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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$120bn, assuming current domestic prices in Indonesia. This accounts for around three-percent of GDP and is therefore unsustainable." As a result, Wood Mackenzie expects Jokowi's government to make changes:
- The government is expected to push through further price reforms, which will impact near-term demand. However, the income-effect prevails in the medium term and will drive demand growth.
- If subsidies are sharply reduced, we could see a demand drop of around 60-70 thousand barrels per day (kb/d) in gasoline and 45-50 kb/d in diesel.
- The current market size of unsubsidised retail fuels (gasoline and diesel) is very small; however, there is a huge upside potential if the government fully deregulates the market. This would provide a good market opportunity to foreign players operating in the unsubsidised retail fuels market or new players looking to invest in refining and retail sectors in Indonesia.
Editor’s notes:
Wood Mackenzie is a global leader in commercial intelligence for the energy, metals and mining industries. We provide objective analysis and advice on assets, companies and markets, giving clients the insights they need to make better strategic decisions. For more information visit: www.woodmac.com
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Friday, 04 July 14
PARAM MITRA COAL RESOURCES SECURES US$ 7.5M INVESTMENT FROM TEMBUSU PARTNERS
Param Mitra Coal Resources Pte Ltd (“PMCR”), which owns two operating coal mines in Indonesia, has secured from Singapore private equit ...
Thursday, 03 July 14
BUMI TRANSFERS 19% OF KPC STAKE VALUED AT US$ 950 MILLION TO CIC
COALspot.com: PT. Bumi Resources announces that 19% of its holdings in Kaltim Prima Coal (KPC), valued at US$ 950 million, has been transferred to ...
Thursday, 03 July 14
PANAMAX : IN THE ATLANTIC, OWNERS ARE WILLING TO FIX AT ABOUT $2.5K PER DAY - FEARNEYS
Handy
In its latest weekly report, shipbroker Fearneys noted that, this week seems to have been more of a wait and see game between owners and ch ...
Wednesday, 02 July 14
NEWMONT FILES FOR INTERNATIONAL ARBITRATION ON ORE EXPORT BAN - THE JAKARTA POST
PT Newmont Nusa Tenggara (NNT), a subsidiary of United States-based Newmont Corporation, has filed for international arbitration against the govern ...
Wednesday, 02 July 14
THE PANAMAX MARKET CONTINUED TO BLEED FOR ANOTHER WEEK - INTERMODAL
COALspot.com: The Dry Bulk market succumbed to mounting pressure this past week, while the Capesize market proved unable to “save the day&rdq ...
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- ICICI Bank Limited - India
- Latin American Coal - Colombia
- Power Finance Corporation Ltd., India
- Intertek Mineral Services - Indonesia
- Timah Investasi Mineral - Indoneisa
- Marubeni Corporation - India
- GAC Shipping (India) Pvt Ltd
- Semirara Mining and Power Corporation, Philippines
- Parliament of New Zealand
- Parry Sugars Refinery, India
- Ambuja Cements Ltd - India
- Riau Bara Harum - Indonesia
- European Bulk Services B.V. - Netherlands
- Indonesian Coal Mining Association
- McConnell Dowell - Australia
- Indika Energy - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Mintek Dendrill Indonesia
- Merrill Lynch Commodities Europe
- Kobexindo Tractors - Indoneisa
- Global Coal Blending Company Limited - Australia
- Thai Mozambique Logistica
- Chamber of Mines of South Africa
- Energy Development Corp, Philippines
- Malabar Cements Ltd - India
- Coalindo Energy - Indonesia
- SMG Consultants - Indonesia
- Simpson Spence & Young - Indonesia
- SMC Global Power, Philippines
- Price Waterhouse Coopers - Russia
- Mercuria Energy - Indonesia
- PNOC Exploration Corporation - Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- CIMB Investment Bank - Malaysia
- Sical Logistics Limited - India
- Karaikal Port Pvt Ltd - India
- Straits Asia Resources Limited - Singapore
- Wilmar Investment Holdings
- Asmin Koalindo Tuhup - Indonesia
- International Coal Ventures Pvt Ltd - India
- Gujarat Sidhee Cement - India
- Renaissance Capital - South Africa
- Toyota Tsusho Corporation, Japan
- Tata Chemicals Ltd - India
- Mercator Lines Limited - India
- Krishnapatnam Port Company Ltd. - India
- Thiess Contractors Indonesia
- Sojitz Corporation - Japan
- Coal and Oil Company - UAE
- Sinarmas Energy and Mining - Indonesia
- Antam Resourcindo - Indonesia
- Dalmia Cement Bharat India
- Bukit Baiduri Energy - Indonesia
- The University of Queensland
- Formosa Plastics Group - Taiwan
- Jorong Barutama Greston.PT - Indonesia
- South Luzon Thermal Energy Corporation
- Cement Manufacturers Association - India
- New Zealand Coal & Carbon
- Globalindo Alam Lestari - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Larsen & Toubro Limited - India
- Ministry of Finance - Indonesia
- Holcim Trading Pte Ltd - Singapore
- GVK Power & Infra Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Trasteel International SA, Italy
- Aboitiz Power Corporation - Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Indian Oil Corporation Limited
- Essar Steel Hazira Ltd - India
- Borneo Indobara - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Electricity Authority, New Zealand
- Iligan Light & Power Inc, Philippines
- Indogreen Group - Indonesia
- Altura Mining Limited, Indonesia
- Planning Commission, India
- Grasim Industreis Ltd - India
- IHS Mccloskey Coal Group - USA
- Kepco SPC Power Corporation, Philippines
- Deloitte Consulting - India
- India Bulls Power Limited - India
- Australian Coal Association
- Romanian Commodities Exchange
- Barasentosa Lestari - Indonesia
- Posco Energy - South Korea
- Eastern Energy - Thailand
- Leighton Contractors Pty Ltd - Australia
- ASAPP Information Group - India
- Singapore Mercantile Exchange
- Central Java Power - Indonesia
- Ministry of Mines - Canada
- Kapuas Tunggal Persada - Indonesia
- Xindia Steels Limited - India
- Carbofer General Trading SA - India
- Australian Commodity Traders Exchange
- Metalloyd Limited - United Kingdom
- London Commodity Brokers - England
- The Treasury - Australian Government
- Manunggal Multi Energi - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Karbindo Abesyapradhi - Indoneisa
- Bhoruka Overseas - Indonesia
- Baramulti Group, Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Heidelberg Cement - Germany
- Electricity Generating Authority of Thailand
- Minerals Council of Australia
- Orica Australia Pty. Ltd.
- Ceylon Electricity Board - Sri Lanka
- Vedanta Resources Plc - India
- Tamil Nadu electricity Board
- Bhatia International Limited - India
- Central Electricity Authority - India
- TNB Fuel Sdn Bhd - Malaysia
- Bukit Makmur.PT - Indonesia
- Economic Council, Georgia
- Samtan Co., Ltd - South Korea
- Interocean Group of Companies - India
- MS Steel International - UAE
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Bayan Resources Tbk. - Indonesia
- White Energy Company Limited
- Oldendorff Carriers - Singapore
- Savvy Resources Ltd - HongKong
- Energy Link Ltd, New Zealand
- Kumho Petrochemical, South Korea
- GMR Energy Limited - India
- Orica Mining Services - Indonesia
- PowerSource Philippines DevCo
- Indo Tambangraya Megah - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Medco Energi Mining Internasional
- PetroVietnam Power Coal Import and Supply Company
- Jaiprakash Power Ventures ltd
- Ministry of Transport, Egypt
- Bulk Trading Sa - Switzerland
- Rashtriya Ispat Nigam Limited - India
- Siam City Cement PLC, Thailand
- Sakthi Sugars Limited - India
- Rio Tinto Coal - Australia
- Anglo American - United Kingdom
- Kohat Cement Company Ltd. - Pakistan
- Directorate General of MIneral and Coal - Indonesia
- Sindya Power Generating Company Private Ltd
- Salva Resources Pvt Ltd - India
- Standard Chartered Bank - UAE
- Global Business Power Corporation, Philippines
- Agrawal Coal Company - India
- CNBM International Corporation - China
- Pendopo Energi Batubara - Indonesia
- Sree Jayajothi Cements Limited - India
- Bharathi Cement Corporation - India
- Therma Luzon, Inc, Philippines
- Sarangani Energy Corporation, Philippines
- Eastern Coal Council - USA
- Edison Trading Spa - Italy
- Jindal Steel & Power Ltd - India
- Meralco Power Generation, Philippines
- Georgia Ports Authority, United States
- Cigading International Bulk Terminal - Indonesia
- Banpu Public Company Limited - Thailand
- Directorate Of Revenue Intelligence - India
- Semirara Mining Corp, Philippines
- San Jose City I Power Corp, Philippines
- Global Green Power PLC Corporation, Philippines
- Binh Thuan Hamico - Vietnam
- Attock Cement Pakistan Limited
- Aditya Birla Group - India
- Bangladesh Power Developement Board
- Bhushan Steel Limited - India
- Maheswari Brothers Coal Limited - India
- Petron Corporation, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Africa Commodities Group - South Africa
- Vizag Seaport Private Limited - India
- Lanco Infratech Ltd - India
- SN Aboitiz Power Inc, Philippines
- Mjunction Services Limited - India
- Wood Mackenzie - Singapore
- LBH Netherlands Bv - Netherlands
- Kalimantan Lumbung Energi - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- IEA Clean Coal Centre - UK
- OPG Power Generation Pvt Ltd - India
- Star Paper Mills Limited - India
- Commonwealth Bank - Australia
- Independent Power Producers Association of India
- PTC India Limited - India
- Siam City Cement - Thailand
- Maharashtra Electricity Regulatory Commission - India
- Alfred C Toepfer International GmbH - Germany
- Uttam Galva Steels Limited - India
- Ind-Barath Power Infra Limited - India
- Videocon Industries ltd - India
- Chettinad Cement Corporation Ltd - India
- Madhucon Powers Ltd - India
- VISA Power Limited - India
- Makarim & Taira - Indonesia
- Kartika Selabumi Mining - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Port Waratah Coal Services - Australia
- Miang Besar Coal Terminal - Indonesia
- TeaM Sual Corporation - Philippines
- Neyveli Lignite Corporation Ltd, - India
- Indian Energy Exchange, India
- Goldman Sachs - Singapore
- Meenaskhi Energy Private Limited - India
- Coastal Gujarat Power Limited - India
- The State Trading Corporation of India Ltd
- Kaltim Prima Coal - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Kideco Jaya Agung - Indonesia
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