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Tuesday, 06 September 11
INDONESIAS PROPOSED COAL EXPORT BAN MAY HAVE IMPACT ON THE INDIAN POWER SECTOR - DIPESH DIPU
.jpg) COALspot.com - This is a special interview about Indonesian proposed coal export ban by 2014, with Mr. Dipesh Dipu, Director of Deloitte Touche Tohmatsu, India.
The Indonesian government is currently in the process of drafting a new regulation that could ban the export of low-grade coal by January 12, 2014. This is likely to apply to coal below 5700 kcal/kg on air dried basis in value.
As of now Indonesia is producing around 150 million tons of coal with calorific value below 5700 GAD (according to chairman of Indonesian coal mining association). However by 2014, there are possibilities the total production of below 5700 GAD coal may reach more than 200 million per annum.
Will Indonesian coal export ban impact on the Indian fuel requirements?
The earlier grade of coal that was being considered for proposed ban has GCV of 5100 kcal/kg of less (adb), which can be comparable to 3800-4200 kcal/kg (arb) domestic coal available in India. This grade of coal has found favor in India primarily due to likely price advantage but economics of power generation based on such grade of imported coal may be a suspect. This considering that such grades of coal from Indonesia typically have high moisture content, which makes transportation cost per unit of energy generated higher. The quantum of the low grade of coal (<5100 kcal/kg adb) procured from Indonesia is likely to remain relatively low.
However, if the new definition of low grade coal is applied (<5700 kcal/kg adb), it may be reasonable to believe that such a ban may have impact on the Indian power sector as volumes in this grade of coal are expected to rise in the proportion of coal exports to India. Several of the acquisitions made by Indian power generation companies in Indonesia have been in coal blocks that will produce coal of this grade, and a blanket ban on the exports can jeopardize power plant development in India.
On the other hand, the domestic Indonesian market may not be prepared to consume all the coal mined of this grade in view of the power generation capacity addition plans in Indonesia. In such a case, the coal mine development is likely to be deferred. The Indonesian law makers may need to reconsider domestic market demand, investment climate in coal sector and impact of the legislation on the export revenues.
What is the alternative source for Indian power industry if the proposed coal export ban come into effect by 2014?
Indian power generation companies have been forced to look out for coal assets abroad due to the investment and regulatory environment within the country. India boasts of more than 110 billion tonnes of coal reserves, which largely fall within a 300 meters of depth. If the regulatory and investment environment is amended to allow greater participation of private sector Indian dependence on imports will be reduced.
However, for imports, India will continue to look at Indonesia, South Africa, Australia and newer destinations like Mozambique and Columbia. But these sources also have constraints, domestic demands in South Africa is likely to restrict quantum jump in exports out of South Africa. Indonesia has also proposed domestic market obligations. Mozambique may have infrastructure constraints for large volumes of coal being transported from Tete province to ports of Maputo, Ncala or Beira. Australian coal is of high quality but may have higher costs of mining and transport.
What would be the additional cost if Indian consumers switch their sourcing origin from Indonesia?
Indonesia has competitive advantage due to its geographical closeness. However, on a per tonne basis, assuming comparable quality, costs of transport may make marginal difference when compared with South Africa and Mozambique.
When compared to Australian coal, due to the high quality, cost of energy may well be comparable even though shipping costs are higher. Between Indonesian coal (5500 kcal/kg adb priced at USD 90 per tonne) and Australian coal (6500 kcal/kg adb priced at USD 120 per tonne), indicative variable cost difference of power generation may be about Indian Rupees 0.20 to 0.30 per kWh (electricity unit) in favor of Indonesian coal.
Will it affect Indian economy growth or this coal export ban is ignorable as India can easily identify alternative sources of fuel?
The magnitude of growth in power generation in India will necessarily mean that coal will remain the mainstay. Natural gas has had issues of availability. Nuclear plant development is facing socio-political challenge in view of the risks of technology failure. Development of hydel power has also faced issues of land acquisition, rehabilitation & resettlement apart from the technical issues of hydro-geological features. Renewable sources such as solar and wind generation are still projected to constitute a small portion of India power generation mix. Identifying an alternative source that can match coal in its accessibility, availability and affordability in the context of scale of capacity addition required in India is a challenge.
What is the Indian government's role on this issue, whether government has to come out with the solution such as easing Indian mining and environment law, open up mining for foreigners, G2G arrangement, etc…?
There is a need to look at domestic sources with pro-active and constructive approach and make all necessary legal and statutory amendments that make the resources available and mineable. Easing the regulations may not be one of such measures but making those regulations work in sync with each other in a time bound and predictable manner must certainly be.
There is certainly a case for opening the domestic coal sector for private participation, including independent miners, and for foreign participation so that newer technology and enhanced scale of operations are implemented in India. The regulation also needs to permit risk capital to come in for prospecting and exploration.
For imports the G2G relations can be leveraged to secure coal assets. India has good relationship with Indonesia and has also signed a tax treaty with Mozambique in 2010 which will facilitate investments. Government may also engage with these countries to ease exports to India and extend fiscal support to coal mining companies investing in mining and associated infrastructure development.
About Dipesh Dipu
Dipesh Dipu works as Director with Deloitte Touche Tohmatsu India Pvt. Ltd in the Energy and Resources consulting practice of the firm and anchors the Firm’s initiative in the mining and metals sectors.
He is a mining engineering graduate from Indian School of Mines and is a Chartered Financial Analyst (CFA). He has also done executive program in business management from Indian Institute of Management Calcutta. Dipesh has recently been awarded the Abheraj Baldota Gold Medal for the Young Mining Engineer of the Year 2007 by the Mining Engineers’ Association of India in recognition of his contributions in the improvement of mining industry in India.
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- Attock Cement Pakistan Limited
- Indian Oil Corporation Limited
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- Georgia Ports Authority, United States
- Bank of Tokyo Mitsubishi UFJ Ltd
- Mercator Lines Limited - India
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- Lanco Infratech Ltd - India
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- LBH Netherlands Bv - Netherlands
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- Baramulti Group, Indonesia
- Independent Power Producers Association of India
- Rashtriya Ispat Nigam Limited - India
- PowerSource Philippines DevCo
- Ind-Barath Power Infra Limited - India
- Rio Tinto Coal - Australia
- Timah Investasi Mineral - Indoneisa
- Petron Corporation, Philippines
- Orica Mining Services - Indonesia
- Central Electricity Authority - India
- Samtan Co., Ltd - South Korea
- Indika Energy - Indonesia
- Vizag Seaport Private Limited - India
- Aboitiz Power Corporation - Philippines
- Sindya Power Generating Company Private Ltd
- Anglo American - United Kingdom
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- Price Waterhouse Coopers - Russia
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- Meenaskhi Energy Private Limited - India
- The Treasury - Australian Government
- Kepco SPC Power Corporation, Philippines
- Global Coal Blending Company Limited - Australia
- Borneo Indobara - Indonesia
- Makarim & Taira - Indonesia
- Planning Commission, India
- ASAPP Information Group - India
- Simpson Spence & Young - Indonesia
- Australian Coal Association
- Bukit Baiduri Energy - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- AsiaOL BioFuels Corp., Philippines
- Kideco Jaya Agung - Indonesia
- Parliament of New Zealand
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- SN Aboitiz Power Inc, Philippines
- Wilmar Investment Holdings
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- Miang Besar Coal Terminal - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Tata Chemicals Ltd - India
- Jindal Steel & Power Ltd - India
- PTC India Limited - India
- Power Finance Corporation Ltd., India
- Chettinad Cement Corporation Ltd - India
- Indogreen Group - Indonesia
- CNBM International Corporation - China
- Antam Resourcindo - Indonesia
- Bayan Resources Tbk. - Indonesia
- Eastern Coal Council - USA
- Economic Council, Georgia
- Eastern Energy - Thailand
- Kapuas Tunggal Persada - Indonesia
- Wood Mackenzie - Singapore
- Krishnapatnam Port Company Ltd. - India
- Sarangani Energy Corporation, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Globalindo Alam Lestari - Indonesia
- MS Steel International - UAE
- Ministry of Finance - Indonesia
- Heidelberg Cement - Germany
- GVK Power & Infra Limited - India
- Interocean Group of Companies - India
- New Zealand Coal & Carbon
- Electricity Generating Authority of Thailand
- Singapore Mercantile Exchange
- IHS Mccloskey Coal Group - USA
- Malabar Cements Ltd - India
- Sakthi Sugars Limited - India
- Gujarat Electricity Regulatory Commission - India
- Renaissance Capital - South Africa
- Sinarmas Energy and Mining - Indonesia
- Riau Bara Harum - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Bulk Trading Sa - Switzerland
- Videocon Industries ltd - India
- Toyota Tsusho Corporation, Japan
- TNB Fuel Sdn Bhd - Malaysia
- The University of Queensland
- Medco Energi Mining Internasional
- TeaM Sual Corporation - Philippines
- Commonwealth Bank - Australia
- VISA Power Limited - India
- Ceylon Electricity Board - Sri Lanka
- SMC Global Power, Philippines
- South Luzon Thermal Energy Corporation
- Intertek Mineral Services - Indonesia
- San Jose City I Power Corp, Philippines
- PNOC Exploration Corporation - Philippines
- Salva Resources Pvt Ltd - India
- Directorate Of Revenue Intelligence - India
- Bhushan Steel Limited - India
- Mercuria Energy - Indonesia
- Madhucon Powers Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Coal and Oil Company - UAE
- European Bulk Services B.V. - Netherlands
- Uttam Galva Steels Limited - India
- Barasentosa Lestari - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- London Commodity Brokers - England
- Manunggal Multi Energi - Indonesia
- Indonesian Coal Mining Association
- CIMB Investment Bank - Malaysia
- IEA Clean Coal Centre - UK
- Vedanta Resources Plc - India
- Maharashtra Electricity Regulatory Commission - India
- Latin American Coal - Colombia
- Deloitte Consulting - India
- Sical Logistics Limited - India
- GMR Energy Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Karaikal Port Pvt Ltd - India
- Orica Australia Pty. Ltd.
- Asmin Koalindo Tuhup - Indonesia
- Africa Commodities Group - South Africa
- Kaltim Prima Coal - Indonesia
- Straits Asia Resources Limited - Singapore
- OPG Power Generation Pvt Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- Petrochimia International Co. Ltd.- Taiwan
- Cigading International Bulk Terminal - Indonesia
- Posco Energy - South Korea
- Siam City Cement - Thailand
- Kalimantan Lumbung Energi - Indonesia
- Edison Trading Spa - Italy
- GAC Shipping (India) Pvt Ltd
- Bharathi Cement Corporation - India
- Savvy Resources Ltd - HongKong
- Leighton Contractors Pty Ltd - Australia
- Energy Link Ltd, New Zealand
- Iligan Light & Power Inc, Philippines
- Central Java Power - Indonesia
- Port Waratah Coal Services - Australia
- Holcim Trading Pte Ltd - Singapore
- Coalindo Energy - Indonesia
- Electricity Authority, New Zealand
- Ministry of Mines - Canada
- Bangladesh Power Developement Board
- Formosa Plastics Group - Taiwan
- Maheswari Brothers Coal Limited - India
- Merrill Lynch Commodities Europe
- Kohat Cement Company Ltd. - Pakistan
- Thai Mozambique Logistica
- Indian Energy Exchange, India
- Kumho Petrochemical, South Korea
- Cement Manufacturers Association - India
- Larsen & Toubro Limited - India
- Mintek Dendrill Indonesia
- Alfred C Toepfer International GmbH - Germany
- Global Business Power Corporation, Philippines
- Therma Luzon, Inc, Philippines
- Gujarat Sidhee Cement - India
- Bhatia International Limited - India
- Australian Commodity Traders Exchange
- Aditya Birla Group - India
- Indo Tambangraya Megah - Indonesia
- Chamber of Mines of South Africa
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- ICICI Bank Limited - India
- Energy Development Corp, Philippines
- Ambuja Cements Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Mjunction Services Limited - India
- Essar Steel Hazira Ltd - India
- Altura Mining Limited, Indonesia
- Banpu Public Company Limited - Thailand
- SMG Consultants - Indonesia
- The State Trading Corporation of India Ltd
- Kartika Selabumi Mining - Indonesia
- Siam City Cement PLC, Thailand
- Goldman Sachs - Singapore
- Metalloyd Limited - United Kingdom
- Pendopo Energi Batubara - Indonesia
- Carbofer General Trading SA - India
- International Coal Ventures Pvt Ltd - India
- Sojitz Corporation - Japan
- Marubeni Corporation - India
- India Bulls Power Limited - India
- Minerals Council of Australia
- Thiess Contractors Indonesia
- Oldendorff Carriers - Singapore
- Grasim Industreis Ltd - India
- Ministry of Transport, Egypt
- Standard Chartered Bank - UAE
- Global Green Power PLC Corporation, Philippines
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