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Thursday, 16 April 15
NEW COMMODITY SUPERHIGHWAY WILL EMERGE IN CHINA, ALTERING ENERGY TRADE FLOWS - WOOD MACKENZIE
 Wood Mackenzie says that China’s Go West strategy – encouraging coastal to inland flow of capital and people - will result in the formation of a new commodity superhighway. This new superhighway will impact the energy trade flows within China and externally via the new Silk Road routes; which acts to link the country's east to west, onwards to Central Asia and beyond. This represents significant business and investment opportunities in China's west.
Wood Mackenzie’s Principal Asia Economist, Ms Cynthia Lim, explains China’s Go West policy, “The plan is already underway and is often touted as China’s silver bullet to ensure long-term GDP growth as the economically dominant coastal region approaches maturity. The coastal provinces will have to upgrade their industries to higher value-add sectors, such as services while industries will relocate inland westwards. This is shifting the regional distribution of demand centres and power generation; and the impact will become more apparent in the next two decades. This will form an impressive commodity superhighway.”
The commodity superhighway will have three main implications: "The first implication," says Mr Frank Yu, Senior Asia Power Consultant, “Is that power generation in the central and western regions will almost triple from around 3,200 Terrawatt hours (TWh) in 2015 to almost 9,600TWh in 2035. This far outpaces the coastal region’s generation growth in the same period, which is only set to increase from under 3,000TWh to 6,000TWh.”
The second implication is the emergence of new energy trade flows within China, from the inland west to coastal regions of China. Mr Yu explains, “Coastal regions will become further reliant on China’s west to meet its energy demand. The west has an abundant supply of energy, accounting for more than 65% of China’s marketable coal and gas reserves. As coal remains the dominant fuel, coal-fired power plants in central and western province areas will generate more power to feed demand-heavy coastal centres through long-distance power transmission grids. Additionally, the coastal region’s generation growth in the same period, which is only set to increase from under 3,000TWh to 6,000TWh.”
The second implication is the emergence of new energy trade flows within China, from the inland west to coastal regions of China. Mr Yu explains, “Coastal regions will become further reliant on China’s west to meet its energy demand. The west has an abundant supply of energy, accounting for more than 65% of China’s marketable coal and gas reserves. As coal remains the dominant fuel, coal-fired power plants in central and western province areas will generate more power to feed demand-heavy coastal centres through long-distance power transmission grids. Additionally, the west holds the majority of renewable energy potential – hydropower, wind and solar. We also expect shale gas production in the west to ramp up, particularly from Sichuan, Shaanxi and Xinjiang, to around 140 billion cubic metres (bcm) by 2035. ”
Wood Mackenzie says the third implication is that planned transport infrastructure build will open up new markets in Central Asia and facilitate energy imports into China via its western border. China is planning two main routes – the new land-borne ‘Silk Road Economic Belt’ and the ‘21st Century Maritime Silk Road’, from southeast China to west Asia, via the South China sea. Infrastructure development will make Xinjiang a key gateway for commodity trade between China, Central Asia and Russia. Ms Lim says, “Xinjiang is strategically important because of its rich energy resources and as a transport hub with oil and gas supplies from Central Asia and Russia converging before being distributed for use in the east.
“For China’s west to fulfil its growth potential, significant investment is needed in energy production and transport infrastructure. We estimate that investment in new power generation capacity and coal mines in Xinjiang, for example, will total US$140billion (bn) and US$120bn respectively in the next 20 years. However, there are also key risks to the success of this commodity superhighway that investors will have to watch for.”
Wood Mackenzie's analysis says the risks are: Firstly, the pace and scale of economic and energy reforms - slow progress in restructuring provincial government debt and introducing market pricing for gas and power could subdue western development. Secondly, the rate of building infrastructure for power transmission as this is key for the success of trade routes with coastal China and Central Asia. Thirdly, water scarcity as it could mean coal mining and power plants that already face cost pressure from extra raw material preparation requirements like coal washing could face higher costs. Lastly, political risks must be managed – this includes diplomatic relationships with China’s Central Asian neighbours in building the new trade routes as well as potential domestic unrest in Xinjiang.
Ms Lim concludes, “Many of the risks can be mitigated through government support and finance but the geopolitical and social risks are far less predictable. China’s west has the energy resources, cost advantages and policy support to become a new energy and commodity superhighway, re-defining the flow of trade for decades to come. It could drive robust GDP growth for China through the longer-term and strengthen China’s economic and political influence with its neighbours. Given the high stakes of this commodity superhighway, success of the Go West strategy is a major Chinese government priority.”
About Wood Mackenzie:
Wood Mackenzie is a global leader in commercial intelligence for the energy, chemicals, metals and mining industries, providing objective analysis and advice on assets, companies, and markets to leading international and national energy and metals companies as well as financial institutions and governments.
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Thursday, 11 June 15
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- Petron Corporation, Philippines
- Kobexindo Tractors - Indoneisa
- Coalindo Energy - Indonesia
- Baramulti Group, Indonesia
- Wilmar Investment Holdings
- Energy Development Corp, Philippines
- Antam Resourcindo - Indonesia
- Intertek Mineral Services - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Agrawal Coal Company - India
- Sarangani Energy Corporation, Philippines
- Coastal Gujarat Power Limited - India
- Australian Coal Association
- Standard Chartered Bank - UAE
- Kumho Petrochemical, South Korea
- IHS Mccloskey Coal Group - USA
- Grasim Industreis Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Barasentosa Lestari - Indonesia
- Karaikal Port Pvt Ltd - India
- Jaiprakash Power Ventures ltd
- Port Waratah Coal Services - Australia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Gujarat Sidhee Cement - India
- Savvy Resources Ltd - HongKong
- Attock Cement Pakistan Limited
- SN Aboitiz Power Inc, Philippines
- Chamber of Mines of South Africa
- GAC Shipping (India) Pvt Ltd
- Globalindo Alam Lestari - Indonesia
- Merrill Lynch Commodities Europe
- Eastern Coal Council - USA
- Aditya Birla Group - India
- Price Waterhouse Coopers - Russia
- San Jose City I Power Corp, Philippines
- Lanco Infratech Ltd - India
- Mintek Dendrill Indonesia
- Jindal Steel & Power Ltd - India
- Dalmia Cement Bharat India
- Singapore Mercantile Exchange
- The Treasury - Australian Government
- Directorate Of Revenue Intelligence - India
- Kalimantan Lumbung Energi - Indonesia
- Sree Jayajothi Cements Limited - India
- Bukit Makmur.PT - Indonesia
- Ministry of Mines - Canada
- Altura Mining Limited, Indonesia
- Indogreen Group - Indonesia
- Simpson Spence & Young - Indonesia
- CNBM International Corporation - China
- GMR Energy Limited - India
- Straits Asia Resources Limited - Singapore
- Sindya Power Generating Company Private Ltd
- Rio Tinto Coal - Australia
- Bayan Resources Tbk. - Indonesia
- Indo Tambangraya Megah - Indonesia
- Indian Oil Corporation Limited
- Chettinad Cement Corporation Ltd - India
- Sakthi Sugars Limited - India
- Ceylon Electricity Board - Sri Lanka
- Kideco Jaya Agung - Indonesia
- Central Java Power - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Romanian Commodities Exchange
- Aboitiz Power Corporation - Philippines
- Tamil Nadu electricity Board
- Ambuja Cements Ltd - India
- The University of Queensland
- Krishnapatnam Port Company Ltd. - India
- Holcim Trading Pte Ltd - Singapore
- Bulk Trading Sa - Switzerland
- Africa Commodities Group - South Africa
- Goldman Sachs - Singapore
- Sical Logistics Limited - India
- SMG Consultants - Indonesia
- London Commodity Brokers - England
- Essar Steel Hazira Ltd - India
- Ind-Barath Power Infra Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Australian Commodity Traders Exchange
- Economic Council, Georgia
- Bhushan Steel Limited - India
- GVK Power & Infra Limited - India
- Electricity Generating Authority of Thailand
- Gujarat Electricity Regulatory Commission - India
- Ministry of Finance - Indonesia
- Videocon Industries ltd - India
- MS Steel International - UAE
- LBH Netherlands Bv - Netherlands
- New Zealand Coal & Carbon
- India Bulls Power Limited - India
- Larsen & Toubro Limited - India
- Bukit Baiduri Energy - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- OPG Power Generation Pvt Ltd - India
- Carbofer General Trading SA - India
- European Bulk Services B.V. - Netherlands
- Mercator Lines Limited - India
- Banpu Public Company Limited - Thailand
- Indonesian Coal Mining Association
- Toyota Tsusho Corporation, Japan
- Kartika Selabumi Mining - Indonesia
- Interocean Group of Companies - India
- SMC Global Power, Philippines
- Medco Energi Mining Internasional
- TeaM Sual Corporation - Philippines
- Eastern Energy - Thailand
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Siam City Cement - Thailand
- ICICI Bank Limited - India
- Orica Mining Services - Indonesia
- Central Electricity Authority - India
- PTC India Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Kaltim Prima Coal - Indonesia
- Mjunction Services Limited - India
- Energy Link Ltd, New Zealand
- Rashtriya Ispat Nigam Limited - India
- Indian Energy Exchange, India
- Parliament of New Zealand
- Bukit Asam (Persero) Tbk - Indonesia
- Independent Power Producers Association of India
- Maharashtra Electricity Regulatory Commission - India
- Xindia Steels Limited - India
- Heidelberg Cement - Germany
- Georgia Ports Authority, United States
- Iligan Light & Power Inc, Philippines
- Riau Bara Harum - Indonesia
- Global Coal Blending Company Limited - Australia
- Power Finance Corporation Ltd., India
- GN Power Mariveles Coal Plant, Philippines
- Orica Australia Pty. Ltd.
- Kepco SPC Power Corporation, Philippines
- Semirara Mining Corp, Philippines
- Global Green Power PLC Corporation, Philippines
- Ministry of Transport, Egypt
- White Energy Company Limited
- Coal and Oil Company - UAE
- Minerals Council of Australia
- Bharathi Cement Corporation - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- The State Trading Corporation of India Ltd
- Formosa Plastics Group - Taiwan
- TNB Fuel Sdn Bhd - Malaysia
- Anglo American - United Kingdom
- Malabar Cements Ltd - India
- Tata Chemicals Ltd - India
- Madhucon Powers Ltd - India
- Maheswari Brothers Coal Limited - India
- IEA Clean Coal Centre - UK
- Mercuria Energy - Indonesia
- Commonwealth Bank - Australia
- Edison Trading Spa - Italy
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Therma Luzon, Inc, Philippines
- Bangladesh Power Developement Board
- Leighton Contractors Pty Ltd - Australia
- Salva Resources Pvt Ltd - India
- PowerSource Philippines DevCo
- AsiaOL BioFuels Corp., Philippines
- Posco Energy - South Korea
- Kapuas Tunggal Persada - Indonesia
- Electricity Authority, New Zealand
- ASAPP Information Group - India
- Borneo Indobara - Indonesia
- Makarim & Taira - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- CIMB Investment Bank - Malaysia
- Metalloyd Limited - United Kingdom
- Pendopo Energi Batubara - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Meenaskhi Energy Private Limited - India
- Bhatia International Limited - India
- Miang Besar Coal Terminal - Indonesia
- Meralco Power Generation, Philippines
- Thiess Contractors Indonesia
- Thai Mozambique Logistica
- Asmin Koalindo Tuhup - Indonesia
- Oldendorff Carriers - Singapore
- Global Business Power Corporation, Philippines
- PNOC Exploration Corporation - Philippines
- Marubeni Corporation - India
- Deloitte Consulting - India
- South Luzon Thermal Energy Corporation
- Directorate General of MIneral and Coal - Indonesia
- Sojitz Corporation - Japan
- McConnell Dowell - Australia
- Cement Manufacturers Association - India
- VISA Power Limited - India
- Renaissance Capital - South Africa
- Planning Commission, India
- Kohat Cement Company Ltd. - Pakistan
- Parry Sugars Refinery, India
- Petrochimia International Co. Ltd.- Taiwan
- International Coal Ventures Pvt Ltd - India
- Uttam Galva Steels Limited - India
- Manunggal Multi Energi - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Samtan Co., Ltd - South Korea
- Sinarmas Energy and Mining - Indonesia
- Star Paper Mills Limited - India
- Trasteel International SA, Italy
- Wood Mackenzie - Singapore
- Cigading International Bulk Terminal - Indonesia
- Bhoruka Overseas - Indonesia
- Latin American Coal - Colombia
- Binh Thuan Hamico - Vietnam
- Jorong Barutama Greston.PT - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Indika Energy - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Neyveli Lignite Corporation Ltd, - India
- Timah Investasi Mineral - Indoneisa
- Siam City Cement PLC, Thailand
- Vedanta Resources Plc - India
- Vizag Seaport Private Limited - India
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