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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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- Thiess Contractors Indonesia
- Coalindo Energy - Indonesia
- Ambuja Cements Ltd - India
- Bharathi Cement Corporation - India
- Agrawal Coal Company - India
- London Commodity Brokers - England
- Essar Steel Hazira Ltd - India
- CNBM International Corporation - China
- Wood Mackenzie - Singapore
- Banpu Public Company Limited - Thailand
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Alfred C Toepfer International GmbH - Germany
- Asmin Koalindo Tuhup - Indonesia
- Parry Sugars Refinery, India
- White Energy Company Limited
- Bangladesh Power Developement Board
- Posco Energy - South Korea
- Indo Tambangraya Megah - Indonesia
- Bhatia International Limited - India
- Mintek Dendrill Indonesia
- The State Trading Corporation of India Ltd
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Manunggal Multi Energi - Indonesia
- International Coal Ventures Pvt Ltd - India
- Meralco Power Generation, Philippines
- Siam City Cement PLC, Thailand
- Renaissance Capital - South Africa
- ICICI Bank Limited - India
- Chamber of Mines of South Africa
- Formosa Plastics Group - Taiwan
- India Bulls Power Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- SN Aboitiz Power Inc, Philippines
- Sindya Power Generating Company Private Ltd
- Leighton Contractors Pty Ltd - Australia
- Commonwealth Bank - Australia
- Therma Luzon, Inc, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- CIMB Investment Bank - Malaysia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Coal and Oil Company - UAE
- Cigading International Bulk Terminal - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Jaiprakash Power Ventures ltd
- Straits Asia Resources Limited - Singapore
- Indogreen Group - Indonesia
- Videocon Industries ltd - India
- Directorate Of Revenue Intelligence - India
- OPG Power Generation Pvt Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- Aditya Birla Group - India
- The University of Queensland
- Deloitte Consulting - India
- Kaltim Prima Coal - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Savvy Resources Ltd - HongKong
- Makarim & Taira - Indonesia
- Anglo American - United Kingdom
- Goldman Sachs - Singapore
- Xindia Steels Limited - India
- Aboitiz Power Corporation - Philippines
- Ind-Barath Power Infra Limited - India
- Jindal Steel & Power Ltd - India
- McConnell Dowell - Australia
- Bukit Makmur.PT - Indonesia
- Eastern Coal Council - USA
- Romanian Commodities Exchange
- Sinarmas Energy and Mining - Indonesia
- Rio Tinto Coal - Australia
- Carbofer General Trading SA - India
- Karbindo Abesyapradhi - Indoneisa
- Central Java Power - Indonesia
- Coastal Gujarat Power Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Electricity Generating Authority of Thailand
- Africa Commodities Group - South Africa
- Ministry of Finance - Indonesia
- Karaikal Port Pvt Ltd - India
- Georgia Ports Authority, United States
- Siam City Cement - Thailand
- AsiaOL BioFuels Corp., Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- SMC Global Power, Philippines
- Krishnapatnam Port Company Ltd. - India
- Energy Link Ltd, New Zealand
- Port Waratah Coal Services - Australia
- Wilmar Investment Holdings
- Edison Trading Spa - Italy
- Vizag Seaport Private Limited - India
- Semirara Mining and Power Corporation, Philippines
- Ministry of Transport, Egypt
- Bhoruka Overseas - Indonesia
- Semirara Mining Corp, Philippines
- Kepco SPC Power Corporation, Philippines
- Minerals Council of Australia
- South Luzon Thermal Energy Corporation
- Australian Commodity Traders Exchange
- Gujarat Sidhee Cement - India
- Singapore Mercantile Exchange
- Indian Energy Exchange, India
- Bahari Cakrawala Sebuku - Indonesia
- Ministry of Mines - Canada
- Gujarat Mineral Development Corp Ltd - India
- Mjunction Services Limited - India
- Standard Chartered Bank - UAE
- PetroVietnam Power Coal Import and Supply Company
- Global Green Power PLC Corporation, Philippines
- Dalmia Cement Bharat India
- Salva Resources Pvt Ltd - India
- Australian Coal Association
- GAC Shipping (India) Pvt Ltd
- Kartika Selabumi Mining - Indonesia
- Economic Council, Georgia
- Lanco Infratech Ltd - India
- Indonesian Coal Mining Association
- Gujarat Electricity Regulatory Commission - India
- Meenaskhi Energy Private Limited - India
- PTC India Limited - India
- Intertek Mineral Services - Indonesia
- Madhucon Powers Ltd - India
- New Zealand Coal & Carbon
- Mercator Lines Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- SMG Consultants - Indonesia
- Cement Manufacturers Association - India
- Central Electricity Authority - India
- Altura Mining Limited, Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- VISA Power Limited - India
- Tamil Nadu electricity Board
- LBH Netherlands Bv - Netherlands
- Latin American Coal - Colombia
- Bukit Baiduri Energy - Indonesia
- Toyota Tsusho Corporation, Japan
- Indian Oil Corporation Limited
- Bulk Trading Sa - Switzerland
- Kumho Petrochemical, South Korea
- Larsen & Toubro Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Bayan Resources Tbk. - Indonesia
- Kideco Jaya Agung - Indonesia
- Grasim Industreis Ltd - India
- Medco Energi Mining Internasional
- Sree Jayajothi Cements Limited - India
- Thai Mozambique Logistica
- Power Finance Corporation Ltd., India
- Independent Power Producers Association of India
- Kobexindo Tractors - Indoneisa
- Heidelberg Cement - Germany
- Marubeni Corporation - India
- Planning Commission, India
- Simpson Spence & Young - Indonesia
- Binh Thuan Hamico - Vietnam
- Timah Investasi Mineral - Indoneisa
- Oldendorff Carriers - Singapore
- Ceylon Electricity Board - Sri Lanka
- GVK Power & Infra Limited - India
- Parliament of New Zealand
- PNOC Exploration Corporation - Philippines
- Price Waterhouse Coopers - Russia
- Barasentosa Lestari - Indonesia
- IHS Mccloskey Coal Group - USA
- Global Business Power Corporation, Philippines
- Billiton Holdings Pty Ltd - Australia
- The Treasury - Australian Government
- Iligan Light & Power Inc, Philippines
- Sakthi Sugars Limited - India
- Metalloyd Limited - United Kingdom
- Petron Corporation, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Sarangani Energy Corporation, Philippines
- Maheswari Brothers Coal Limited - India
- European Bulk Services B.V. - Netherlands
- Energy Development Corp, Philippines
- MS Steel International - UAE
- Miang Besar Coal Terminal - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Rashtriya Ispat Nigam Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Kapuas Tunggal Persada - Indonesia
- TeaM Sual Corporation - Philippines
- Global Coal Blending Company Limited - Australia
- Vedanta Resources Plc - India
- PowerSource Philippines DevCo
- Electricity Authority, New Zealand
- GMR Energy Limited - India
- Sojitz Corporation - Japan
- Indika Energy - Indonesia
- Eastern Energy - Thailand
- Samtan Co., Ltd - South Korea
- Bhushan Steel Limited - India
- Trasteel International SA, Italy
- San Jose City I Power Corp, Philippines
- Globalindo Alam Lestari - Indonesia
- Orica Mining Services - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Pendopo Energi Batubara - Indonesia
- Attock Cement Pakistan Limited
- Merrill Lynch Commodities Europe
- Mercuria Energy - Indonesia
- Riau Bara Harum - Indonesia
- Star Paper Mills Limited - India
- IEA Clean Coal Centre - UK
- Chettinad Cement Corporation Ltd - India
- Borneo Indobara - Indonesia
- ASAPP Information Group - India
- Malabar Cements Ltd - India
- Sical Logistics Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Antam Resourcindo - Indonesia
- Uttam Galva Steels Limited - India
- Orica Australia Pty. Ltd.
- Interocean Group of Companies - India
- Tata Chemicals Ltd - India
- Baramulti Group, Indonesia
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