Wednesday, January 27, 2016

Salim Buys Rio Tinto Coal's Mine in Australia for $224m

Jakarta. Indonesia conglomerate Salim Group has agreed to buy a coal mine in Australia from gold miner Rio Tinto for $224 million plus royalties, the miner said in a statement on Wednesday.

Rio Tinto sold its assets in Mount Pleasant thermal coal to MACH Energy Australia, as part of the company's divestment of assets around the world. MACH Energy Australia is an entity controlled by Indonesian billionaire Anthoni Salim, according to a report from Reuters.

MACH Energy would pay royalties only when the coal price exceeds $72.5 per metric ton. The current price for Australian thermal coal is $47.40, according to Reuters.

“We believe Mount Pleasant can have a very positive future under its new owners with different priorities for development and capital allocation,” Jean-S├ębastien Jacques, Rio Tinto Copper & Coal chief executive, said in the statement.

Located in Hunter Valley in New South Wales, Mount Pleasant is estimated to contain total marketable reserves of 474 million metric tons.

Anthoni Salim is the third richest man in Indonesia according to GlobeAsia and his Salim Group controls assets including instant noodle maker Indofood Sukses Makmur, agribusiness units Indofood Agri Resources and car manufacturer distributor Indomobil Sukses Internasional.

Jakarta Globe

Monday, January 18, 2016

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."


Wednesday, January 13, 2016

Govt. Plans to Establish Mining Holding Company on Track With New Deal

Jakarta. Government plans to establish a holding company for state-owned miners by the end of 2019 has received another push in the right direction with two major miners consolidating.

The holding company would consolidate gold and copper miner Aneka Tambang with coal miner Tambang Batubara Bukit Asam, tin producer Timah and aluminium maker Indonesia Asahan Aluminium to make a giant entity with about $2.5 billion in market capitalization.

The government expects the holding to command more comprehensive business lines and strong financial strength, reducing its reliance on government capital injections to support expansion.

"We emphasize state-owned enterprise's financial independent and we hope that it would be a giant not only in this country but also globally," State-Owned Enterprises Minister Rini Soemarno said on Friday.

A road-map document detailing the plan will be ready by the end of this year, she said, with full integration expected to place within three years.

Indonesia has pushed state-owned enterprises to consolidate and become agglomerations of expertise and capital, making operations more efficient and expansion easier.

Still, vested interests and a long history of competition among SOEs stands in the way of integration.

The country has only rare success in this area. In 2013, five cement companies under Semen Indonesia merged after two decades of conflict — which saw employees pitted against directors, the central government against regional governments and local business against foreign investors.

Still, the miners have paved the way for integration with join-projects which maximizes each other strength, Rini said.

On Friday, Bukit Asam and Antam agreed to allow the former build the power plant for Antam's ferronickel plant in East Halmahera. Antam also secured cooperation with Inalum to build a smelter-grade alumina smelter in Mempawah, West Kalimantan.

"There are so many potential projects that they can work together," Rini said.

Jakarta Globe

Saturday, January 9, 2016

Indonesian Govt Revenue From Oil and Gas Seen Down 16% Year-on-Year in 2016

Jakarta. Indonesian government revenue from the upstream oil and gas sector is expected to decline 16 percent to $10.77 billion in 2016 from $12.86 billion in 2015, the country’s oil and gas regulator (SKKMigas) said on Tuesday.

The regulator is targeting an average daily crude oil output of 827,780 barrels per day (bpd) in 2016, SKKMigas Chairman Amien Sunaryadi said, and an average gas output of 6,266 million standard cubic feet per day.

The Cepu block, operated by Exxon Mobil Corp, will reach peak output of 168,430 bpd in March, Sunaryadi said, later than an earlier target of January.

No reason was given for the delay or for the expected decline in state revenues.


Subsidiary of Energi Mega Secures $60m Loan Facility From Creditors

Jakarta. EMP Bentu, a subsidiary of oil and gas company Energi Mega Persada, secured a $60 million loan facility from overseas creditors Turin-based Intesa Sanpaolo and London-based Britannic Strategies on Dec. 31 to help refinance its debts, the company said in a statement on Tuesday.

The loan, which will mature within five years, will be used to help refinance EMP Bentu's $53 million loan from an existing creditor.

“The refinancing can save interest costs of up to $6.3 million in 2016. This cost saving will have a positive impact on EMP’s future financial results," EMP president director Imam Agustino said in the statement.

“In the past 24 months, we have been able to reduce our outstanding loans by over $300 million. In addition, we have successfully refinanced a few loans with new ones at lower [interest] rates. Consequently, EMP is expected to show better liquidity ratios going forward,” Didit Ratam, EMP director said.

EMP is controlled by tycoon-politician Aburizal Bakrie.

Sunday, January 3, 2016

Energi Mega Eyes $96.25m From Planned Gas Block Sale in Mozambique

Jakarta. Energi Mega Persada, an oil and gas company controlled by tycoon-politician Aburizal Bakrie, is looking to rake in at least $96.25 million from selling half of its rights at the Buzi natural gas block in Mozambique, according to a top executive.

Imam Agustino, president director of Energi Mega Persada, said the company is currently in the process of negotiations to sell its rights with a strategic investor from Africa.

Energi Mega Persada has been looking to sell its participating rights at the block since the end of 2014, before opening tender earlier this June in London.

"We hope to get about 10 percent profit compared to our purchasing price back in 2013," Imam said in Jakarta on Tuesday.

"The profit from this transaction will be used to develop the Buzi block in the future and increase oil and gas production."

The Buzi block is estimated to have up to 212.3 billion cubic meters of proven and probable reserves.

Energi Mega Persada won 75 percent participating rights in the Buzi block in Mozambique for $175 million in 2013, while the remainder is held by the Mozambican government through Empressa Nacional de Hidrocarbonetos.

Jakarta Globe

Thursday, December 31, 2015

BKPM: Power Plant Projects Dominate 2015 Investment Proposals

Jakarta. Power plant projects dominated investment proposals in Indonesia with up to 37.5 percent of the total this year, taking the government one step closer to achieving its goal of rolling out 35 gigawatts in additional power-generating capacity by 2019.

Indonesia's Investment Coordinating Board (BKPM) reported that it received Rp 707.37 trillion worth of principle license proposals for projects in the electricity, water and gas sectors between Jan. 1 and Dec. 28 this year, tripling from the same period last year.

The country booked about Rp 1,886 trillion worth of principle licenses in total so far this year, up 45 percent from the same period last year, according to BKPM.

Still, actual execution of the proposed projects — one of the country's biggest stumbling blocks — remains to be proven.

"Whenever we visit construction sites this year, one of the biggest problems is energy. 

Because of that, realizing this investment in the long run will be crucial in boosting the competitiveness of other sectors," BKPM chief Franky Sibarani said in a statement received by the Jakarta Globe on Tuesday.

He said that the government has been making attempts to streamline and improve the licensing process as well as offering tax allowance facilities in the electricity sector in order to achieve the 35 gigawatt goal.

This included efforts to coordinate with the Ministry of Energy and Mineral Resources and state electricity operator Perusahaan Listrik Negara to cut the licensing process to 25 permits within 256 days compared to 49 permits in 923 days, according to a statement.

Jakarta Globe