Sunday, July 24, 2016

India's Coal Shift a Double Whammy for Indonesian Exporters




New Delhi/Jakarta. For many coal miners in Indonesia's resource-dependent economy, a surprise shift in India's coal industry— from big importer to potential exporter — could not have come at a worse time.

Prices have slumped over the past five years and a slowing China is buying less. Now, Indonesia faces an Indian double whammy: not only is its main export market producing so much coal that it aims to wind down imports in two years, it's also set to start exporting for the first time — to a market dominated by Indonesia.

State-run Coal India is opening mines at the rate of one a month and expanding existing ones, as Prime Minister Narendra Modi fast-tracks environmental clearances to double output this decade and meet election promises to provide power to a population of 1.3 billion.
That dash for production has left Coal India with a stockpile of more than 50 million tonnes of mined coal, but domestic demand is rising more slowly than anticipated, prompting it to start talks to export to neighbouring Bangladesh.

Not so long ago, Indonesian coal executives brushed aside concerns about slowing sales to China, citing strong Indian demand - suggesting they have underestimated India's ability to quickly ramp up production.

"This is a threat to the Indonesian coal industry," said Supriatna Suhala, executive director of the Indonesian Coal Mining Association (ICMA). "In future, we may have to compete with India. They may become an exporter to Asia."

"Dire trouble"

In Indonesia, the shift in Indian demand is most keenly felt among producers of low-quality coal in southern Sumatra, said Ben Lawson, chief operating officer of Sanaman Coal, which owns a small, unopened mine in the region.

"There's been a ton of closures in South Sumatra and Jambi [provinces] because that was all geared towards the Indian market," he said, noting many mines producing nearby are in "dire trouble".

This could trigger more mine closures on top of thousands already shut across Indonesia due to weak demand and prices, piling the pressure on President Joko Widodo and an economy where coal mining accounts for around 4 percent of GDP.

Even larger firms such as Adaro Energy, Berau Coal Energy and Bukit Asam may have to cut jobs and output once long-term supply contracts to India expire, analysts say - though they are better placed as they have lower mining costs, investments in other businesses like power generation and are able to supply the higher grade, low-ash coal that India's coastal plants rely on.

Price pressure

While Modi's manufacturing push could re-boot Indian demand, current production rates and stock levels signal that India, which has the world's fourth-largest coal reserves, is likely to become an exporter of thermal coal for power generation.

A switch by such a big buyer will keep the pressure on world thermal coal prices , which have picked up from decade lows in January but are still well below where they were five years ago.

Anil Swarup, the top civil servant in India's coal ministry, acknowledged the country's low-quality coal could be a tough sell, particularly as higher grades are available at such low prices. 

Nevertheless, he said Coal India was in talks with Bangladesh over price and the quality of coal to be sold, and he hoped to "see some action on the ground in three months."

Electricity-starved Bangladesh buys only around 3 million tonnes of coal a year, but consultancy Wood Mackenzie predicts demand could jump to as much as 15 million tonnes by 2020 as planned power plants worth at least $8 billion are built there with help from India and China.

Spoiled for choice

India's declining appetite for Indonesian coal is partly a result of low prices that have made higher calorific value coal available elsewhere more affordable.

"It's impacting all the major export markets because now the Indians are not at a loss for choice, and you can see that from month-to-month they just skip around from South Africa to Indonesia," said Lawson at Sanaman Coal.

Imports by India's coastal power plants, which are designed to use only high-grade imported coal, rose around 3 percent to 43.5 million tonnes in the year to end-March, according to mjunction, an online trading platform.

Overall, India's January-May coal imports fell 5.4 percent to 82.57 million metric tons, according to vessel-tracking data compiled by Thomson Reuters. Though Indonesia remained the top supplier, its sales to India fell by a fifth to 36.72 million metric tons, while shipments from South Africa increased by more than a quarter to 16.58 million metric tons.

Indonesia is now tapping other existing export markets, from South Korea and Taiwan to Japan, and may also target countries that don't have large coal resources, such as Malaysia, the Philippines, Bangladesh, Pakistan and Vietnam.
It has also capped its production at 400 million tonnes and is fast-tracking power plant developments to use more domestic coal, said Suhala at the ICMA.

"Indian demand, the great savior from falling China demand, has turned out to be largely fictional," said Hans Lukiman, a small-scale Indonesian coal miner.

Reuters

Tuesday, July 19, 2016

BP to Go Ahead With $8b Indonesia LNG Project Expansion




Tokyo/Jakarta. BP gained final investment approval to an $8 billion expansion of the Tangguh liquefied natural gas (LNG) project in Indonesia on Friday, clearing the way for a third train to start operations in 2020.

BP is going forward with expansion of Tangguh despite announcing it would rein back on spending this year due to weak oil prices. It also approved investment on an Egyptian gas field last week.

The investment will boost annual LNG production capacity at the Tangguh project in Indonesia's West Papua province by 50 percent to 11.4 million metric tons.

Three-quarters of the gas from the new Train 3 will be supplied to Indonesian power utility Perusahaan Listrik Negara , BP said. The rest will go to Japan's Kansai Electric Power.

Officials at Indonesia's upstream energy regulator SKKMigas said the project was worth $8 billion, although BP declined to confirm that figure.

"We are finalising details with potential lenders and at this point I'm not able to disclose who they are," Christina Verchere, BP regional president Asia Pacific, told reporters.
In May BP cut its budget for the project to $8-10 billion from $12 billion.

"This final investment decision was made after confirmation with Tangguh production-sharing contractors and is based on commercial considerations," said Indonesian energy minister Sudirman Said.

BP leads the Tangguh project with a 37.16 percent stake. Its partners include MI Berau, China National Offshore Oil and a venture between Mitsubishi and Inpex.

Friday's decision also sealed a $2.43-billion onshore building contract for a consortium led by Tripatra, part of Indonesia's Indika Energy Group, SKKMigas chief Amien Sunaryadi said.
A $448-million offshore contract was awarded to the Indonesian unit of Saipem, he said.

"(These) are the contractors who did the front end engineering designs, so we hope the (results) aren't too different from that," Sunaryadi said.

Reuters, Jakarta Globe

India's Coal Shift a Double Whammy for Indonesian Exporters




New Delhi/Jakarta. For many coal miners in Indonesia's resource-dependent economy, a surprise shift in India's coal industry— from big importer to potential exporter — could not have come at a worse time.

Prices have slumped over the past five years and a slowing China is buying less. Now, Indonesia faces an Indian double whammy: not only is its main export market producing so much coal that it aims to wind down imports in two years, it's also set to start exporting for the first time — to a market dominated by Indonesia.

State-run Coal India is opening mines at the rate of one a month and expanding existing ones, as Prime Minister Narendra Modi fast-tracks environmental clearances to double output this decade and meet election promises to provide power to a population of 1.3 billion.

That dash for production has left Coal India with a stockpile of more than 50 million tonnes of mined coal, but domestic demand is rising more slowly than anticipated, prompting it to start talks to export to neighbouring Bangladesh.

Not so long ago, Indonesian coal executives brushed aside concerns about slowing sales to China, citing strong Indian demand - suggesting they have underestimated India's ability to quickly ramp up production.

"This is a threat to the Indonesian coal industry," said Supriatna Suhala, executive director of the Indonesian Coal Mining Association (ICMA). "In future, we may have to compete with India. They may become an exporter to Asia."

"Dire trouble"

In Indonesia, the shift in Indian demand is most keenly felt among producers of low-quality coal in southern Sumatra, said Ben Lawson, chief operating officer of Sanaman Coal, which owns a small, unopened mine in the region.

"There's been a ton of closures in South Sumatra and Jambi [provinces] because that was all geared towards the Indian market," he said, noting many mines producing nearby are in "dire trouble".

This could trigger more mine closures on top of thousands already shut across Indonesia due to weak demand and prices, piling the pressure on President Joko Widodo and an economy where coal mining accounts for around 4 percent of GDP.

Even larger firms such as Adaro Energy, Berau Coal Energy and Bukit Asam may have to cut jobs and output once long-term supply contracts to India expire, analysts say - though they are better placed as they have lower mining costs, investments in other businesses like power generation and are able to supply the higher grade, low-ash coal that India's coastal plants rely on.

Price pressure

While Modi's manufacturing push could re-boot Indian demand, current production rates and stock levels signal that India, which has the world's fourth-largest coal reserves, is likely to become an exporter of thermal coal for power generation.

A switch by such a big buyer will keep the pressure on world thermal coal prices , which have picked up from decade lows in January but are still well below where they were five years ago.
Anil Swarup, the top civil servant in India's coal ministry, acknowledged the country's low-quality coal could be a tough sell, particularly as higher grades are available at such low prices. Nevertheless, he said Coal India was in talks with Bangladesh over price and the quality of coal to be sold, and he hoped to "see some action on the ground in three months."

Electricity-starved Bangladesh buys only around 3 million tonnes of coal a year, but consultancy Wood Mackenzie predicts demand could jump to as much as 15 million tonnes by 2020 as planned power plants worth at least $8 billion are built there with help from India and China.

Spoiled for choice

India's declining appetite for Indonesian coal is partly a result of low prices that have made higher calorific value coal available elsewhere more affordable.

"It's impacting all the major export markets because now the Indians are not at a loss for choice, and you can see that from month-to-month they just skip around from South Africa to Indonesia," said Lawson at Sanaman Coal.

Imports by India's coastal power plants, which are designed to use only high-grade imported coal, rose around 3 percent to 43.5 million tonnes in the year to end-March, according to mjunction, an online trading platform.

Overall, India's January-May coal imports fell 5.4 percent to 82.57 million metric tons, according to vessel-tracking data compiled by Thomson Reuters. Though Indonesia remained the top supplier, its sales to India fell by a fifth to 36.72 million metric tons, while shipments from South Africa increased by more than a quarter to 16.58 million metric tons.

Indonesia is now tapping other existing export markets, from South Korea and Taiwan to Japan, and may also target countries that don't have large coal resources, such as Malaysia, the Philippines, Bangladesh, Pakistan and Vietnam.

It has also capped its production at 400 million tonnes and is fast-tracking power plant developments to use more domestic coal, said Suhala at the ICMA.

"Indian demand, the great savior from falling China demand, has turned out to be largely fictional," said Hans Lukiman, a small-scale Indonesian coal miner.

Reuters

Tuesday, June 21, 2016

Indonesia Rejects Exxon Proposal to Boost Cepu Block Output





Jakarta. Indonesia has rejected a proposal to increase crude output from the Cepu block operated by US oil and gas giant Exxon Mobil to up to 200,000 barrels per day, the country’s upstream oil and gas regulator (SKKMigas) told parliament on Tuesday (14/6).

SKKMigas disagrees with Exxon’s analysis of the potential for the project based on environmental and subsurface considerations, SKKMigas chief Amien Sunaryadi said.
Exxon proposed the increase to 200,000 bpd last month noting potential in the project’s reservoirs but said the decision was in the government’s hands.

Reuters

Govt, House Agree to Lower Target on Oil, Gas Production




Jakarta. The government and the House of Representatives budget committee have agreed on Wednesday (15/06) to lower the oil and gas production target in the 2016 revised state budget, a senior official said.

The oil production target is reduced to 820,000 barrels per day from 830,000 bpd in the initial budget, while gas production is lowered slightly to 1.15 million barrels of oil equivalent per day from the 1.16 million in the 2016 state budget.

The committee earlier agreed to a lower oil price assumption at $40 per barrel from $50 initially.

While the figures are slightly more optimistic than the government's proposal, the government still needs a day to calculate their impact on this year's revenue and subsidy spending, Ministry of Finance fiscal policy head Suahasil Nazara said.

According to 2016 state budget revision proposed by the government earlier, total revenue would reach Rp 1,733 trillion ($129.9 billion), almost 5 percent lower than the target in the original budget, as it expects revenue from oil and gas to drop by more than a fifth compared to last year.

Jakarta Globe

Thursday, June 9, 2016

GE Sets Up Gas Turbines for 100-MW Electricity Project in Gorontalo




Jakarta. General Electric has set up turbines for a 100-megawatt gas-fueled power plant in Gorontalo province this week, marking the company's first electricity project as part of Indonesia's grand plan to increase its power capacity to 35,000 megawatts by 2020.

The four TM2500 aeroderivative gas turbines have been installed at state utility company Perusahaan Listrik Negara's power plant in Paguat, Pahuwato district.
GE claims that the turbines can be installed much faster than other power generators, taking only six months from initial construction to becoming fully operational.

"Our technology has been successfully installed in various countries such as Egypt, Algeria, Greece and Japan," GE Indonesia chief executive Handry Satriago said in a statement. "GE's aeroderivative turbines' easy installation makes it ideal for application in remote areas."

Output from the four turbines will be used to maintain voltage stability and meet Sulawesi's electricity needs.

Jakarta Globe

Wednesday, June 8, 2016

Weather May Disrupt Indonesia Coal Output From July to Jan 2017: Agency




Jakarta. Coal production and exports from Indonesia's Sumatra region may be disrupted by abnormally wet weather from July until January 2017, the country's national weather agency (BMKG) said on Friday (03/06), as a result of the La Nina weather phenomenon.

"Transportation is disrupted because it correlates with bad weather. Mining areas are more vulnerable because they are usually steep so the potential for landslides is higher," Nurhayati, head of the Climate, Agroclimate and Maritime Affairs division at BMKG told reporters.
Nurhayati added that river depths would be affected by the forecast additional precipitation, potentially hampering coal barges.

Production and exports from the country's top coal producing region of Kalimantan could be disrupted from October to January, Nurhayati added.

Reuters