Saturday, September 26, 2015

Russia Reportedly to Invest $34m in East Kalimantan Railway, Infrastructure

Balikpapan, East Kalimantan. The provincial government of East Kalimantan says Russian investors plan to spend Rp 500 trillion ($33.9 billion) on a railway, bridges and various other infrastructure there.

Bere Ali, an assistant to the provincial administration secretary, said on Friday that the Russians were willing to invest without the need for the local government to put up any money of its own.

Russia’s biggest rail and locomotive company, Russian Railways, earlier completed a feasibility study to build tracks stretching almost 190 kilometers from West Kutai to Balikpapan – Indonesia’s coal and oil hubs, respectively.

Bere said this could start as a freight or a passenger railway, depending on market demand. He added that East Kalimantan Governor Awang Farouk Ishak had checked the kinds of trains that could be used on the line during a visit to Russia recently.

“When the railway is ready, whichever type of train is chosen will be OK. It will depend on the market demand – whether they want coal first, or passenger service first,” Bere said.

He also claimed that Russian investors planned to build 23 bridges across the province. “They will also build a science park and invest in many other projects,” he said.

Bere said the local administration and Russia had also discussed the possibility of developing a nuclear power plant in East Kalimantan, possibly involving Russia’s Rosatom. Any such plan, however, would require approval from the central government.

The Jakarta Globe was unable to confirm any of these stated plans with the Russian Embassy.

Monday, September 21, 2015

Pertamina to Take Over ExxonMobil's Aceh Operations Next Month

Jakarta. State energy firm Pertamina is acquiring all of ExxonMobil's oil and gas blocks in Aceh as part of its expansion efforts and to help ensure gas supply to a local fertilizer company.
ExxonMobil, the world largest listed oil and gas company, is selling its interest in B Block and North Sumatra Offshore, as production has steadily been on the decline and the firm's rights over them is scheduled to expire in 2018.

B Block and North Sumatra Offshore now yield only 2,000 barrel of oil and 50 million standard cubic feet per day. Still, Pertamina is confident it could triple production, Pertamina president director Dwi Soetjipto said over the weekend.

"We will simplify operations in [Aceh] and integrate the upstream and downstream activities," Dwi said without disclosing the value of the deal as the company is still in the process of finalizing the details.

ExxoMobil will also sell a 30 percent share in liquefied natural gas maker Arun Natural Gas Liquefaction to Pertamina. The latter currently owns 55 percent of the company.
A joint venture called Japanese-Indonesia LNG Company holds the remaining shares in Arun NGL.
Adapun Pertamina mengempit 55 persen saham dan sisanya sebanyak 15 persen dimiliki oleh konsorsium Japan-Indonesia LNG Company (JILCO). - See more at:

Upstream oil and gas regulator SKKMigas has approved Pertamina's move and said it would help ensure gas supply to fertilizer maker Pupuk Iskandar Muda, the SKKMigas spokesman Elan Bintoro said over the weekend.

ExxonMobil will officially hand over operation to Pertamina next month, Elan said.
SKKMigas said the move would not affect the provincial government's plan to buy into the blocks when the current rights expire in 2018.

Investor Daily

Saturday, September 19, 2015

Indonesia's Coal Output Falls 15.4% in January-August

Jakarta. Indonesia's coal output declined 15.4 percent in the January to August period this year on the back of low demand, a ministry official said on Monday.

Adhi Wibowo, director of coal business development at the ministry, said that Indonesia's coal production was 263 million tons in the first eight months of this year, down 15.4 percent from 311 million tons in the same period last year.

"The production decline is caused by the low global demand of coal," Adhi told reporters on Monday.

He also said that Indonesia's coal export declined 18 percent to 211 million tons in the January to August period compared to 258 million tons in the same period a year earlier.
Coal miners continue to face challenges in the industry because of weak commodity prices sparked by lower global demand.

However, Adhi added that the weak coal price did not affect the domestic demand for coal. The domestic volume reached 52 million tons until August, down one million ton compared to the January to August period last year.

"The domestic demand remains stable because there are needs for power plants and the industrial sector," he said.

The coal output reached 81.88 percent of the total target that the government set for this year, which is 425 million tons.

Jakarta Globe

Saturday, September 12, 2015

Indonesia's Motorbike Sales Rise in August, but Gloom Remains

Jakarta. Sales of motorbikes and automobiles in Indonesia recovered slightly in August after months of poor numbers, but the industry remains pessimistic about the outlook for the rest of this year.

Motorcycle sales rose 2.1 percent from a year earlier in August, data from industry association showed on Friday, the first growth after seven months. Sales in August were 622,089 units, the highest since October last year.

The number of cars sold in August still contracted on an annual basis, but only by 6.4 percent, compared with July's 39.1 percent plunge. From a year earlier, car sales have fallen every month since September 2014.

Sales of cars and motorbikes are leading economic indicators in Southeast Asia's largest economy, where domestic consumption accounts for more than half of gross domestic product (GDP).

The August increase in motorbike sales did not dispel gloom.

"We don't see this as a breath of fresh air," said Sigit Kumala, head of commercial at 

Indonesia's motorcycle association, adding the August figure could be a mirage.

"The fact that sales were down more than 21 percent in January-September means this is still a tough year," he said.

Indonesia's car association, Gaikindo, was equally downbeat. Jongkie Sugiarto, chairman, said it just cut its 2015 car sales target for the second time, to between 950,000 and 1 million from 1.1 million.

At the beginning of 2015, Gaikindo had forecast sales of 1.2 million cars for the year.
"We are not seeing much change," Sugiarto said.

In a bid to revive growth in automotive industry, the central bank in June eased its regulations on minimum down payment for car and motorcycle loans.

The new minimum down payment for cars and motorcycles bought with credit was set at 25 percent and 20 percent respectively, from 30 and 25 percent previously.

The measure "offers little support and doesn't have much impact," Sugiarto said.
Hurt by low commodity prices, Indonesia's annual economic growth dropped to 4.67 percent in the second quarter, its weakest pace in six years.

Bank Indonesia expects 2015 growth of 4.89 percent, which would make this the first expansion below 5 percent since 2009.


Indonesia's Pertamina to Supply Diesel to Adaro Until 2022

Jakarta. Indonesia's state-owned energy company Pertamina signed a deal on Friday to supply 400 million-550 million liters (2.5 million-3.5 million barrels) of diesel fuel per year to coal miner Adaro Energy, the two companies said.

"With the deal, where previously we bought fuel from foreign companies worth $340 million per year, now we will purchase from our brother, Pertamina, and the transaction will be done onshore," Adaro CEO Garibaldi Thohir told reporters.

The supply deal runs from November through to October 2022 and is expected to supply the bulk of Adaro's annual fuel demand of an estimated 600 million-700 million liters of diesel.

The deal follows a memorandum of understanding signed by the companies in May, in which Pertamina agreed to supply up to 800 million liters of diesel a year to Adaro until 2025.


Monday, August 24, 2015

Analysis: Get Used to Cheap Oil, Derivatives Markets Say

London. Oil prices will stay low for years to come, derivatives markets say, keeping a lid on inflation and helping boost global growth.

Oil has more than halved in value over the last year, thanks to huge oversupply, and many oil companies, particularly in the United States, say they may soon have to rein in production, tightening supply, unless the market recovers.

That has led many analysts to predict that oil - on average around 5 percent of companies' costs - will see price rises later this year or in 2016, pushing up inflation.
But oil derivatives tell another story.

Contracts for delivery of crude oil in the future on the big commodities markets such as the New York Mercantile Exchange and the InterContinental Exchange show the price of oil in five years' time has collapsed in recent months.

US crude now costs around $42 a barrel for delivery next month, and only about $20 more for delivery in 2020.

Prices of oil for future delivery are usually much more stable than volatile near-term prices, holding their value even when the spot market crashes.
But the recent oil-price rout looks different.

Prices for all futures months for years to come, also known as the futures price "curve", have come down sharply.

"The curve is saying prices will stay low for some time," said Amrita Sen, oil analyst at consultancy Energy Aspects.

Futures prices are not forecasts, not least because liquidity tends to be low for long-term forward contracts.

But they are good indicators of sentiment because they are a market where speculators bet on forward prices, and also allow large producers and consumers to hedge future business.

Analysts say the futures curve is saying the current collapse in oil prices will be sustained because it has been driven by massive oversupply that is likely to persist.

Oil prices have collapsed over the last year as Saudi Arabia and other members of the Organization of the Petroleum Exporting Countries have increased production to try to protect market share from competitors such as US shale oil drillers.

"No recovery"

The global crude oil benchmark, North Sea Brent, fell to almost $45 a barrel in January from above $115 six months earlier. Prices then rallied but have since plunged towards lows not seen since the financial crisis and long recession that started in 2008/9.

US oil production has risen by more than 4 million barrels per day (bpd) over the last five years, 
thanks to new shale extraction techniques such as "fracking", eroding OPEC's sales.
World oil production is now around 3 million bpd higher than demand, filling oil storage tanks from Houston to Huangdao.

And as prices have fallen, many oil producers have hedged their future oil production using derivatives, selling futures contracts for oil that will be pumped in 2016, 2017 and beyond.
This has helped pull down forward prices as nearby spot prices have collapsed, dragging the whole futures curve lower.

In 2008/9, forward futures held up fairly well. Contracts for US crude oil five years ahead traded as much as $30 above prompt prices, keeping the futures curve in a steep downward slope known as a "contango".

Now that slope is much less steep, with the five-year futures spread under $20.
"There is an imbalance today compared to 2008. We have 3 million bpd more producer hedging from shale guys," said Sen at Energy Aspects. "That will necessarily pressure the back."

Seth Kleinman, head of energy research at Citigroup, agrees:

"The big move in the back of the [futures] curve reflects that, unlike in 2008/9, this is not a short-term demand-led dip, but is really a structural supply-led drop," Kleinman said.
The weakness of forward oil futures also reflected much less demand from speculative fund managers, he said.

"The back end is all about flow and the weakness reflects ... less commitment from hedge funds that the bull story will win out," he added.

Other derivatives paint a similar story, with aggressive oil put options - contracts giving the right to sell oil at a particular level in the future - appearing as low as $35 and even $30 a barrel for US crude.

"Many analysts say oil prices can't stay this low for very long, but that is not what futures markets tell us," said Olivier Jakob at Swiss consultancy Petromatrix in Zug.
"They show no recovery in prices any time soon."


Saturday, August 22, 2015

Oil Near Six-Year Low on Japan Data, Oversupply

London. Oil prices fell towards six-year lows on Monday after data showed Japan's economy contracted and producers in the United States added drilling rigs for a fourth straight week despite a recent rout in prices.

Japan's economy, the world's third biggest oil consumer, shrank in the second quarter from a year earlier, adding to fears that slowdowns in Asia's biggest economies will weigh on oil demand.
The global oversupply picture was exacerbated by another weekly jump in US oil rig additions, hinting at growing production, and news that Oman produced a record-breaking 1 million barrels a day in July.

US crude, or West Texas Intermediate (WTI), for September was trading 70 cents lower at $41.80 a barrel at 0830 GMT, close to its lowest level in more than six years.
Brent for October was down 60 cents at $48.59 a barrel, still a few dollars shy of its six-year low of $45.19. The September contract expired on Friday.

"The oversupply story remains well intact, which fuels the bearish sentiment," said Carsten Fritsch, senior oil analyst at Commerzbank in Frankfurt.

Production by the Organization of the Petroleum Exporting Countries is running well above demand filling stockpiles worldwide. Iran is expected to increase its oil exports once Western sanctions are lifted after ratification of a recent nuclear deal.

Many analysts expect prices to remain depressed as bearish factors hinting at sustained oversupply are set to persist.

"The end of the summer driving season and the start of refinery maintenance season will weigh on near-term demand and pressure prices," said Societe Generale oil analyst Michael Wittner.

"Oversupply, high stocks, and seasonal weaknesses are outweighing record demand growth," he added.

Demand for crude oil is set to fall in the next few weeks as refineries start annual maintenance. A number of European refineries will close for maintenance in September and October, including Royal Dutch Shell, Statoil and Total .

Citigroup has cut its crude oil price outlook citing weak market fundamentals, including an increased supply from OPEC and challenging demand growth in China and emerging markets.

The Wall Street bank lowered its base case Brent price forecasts to $54 per barrel for 2015 and $53 in 2016 from $58 and $63 respectively.