia
- GVK Power & Infra Limited - India
- Kideco Jaya Agung - Indonesia
- SMG Consultants - Indonesia
- Larsen & Toubro Limited - India
- Binh Thuan Hamico - Vietnam
- IEA Clean Coal Centre - UK
- OPG Power Generation Pvt Ltd - India
- Siam City Cement PLC, Thailand
- Rio Tinto Coal - Australia
- Medco Energi Mining Internasional
- VISA Power Limited - India
- Thiess Contractors Indonesia
- Coalindo Energy - Indonesia
- Metalloyd Limited - United Kingdom
- TNB Fuel Sdn Bhd - Malaysia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Indogreen Group - Indonesia
- Dalmia Cement Bharat India
- Karbindo Abesyapradhi - Indoneisa
- Romanian Commodities Exchange
- Bulk Trading Sa - Switzerland
- Marubeni Corporation - India
- San Jose City I Power Corp, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Bayan Resources Tbk. - Indonesia
- Star Paper Mills Limited - India
- India Bulls Power Limited - India
- SN Aboitiz Power Inc, Philippines
- Billiton Holdings Pty Ltd - Australia
- PNOC Exploration Corporation - Philippines
- Bhatia International Limited - India
- Coal and Oil Company - UAE
- Therma Luzon, Inc, Philippines
- Mercuria Energy - Indonesia
- Meenaskhi Energy Private Limited - India
- Baramulti Group, Indonesia
- Globalindo Alam Lestari - Indonesia
- Price Waterhouse Coopers - Russia
- Sojitz Corporation - Japan
- Renaissance Capital - South Africa
- PTC India Limited - India
- Orica Mining Services - Indonesia
- International Coal Ventures Pvt Ltd - India
- Aditya Birla Group - India
- Indian Energy Exchange, India
- Kalimantan Lumbung Energi - Indonesia
- Independent Power Producers Association of India
- Anglo American - United Kingdom
- Interocean Group of Companies - India
- Wilmar Investment Holdings
- Edison Trading Spa - Italy
- Kapuas Tunggal Persada - Indonesia
- Gujarat Sidhee Cement - India
- Karaikal Port Pvt Ltd - India
- Merrill Lynch Commodities Europe
- Holcim Trading Pte Ltd - Singapore
- New Zealand Coal & Carbon
- Leighton Contractors Pty Ltd - Australia
- Singapore Mercantile Exchange
- GMR Energy Limited - India
- Cement Manufacturers Association - India
- Cigading International Bulk Terminal - Indonesia
- Goldman Sachs - Singapore
- Bangladesh Power Developement Board
- Oldendorff Carriers - Singapore
- Bhoruka Overseas - Indonesia
- Indian Oil Corporation Limited
- Minerals Council of Australia
- IHS Mccloskey Coal Group - USA
- Maheswari Brothers Coal Limited - India
- Chamber of Mines of South Africa
- Mercator Lines Limited - India
- Kartika Selabumi Mining - Indonesia
- Essar Steel Hazira Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- Timah Investasi Mineral - Indoneisa
- Kepco SPC Power Corporation, Philippines
- The University of Queensland
- Krishnapatnam Port Company Ltd. - India
- Sical Logistics Limited - India
- Xindia Steels Limited - India
- Madhucon Powers Ltd - India
- European Bulk Services B.V. - Netherlands
- Port Waratah Coal Services - Australia
- Jorong Barutama Greston.PT - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Kumho Petrochemical, South Korea
- TeaM Sual Corporation - Philippines
- Iligan Light & Power Inc, Philippines
- Riau Bara Harum - Indonesia
- Energy Development Corp, Philippines
- Semirara Mining and Power Corporation, Philippines
- Tata Chemicals Ltd - India
- Ministry of Finance - Indonesia
- Ministry of Transport, Egypt
- GAC Shipping (India) Pvt Ltd
- Standard Chartered Bank - UAE
- Economic Council, Georgia
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