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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, 02 July 14
HANDY BULKERS PROVE TO BE THE MOST SOUGHT AFTER VESSELS OVER THE PAST WEEK - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The Handy dry bulker proved to be the most sought after ship by ship owners active in the second hand market, which saw a slight decline in terms o ...
Wednesday, 02 July 14
SHIPPING: MARKET INSIGHT - GEORGE DERMATIS
After 6 months, 57 ministerial meetings and 67 political agreements, the journey of the Greek Presidency in the EU reached its end yesterday; only ...
Tuesday, 01 July 14
INDIAN POWER PLANT COAL STOCKPILES VERY LOW
COALspot.com: According to today's Weekly Dry Bulk Report published by Commodore Research, Indian power plant coal stockpiles have now fallen t ...
Monday, 30 June 14
SUB-BIT FOB INDONESIA COAL PRICES ARE STILL STRUGGLING TO RECOVER
COALspot.com: Indonesian coal swaps for average Q3’ 2014 lost on week and on month according to AsiaClear OTC coal swap's reports release ...
Monday, 30 June 14
WEEKLY CFR SOUTH CHINA COAL SWAPS DECLINE CONTINUES; Q1'15 LOST US$ 4.55 PMT IN A WEEK
COALspot.com: API 8 CFR South China Coal swap for delivery in Q3 fell US$ 5.25 month on month on Friday, dipping under $69 a tone. The CFR South Ch ...
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- Ministry of Finance - Indonesia
- Mjunction Services Limited - India
- Kaltim Prima Coal - Indonesia
- Baramulti Group, Indonesia
- London Commodity Brokers - England
- SMG Consultants - Indonesia
- GVK Power & Infra Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Maheswari Brothers Coal Limited - India
- PNOC Exploration Corporation - Philippines
- GN Power Mariveles Coal Plant, Philippines
- Indika Energy - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Australian Coal Association
- Sojitz Corporation - Japan
- Billiton Holdings Pty Ltd - Australia
- Kepco SPC Power Corporation, Philippines
- Parry Sugars Refinery, India
- Neyveli Lignite Corporation Ltd, - India
- The Treasury - Australian Government
- Thai Mozambique Logistica
- Banpu Public Company Limited - Thailand
- Chettinad Cement Corporation Ltd - India
- Makarim & Taira - Indonesia
- SMC Global Power, Philippines
- International Coal Ventures Pvt Ltd - India
- Sree Jayajothi Cements Limited - India
- Essar Steel Hazira Ltd - India
- Global Coal Blending Company Limited - Australia
- Jindal Steel & Power Ltd - India
- Mercuria Energy - Indonesia
- Holcim Trading Pte Ltd - Singapore
- AsiaOL BioFuels Corp., Philippines
- Petron Corporation, Philippines
- Gujarat Electricity Regulatory Commission - India
- Larsen & Toubro Limited - India
- Formosa Plastics Group - Taiwan
- Sindya Power Generating Company Private Ltd
- Coal and Oil Company - UAE
- Videocon Industries ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Africa Commodities Group - South Africa
- Antam Resourcindo - Indonesia
- Coastal Gujarat Power Limited - India
- Ceylon Electricity Board - Sri Lanka
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Borneo Indobara - Indonesia
- VISA Power Limited - India
- Energy Development Corp, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Therma Luzon, Inc, Philippines
- Sarangani Energy Corporation, Philippines
- CIMB Investment Bank - Malaysia
- Goldman Sachs - Singapore
- Wood Mackenzie - Singapore
- PetroVietnam Power Coal Import and Supply Company
- Bayan Resources Tbk. - Indonesia
- Carbofer General Trading SA - India
- The State Trading Corporation of India Ltd
- Eastern Energy - Thailand
- PTC India Limited - India
- Miang Besar Coal Terminal - Indonesia
- Indo Tambangraya Megah - Indonesia
- CNBM International Corporation - China
- Edison Trading Spa - Italy
- IEA Clean Coal Centre - UK
- ASAPP Information Group - India
- Planning Commission, India
- Pendopo Energi Batubara - Indonesia
- Marubeni Corporation - India
- Metalloyd Limited - United Kingdom
- Kumho Petrochemical, South Korea
- Kapuas Tunggal Persada - Indonesia
- Bhatia International Limited - India
- Commonwealth Bank - Australia
- Binh Thuan Hamico - Vietnam
- Manunggal Multi Energi - Indonesia
- Standard Chartered Bank - UAE
- Siam City Cement - Thailand
- Krishnapatnam Port Company Ltd. - India
- McConnell Dowell - Australia
- Bangladesh Power Developement Board
- Heidelberg Cement - Germany
- Renaissance Capital - South Africa
- Bhushan Steel Limited - India
- Global Business Power Corporation, Philippines
- Timah Investasi Mineral - Indoneisa
- Thiess Contractors Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Madhucon Powers Ltd - India
- Orica Australia Pty. Ltd.
- Anglo American - United Kingdom
- Grasim Industreis Ltd - India
- Aditya Birla Group - India
- PowerSource Philippines DevCo
- Price Waterhouse Coopers - Russia
- Intertek Mineral Services - Indonesia
- Energy Link Ltd, New Zealand
- Aboitiz Power Corporation - Philippines
- Agrawal Coal Company - India
- Vizag Seaport Private Limited - India
- Power Finance Corporation Ltd., India
- Romanian Commodities Exchange
- Malabar Cements Ltd - India
- Ind-Barath Power Infra Limited - India
- Barasentosa Lestari - Indonesia
- Directorate Of Revenue Intelligence - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Interocean Group of Companies - India
- Siam City Cement PLC, Thailand
- Bukit Baiduri Energy - Indonesia
- Indogreen Group - Indonesia
- Economic Council, Georgia
- Xindia Steels Limited - India
- Vedanta Resources Plc - India
- Kohat Cement Company Ltd. - Pakistan
- Karbindo Abesyapradhi - Indoneisa
- Star Paper Mills Limited - India
- The University of Queensland
- IHS Mccloskey Coal Group - USA
- Mercator Lines Limited - India
- San Jose City I Power Corp, Philippines
- TeaM Sual Corporation - Philippines
- Salva Resources Pvt Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- Oldendorff Carriers - Singapore
- Medco Energi Mining Internasional
- Indonesian Coal Mining Association
- Globalindo Alam Lestari - Indonesia
- Meralco Power Generation, Philippines
- Central Electricity Authority - India
- Orica Mining Services - Indonesia
- Riau Bara Harum - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Attock Cement Pakistan Limited
- Jorong Barutama Greston.PT - Indonesia
- OPG Power Generation Pvt Ltd - India
- Eastern Coal Council - USA
- Central Java Power - Indonesia
- Simpson Spence & Young - Indonesia
- Bharathi Cement Corporation - India
- Parliament of New Zealand
- New Zealand Coal & Carbon
- Electricity Generating Authority of Thailand
- Bhoruka Overseas - Indonesia
- LBH Netherlands Bv - Netherlands
- Mintek Dendrill Indonesia
- Semirara Mining and Power Corporation, Philippines
- Lanco Infratech Ltd - India
- Latin American Coal - Colombia
- Port Waratah Coal Services - Australia
- Ministry of Mines - Canada
- Coalindo Energy - Indonesia
- Karaikal Port Pvt Ltd - India
- Electricity Authority, New Zealand
- Georgia Ports Authority, United States
- Tamil Nadu electricity Board
- Jaiprakash Power Ventures ltd
- Tata Chemicals Ltd - India
- Kartika Selabumi Mining - Indonesia
- ICICI Bank Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Minerals Council of Australia
- Kideco Jaya Agung - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- GMR Energy Limited - India
- Singapore Mercantile Exchange
- India Bulls Power Limited - India
- Trasteel International SA, Italy
- Sical Logistics Limited - India
- Toyota Tsusho Corporation, Japan
- Dalmia Cement Bharat India
- White Energy Company Limited
- SN Aboitiz Power Inc, Philippines
- Chamber of Mines of South Africa
- Altura Mining Limited, Indonesia
- Bukit Makmur.PT - Indonesia
- Wilmar Investment Holdings
- Straits Asia Resources Limited - Singapore
- Deloitte Consulting - India
- Posco Energy - South Korea
- Independent Power Producers Association of India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Gujarat Sidhee Cement - India
- Samtan Co., Ltd - South Korea
- TNB Fuel Sdn Bhd - Malaysia
- Uttam Galva Steels Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Indian Oil Corporation Limited
- GAC Shipping (India) Pvt Ltd
- Cigading International Bulk Terminal - Indonesia
- Meenaskhi Energy Private Limited - India
- European Bulk Services B.V. - Netherlands
- Savvy Resources Ltd - HongKong
- Bukit Asam (Persero) Tbk - Indonesia
- MS Steel International - UAE
- Ambuja Cements Ltd - India
- Merrill Lynch Commodities Europe
- Iligan Light & Power Inc, Philippines
- Ministry of Transport, Egypt
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Cement Manufacturers Association - India
- Petrochimia International Co. Ltd.- Taiwan
- Kobexindo Tractors - Indoneisa
- Directorate General of MIneral and Coal - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Rio Tinto Coal - Australia
- Global Green Power PLC Corporation, Philippines
- Sakthi Sugars Limited - India
- Bulk Trading Sa - Switzerland
- Indian Energy Exchange, India
- Vijayanagar Sugar Pvt Ltd - India
- Alfred C Toepfer International GmbH - Germany
- South Luzon Thermal Energy Corporation
- Semirara Mining Corp, Philippines
- Australian Commodity Traders Exchange
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