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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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- Meenaskhi Energy Private Limited - India
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- MS Steel International - UAE
- Price Waterhouse Coopers - Russia
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- Kumho Petrochemical, South Korea
- Kepco SPC Power Corporation, Philippines
- London Commodity Brokers - England
- Coastal Gujarat Power Limited - India
- Maheswari Brothers Coal Limited - India
- Renaissance Capital - South Africa
- IHS Mccloskey Coal Group - USA
- Global Coal Blending Company Limited - Australia
- Aditya Birla Group - India
- Asmin Koalindo Tuhup - Indonesia
- Energy Link Ltd, New Zealand
- Directorate Of Revenue Intelligence - India
- Ministry of Finance - Indonesia
- GAC Shipping (India) Pvt Ltd
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- Eastern Coal Council - USA
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- OPG Power Generation Pvt Ltd - India
- PetroVietnam Power Coal Import and Supply Company
- Merrill Lynch Commodities Europe
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- Thai Mozambique Logistica
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- SMG Consultants - Indonesia
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- European Bulk Services B.V. - Netherlands
- Georgia Ports Authority, United States
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- Mintek Dendrill Indonesia
- Heidelberg Cement - Germany
- ICICI Bank Limited - India
- Global Business Power Corporation, Philippines
- Edison Trading Spa - Italy
- McConnell Dowell - Australia
- Carbofer General Trading SA - India
- Leighton Contractors Pty Ltd - Australia
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- Banpu Public Company Limited - Thailand
- GMR Energy Limited - India
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- Bank of Tokyo Mitsubishi UFJ Ltd
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- Africa Commodities Group - South Africa
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- CNBM International Corporation - China
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- Planning Commission, India
- New Zealand Coal & Carbon
- Metalloyd Limited - United Kingdom
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- Samtan Co., Ltd - South Korea
- Miang Besar Coal Terminal - Indonesia
- The University of Queensland
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- Offshore Bulk Terminal Pte Ltd, Singapore
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- GN Power Mariveles Coal Plant, Philippines
- AsiaOL BioFuels Corp., Philippines
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- Barasentosa Lestari - Indonesia
- Therma Luzon, Inc, Philippines
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- Gujarat Electricity Regulatory Commission - India
- Intertek Mineral Services - Indonesia
- PowerSource Philippines DevCo
- India Bulls Power Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Straits Asia Resources Limited - Singapore
- Gujarat Sidhee Cement - India
- Aboitiz Power Corporation - Philippines
- South Luzon Thermal Energy Corporation
- Globalindo Alam Lestari - Indonesia
- Savvy Resources Ltd - HongKong
- Romanian Commodities Exchange
- Wood Mackenzie - Singapore
- Kohat Cement Company Ltd. - Pakistan
- Coal and Oil Company - UAE
- Petron Corporation, Philippines
- Bukit Baiduri Energy - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Economic Council, Georgia
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- Holcim Trading Pte Ltd - Singapore
- Mercator Lines Limited - India
- Energy Development Corp, Philippines
- Vedanta Resources Plc - India
- Baramulti Group, Indonesia
- Sakthi Sugars Limited - India
- Siam City Cement PLC, Thailand
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Mjunction Services Limited - India
- Indo Tambangraya Megah - Indonesia
- Sindya Power Generating Company Private Ltd
- Parliament of New Zealand
- Coalindo Energy - Indonesia
- Minerals Council of Australia
- Directorate General of MIneral and Coal - Indonesia
- Jindal Steel & Power Ltd - India
- Bhatia International Limited - India
- Electricity Generating Authority of Thailand
- Karaikal Port Pvt Ltd - India
- Medco Energi Mining Internasional
- Petrochimia International Co. Ltd.- Taiwan
- Semirara Mining and Power Corporation, Philippines
- Indian Oil Corporation Limited
- Cigading International Bulk Terminal - Indonesia
- PTC India Limited - India
- Thiess Contractors Indonesia
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- Indian Energy Exchange, India
- Madhucon Powers Ltd - India
- Tata Chemicals Ltd - India
- Standard Chartered Bank - UAE
- Kartika Selabumi Mining - Indonesia
- Riau Bara Harum - Indonesia
- Dalmia Cement Bharat India
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- Wilmar Investment Holdings
- Karbindo Abesyapradhi - Indoneisa
- Bangladesh Power Developement Board
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- Kalimantan Lumbung Energi - Indonesia
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- Grasim Industreis Ltd - India
- Krishnapatnam Port Company Ltd. - India
- SMC Global Power, Philippines
- Mercuria Energy - Indonesia
- Indonesian Coal Mining Association
- LBH Netherlands Bv - Netherlands
- Ministry of Transport, Egypt
- Singapore Mercantile Exchange
- Alfred C Toepfer International GmbH - Germany
- GVK Power & Infra Limited - India
- Deloitte Consulting - India
- Cement Manufacturers Association - India
- Pendopo Energi Batubara - Indonesia
- Manunggal Multi Energi - Indonesia
- Anglo American - United Kingdom
- Kideco Jaya Agung - Indonesia
- Siam City Cement - Thailand
- Bukit Makmur.PT - Indonesia
- IEA Clean Coal Centre - UK
- Kaltim Prima Coal - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Orica Mining Services - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Jaiprakash Power Ventures ltd
- Sojitz Corporation - Japan
- Power Finance Corporation Ltd., India
- Australian Commodity Traders Exchange
- Bukit Asam (Persero) Tbk - Indonesia
- Binh Thuan Hamico - Vietnam
- White Energy Company Limited
- Trasteel International SA, Italy
- Xindia Steels Limited - India
- Australian Coal Association
- Electricity Authority, New Zealand
- Central Electricity Authority - India
- Global Green Power PLC Corporation, Philippines
- Star Paper Mills Limited - India
- Eastern Energy - Thailand
- Goldman Sachs - Singapore
- Neyveli Lignite Corporation Ltd, - India
- PNOC Exploration Corporation - Philippines
- Gujarat Mineral Development Corp Ltd - India
- Posco Energy - South Korea
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- SN Aboitiz Power Inc, Philippines
- Bulk Trading Sa - Switzerland
- Independent Power Producers Association of India
- Marubeni Corporation - India
- Bahari Cakrawala Sebuku - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Bhoruka Overseas - Indonesia
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- Makarim & Taira - Indonesia
- Parry Sugars Refinery, India
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- CIMB Investment Bank - Malaysia
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