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Others

Vulnerable to climate change, ASEAN needs more investment into green infrastructure

17 July 2019

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ASEAN

MANILA – Over the next five years, ASEAN will need US$157 billion in annual infrastructure investment, but projects need to be “climate-proofed” to mitigate the region’s vulnerability to natural disasters and climate change, according to the Asian Development Bank (ADB).

Due to Southeast Asia’s geographical diversity — long coastlines, a large number of archipelagos, and heavily populated low-lying areas — the region has experienced a number of devastating weather-related disasters in the past decade, from hurricanes and flooding to wildfires and landslides.

In 2017, Thailand and Vietnam made the list of top 10 of countries most affected by extreme weather, both in terms of fatalities and economic losses, according to the Global Climate Risk Index2019.

But countries that are repeatedly affected by extreme weather disasters, such as the Philippines, also rank high in the long-term index, with single exceptional events, such as Typhoon Haiyan, having a lasting impact on the country’s economy and infrastructure.

“The analysis reconfirms earlier results of the Climate Risk Index: less developed countries are generally more affected than industrialised countries,” the report read.

“Regarding future climate change, the Climate Risk Index may serve as a red flag… in regions where extreme events will become more frequent or more severe due to climate change.”

The report claims that recent science has found “a clear link between climate change and record-breaking precipitation of 2017’s hurricanes”, suggesting that severe tropical cyclones will increase with every tenth of a degree increase in global average temperature.

“The question is, what can infrastructure do to help you make sure that increases in temperature are kept below 2°C from pre-industrial times?” said Rana Hasan, the Asian Development Bank’s Director of Economic Research and Regional Cooperation.

During a seminar in Manila last month, Hasan told media that experts remain concerned about the effect of temperature rise beyond 2°C.

“We are dealing with potentially dangerous situations like droughts and intense typhoons.”

People row in boats through floodwaters in Hanoi’s suburban Chuong My district on August 2, 2018. Photo: Nhac Ngyuen/AFP

More investment for green infrastructure

As the ASEAN economy continues to grow rapidly, infrastructure projects need to be more sustainable and climate-responsive to mitigate the effects of extreme weather events, Hasan said.

“[We need] new types of infrastructure investment that can significantly reduce our carbon footprint, particularly in the areas of renewable energy,” he said, referencing a recent US$7.6 million loan from the ADB to to help build a 100-megawatt solar power park in Cambodia.

“Electricity and heat production is one of the leading sources of global greenhouse gas emissions as coal, natural gas and oil are burned for power.”

The transport sector is another industry which needs to see change by “reorienting the spending”, Hasan said.

“Rather than building more and more roads, you might consider public mass transit.”

Hasan noted that the effects of natural disasters and climate change pose a real challenge to the region’s development, and infrastructure needs to be stronger and more resilient to climate change.

“More planning needs to take place. Windspeed and typhoons are growing in strength — which means if we build infrastructure according to standards set 40 years ago, we might be left with typhoons destroying more of our infrastructure stock.”

The ADB said it wants to help ASEAN governments scale up their green infrastructure, and recently launched a new US$1 billion loan facility for investment into Southeast Asian projects.

Hiroaki Yamaguichi, director at ADB’s Transport and Communications Division for Southeast Asia, said that when mobilising investment, a difficult balance needs to be struck between development, sustainability and climate resilience.

“A lot of ASEAN countries are affected by climate change, and people are really concerned… Many of our cities are not livable now and it will be worse in the future, we need to do something before it gets worse.”

Coal

Analysis: Indonesian coal mining sector in limbo amid regulation uncertainties – sources

17 July 2019

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Indonesia

Singapore — The fate of seven major Indonesian thermal coal producers is hanging in the balance amid government regulation uncertainties after a mining contract for one of the miners was revoked, stoking fears of a similar rejection for other contracts coming up for renewal in the next couple of years.

According to local media reports, three coal mines operated by Tanito Harum were suspended last week after the Indonesian government revoked the firm’s 20-year contract extension.

Some market players said the suspension of Tanito’s mine operation is setting a precedence for the industry, and overall production might be affected without regulation clarity.

Seven other major coal producers are having their first generation Coal Contracts of Works (CCoW) mining licenses expire over the next five years. These producers include majors like Bumi Resources, Adaro Energy, Kideco and Berau.

As much as 70% of the total Indonesian production is accounted for by the CCoW miners. Indonesia produced about 528 million mt in 2018, exceeding its initial target of 485 million mt. This year, the country is targeting a production of 490 million mt.

A company source at one of the CCoW miners said they will “try to be organized and well prepared for the upcoming renewal.”

“This will send a negative sign for investment and create uncertainties for longer-term investment, while production next year onwards might be impacted if there is no clarity on the issue,” Hendra Sinadia, executive director of the Indonesian Coal Mining Association, told S&P Global Platts.

LONG-TERM PLAN DIFFICULT

Ratings agency Moody’s said in a recent report that there has been no clear guidance from the government on the contract renewal, “which diminishes the ability of companies holding CCoWs, such as Bumi Resources and Indika Resources, to prepare long-term mine production and investment plans.”

“Also, a price cap on thermal coal sales to domestic utilities limits the potential upside for Indonesian coal companies from the strengthening of coal prices, and will constrain miners’ earnings,” Moody’s added.

In the case of non-renewal or revocation of such mining licenses of major producers like PT Bumi and PT Adaro, the impact will be huge due to the volume involved and the tax revenue received by the government, Vishal Kulkarni, associate Director of S&P Global Ratings, Analytical, said.

In April, Bumi Resources said its production target this year is around 88-90 million mt, while Adaro’s production target for this year will be at around 54-56 million mt.

“In our base case, we expect the Indonesian government to look at the renewal of the licenses of these major coal producers, but such renewal will likely come with additional taxes for them to continue mining operations,” said Kulkarni.

TANITO IMPACT

Tanito Harum’s CCoW expired on January 14, and its contract extension was revoked after Indonesia’s Corruption Eradication Commission (KPK) found that the extension was not in line with the mining law, a government official was said in late June.

Tanito did not respond to requests for comment.

Tanito mainly produced the Indonesian mid-calorific value 5,600 kcal/kg GAR grade, with annual production volume between 2-5 million mt, sources said.

Prices did not see a significant impact considering its production volume, and the supply impact on Japan as a major mid-to-high calorific value coal consumer should be minimal, an Indonesian producer said.

Last year, the Indonesian government said it was in the process of issuing a new regulation for coal miners, and planned to phase out CCoW and replace it with a special mining permit (IUPK).

Oil & Gas

Thailand sets its sights on larger LNG share

16 July 2019

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Thailand

Thai government looks to increase imports as gas reserves continue to slide

Thailand’s newly elected coalition government, heading by former junta leader General Prayut Cham-o-cha, will look to significantly lift the proportion of natural gas in the country’s energy mix, following the cabinet’s approval of the amended Power Development Plan (PDP) at the end of April.

Under the new PDP, the government aims to derive 53pc of the country’s power from gas by 2037, an increase of 13 percentage points over the previous plan, 35pc from non-fossil fuels and 12pc from coal — reduced from 25pc in the previous plan. Efforts from the Thai authorities to build coal-fired power plants in southern Thailand have faced constant delays and domestic opposition.

Greater LNG imports will almost certainly be Thailand’s main focus. “By 2025, we expect that LNG will account for close to 40pc of gas supply to the power sector, rising to 80-90pc by the end of the PDP period in 2037,” says Chris Starling, principal at consultancy Lantau Group. Last year, the Gulf of Thailand, including the Malaysia-Thailand Joint Development Area (MTJDA), produced 71pc of the country’s available gas, with the remaining imported via pipeline from Myanmar (17pc) and through LNG (11pc).

Since 2014, domestic production has dropped by 13.4pc from just over 115mn m³/d to less than 100mnn m³/d in 2018, before rebounding slightly in Q1 2019 to 100.9mn m³/d, according to data from Thailand’s ministry of energy. Over the same period, LNG imports rose from the equivalent of 5.2mn m³/d to 18mn m³/d.

Gulf of Thailand reserves have plummeted since they peaked in 2006, halving to around 186.8bn m³ in the latest BP Statistical Review 2019. “By the end of 2017, the reserves to production ratio (r/p) was 5.2 years,” says Dieter Billen, principal at consultancy Roland Berger. By comparison, “Malaysia had a r/p ratio of 34.9 years, Vietnam 68.3 years and Indonesia 42.9 years”.

Similarly, imports from neighbouring Myanmar are expected to slow. Since 2014, production from the Yetagun field has dropped from 9.6mn m³/d to just 4mn m³/d in 2018, and averaged just 3.25mn m³/d over Q1 2019.

Declining reserves from the Yadana, Zawtika and Yetagun offshore fields, and the need to prioritise domestic consumption, could lead to Myanmar exports ending entirely by 2035, says a study by the Economic Research Institute for ASEAN and East Asia (ERIA). Likewise, the MTJDA’s resources are expected to be exhausted by 2027.

Domestic incentives

New domestic exploration is also making little progress, despite the fall in proven gas reserves and production. “LNG is set to dominate the future gas mix, but exploration potential is probably not being fully developed,” says Neil Semple, fuels expert at consultancy Poyry. “There would appear to be some political resistance to using international prices as an incentive and there has been no licensing round since 2008”.

Previously, the energy minister had suggested the 21st bid round could go ahead this year, but no time scale has yet been given. “The new bidding round would address the issue of the general lack of exploration acreage and would also allow the authorities to revisit pricing mechanisms for new domestic gas,” adds Semple.

In December, state oil and gas firm PTT successfully won the concession bidding process for the country’s main producing natural gas fields, Erawan and Bongkot, beginning from 2022 and 2023. PTT has committed to maintaining production from Erawan at 22.6mn m³/d and Bongkot at 19.8mn m³/d, below current levels, says Billen.

Chevron had been operator of Erawan since 1981 but was unsuccessful in retaining the latest concession — the company will maintain its Thailand presence though through its 35pc stake holder in the unexploited Ubon Project in Block 12/27.

Demand boost

While Gulf of Thailand reserves and production continues to fall, domestic demand has continued to be robust at around the 132mn m³/d mark, and averaged 132.5mn m³/d over Q1 2019, according to data from the ministry of energy.

Electricity consumption is by far the largest consumer of natural gas. In 2018, electricity generation accounted for 75.9mn m³/d on average, or over 57pc of overall demand. Other significant offtakers include industry with 21.6mn m³/d (16.3pc), gas separation plants with 28.7mn m³/d (21.7pc) and natural gas vehicles with 6.2mn m³/d (4.7pc).

Thailand’s preference for imported LNG over domestic natural gas could potentially impact electricity prices, through exposing the country to international LNG markets’ greater volatility. “A higher proportion of imports feeding into the national grid will result in an overall higher price to the consumers,” says Kannika Siamwalla, head of regional oil and gas at Malaysian bank RHB. In February, the price differential had widened to $6.30/mn Btu for domestic gas versus $12.10/mn Btu for LNG.

Pushing ahead

Thailand aims to capitalise on the current oversupply of LNG and low global prices, despite potential fiscal risk and import dependence — to date the country sources most of its LNG from Qatar via its 20-year agreement with PTT for 2mn t/yr. Australia and Malaysia also supply the country with much smaller volumes.

The Southeast Asian country is in the process of installing greater capacity, with more planned over the near term. “PTT already completed the 10mn t/yr LNG terminal [Map Ta Phut], plus 1.5mn t/yr reserved for the Electricity Generating Authority of Thailand [EGAT],” says Chaipat Thanawattano, an investment analyst with SCB Securities, a securities trading firm. “The second LNG terminal project [Nong Fab], with capacity of 7.5mn t/yr, is under construction ahead of commencing operations in 2022.”

Next on the agenda, EGAT plans to construct a 5mn t/yr FSRU by 2023 and the government has designs on a third LNG terminal. Last month, though, the energy policy administration committee (Epac) suspended EGAT’s efforts to import 800-1mn t/yr of LNG due to concerns oversupply could leave the kingdom oversupplied. Malaysia’s Petronas had initially won the supply contract.

Bioenergy

Malaysia keeps August crude palm oil export duty at zero percent

16 July 2019

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Malaysia

KUALA LUMPUR, July 16 (Reuters) – Malaysia kept its export duty on crude palm oil for August unchanged at zero percent, according to a circular on the Malaysian Palm Oil Board’s website on Tuesday, citing the national customs department.

The duty has been at zero percent since September.

Malaysia, the world’s second-largest producer of palm oil, calculated a palm oil reference price of 1,905.38 ringgit ($463.93) per tonne for August. Any price above 2,250 ringgit incurs a duty.

The Southeast Asian nation said in May it would defer the imposition of export duties on crude palm oil to Dec. 31 in efforts to boost palm oil exports and expand into new markets.

Malaysian benchmark palm oil futures were down 0.4% at 1,981 ringgit per tonne in early trade on Tuesday. ($1 = 4.1070 ringgit) (Reporting by Emily Chow; Editing by Subhranshu Sahu)

Others

No electricity tariff hike until December, says Yeo

16 July 2019

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Malaysia

KUALA LUMPUR: There will be no hike in electricity tariffs for all categories of domestic users, as well as commercial and industries, for the period between July to December this year.

Energy, Science, Technology, Environment and Climate Change Minister Yeo Bee Yin said based on the imbalance cost pass through (ICPT) mechanism, the cost of fuel and the increase of other generating cost that need to be imposed on users through the surcharge for the same period has amounted to RM1.592 billion, which is an increase of 0.39 cent per kilowatt-hour (kWh).

However, she said, to reduce the burden of the people as well as the commercial and industrial sectors, the government took various steps to reduce the cost.

“The ministry, through the Energy Commission has made adjustments on the outcome and electricity costs in 2018 and 2019 under the Incentive-Based-Regulation (IBR), based on the provisions in the Regulatory Implementation Guidelines (RIGs), and managed to secure a total savings of RM336.70 million.

“The ministry also received approval from the Cabinet to subsidise the electricity tariffs through the allocation of funds from Kumpulan Wang Industri Elektrik (KWIE) of RM107.16 million,” she said during oral question time in Dewan Rakyat today.

She was replying to a question by Datuk Hasbullah Osman (BN-Gerik) on whether the government would revise the new electricity tariffs following the declining prices of global coal and gas in recent months.

Yeo said although the market price of fuel has fallen recently, the ICPT setting for the period between July to December is based on the average fuel price for the period between January to June.

She also said the ministry is drafting the Energy Efficiency and Conservation Act to encourage efficient energy usage to reduce electricity consumption and save electricity bills.

Yeo added an engagement and discussion session with the members of parliament (MPs) would be held to obtain feedback on the Bill. – Bernama

Bioenergy

Govt to file complaint over EU’s biofuel mandate

16 July 2019

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Malaysia

THE government expects to lodge a complaint against the European Union’s (EU) classification of palm oil cultivation to the World Trade Organisation (WTO) as early as November.

Primary Industries Minister Teresa Kok (picture) said the ministry has filed a complaint to the Attorney General’s Chambers (AGC) and is waiting for the chamber to assist in finding experts to lead the case.

“We are pursuing the complaint to the WTO. In fact, the documents are now with the AGC.

“I hope to file the complaint before we meet with the EU again in November.

“My ministry has already discussed with the AGC and they are assisting us to identify experts who can argue the case for,” she told reporters at the ninth International 2019 Planters Conference in Kuala Lumpur yesterday.

Kok added that she will be attending the Council of Palm Oil Producing Countries’ (CPOPC) ministerial meeting with Indonesia today to continue discussing retaliatory moves against the EU’s stance to curb palm oil usage in biofuel within the bloc.

“I will meet our Indonesian counterpart to hear what their stance is on filing a WTO complaint and what are their proposals.

“If they do not want to participate, we will most likely go alone. But it would be strategically good for both countries to unite in this matter,” she said.

Last Friday, Indonesian President Joko Widodo vowed that he is on board to defend palm oil against the bloc’s biofuel curb as the mandate will likely affect 16 million Indonesian farmers or 6% of the country’s population.

Redefining the oil palm cultivation activities which have been classified by the EU as high-risk is among the agendas at Malaysia’s next meeting with the European Parliament.

The meeting is expected to take place latest by November this year.

The European Commission has adopted the Delegated Act proposal to implement the EU Renewable Energy Directive for 2021-2030, which will gradually limit and phase out biofuel imports into the bloc until 2030.

The regulation suggests that oil palm cultivation contributes to deforestation, greenhouse gas emissions and indirect land use change, classifying it as a “high-risk” activity.

Currently, about 36% of the total 5.85 million ha of oil palm plantation areas in the country are certified as Malaysian Sustainable Palm Oil.

Malaysia and Indonesia are the world’s top producers of the commodity, supplying about 85% of global demand.

The EU countries are the second-largest buyers for both countries after India, as Europe currently consumes 7.5 million tonnes of palm oil a year — about 10% to 15% of the global palm oil demand.

Meanwhile, Human Resources Minister M Kulasegaran said the moratorium on the recruitment of Bangladeshi workers is expected to be lifted by September this year.

“We are in the final stage to conclude lifting the moratorium for labour supply from Bangladesh, which is expected in one or two months’ time.

“We want a mechanism that ensures the workers leave the country upon completion of their contracts.

“The mechanism is being drawn up and we are addressing other options like exploitation of workers and agency fees,” he said.

Kulasegaran added that lifting up the moratorium could substantially ease the shortage of foreign workers in the plantation sector which had cost planters billions of ringgit.

Previously, Kulasegaran said the plantation industry lost nearly RM10 billion a year due to unharvested fruits.

Renewables

Philippines turns on 200kW floating solar project By Cecilia Keating

16 July 2019

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Philippines

A 200kW floating solar project in now live above one of the Philippines’ largest reservoirs.

Norwegian floating solar technology provider Ocean Sun partnered with Chinese solar manufacturer GCL-SI in June to build the floating solar system in the 1,170-hectare Magat reservoir, found 220 miles north of capital Manila on the island of Luzon. It is the Philippines-based renewable energy group SN Aboitiz Power-Magat’s (SNAP) first non-hydro project.

The floating system will undergo a 10-month stress-test to ensure it can withstand inflows and typhoons and will initially service house load requirements for SNAP’s Magat hydroelectric power plant. The dam currently generates 360MW of hydro-electricity.

Philippines Energy Secretary Alfonso G. Cusi has been a proponent of floating solar, a new technology popular in countries where land is in high demand. In an inauguration event for the pilot project on June 27, the politician highlighted solar’s potential meet the country’s energy needs, while pointing to solar fields’ prohibitive effect on agricultural land use.

Dr. Børge Bjørneklett, Ocean Sun’s chief technology officer, told PV Tech in an email that conditions in the northern parts of Luzon were “challenging” on account of the region’s frequent typhoons.

“The high wind force, as well as considerable water level variation, had to be accounted for in the mooring analysis of the installation. The pilot has been in operation only a couple of weeks but will be tested through the rainy season and the months to come,” he said. “The system is well-instrumented and we expect to acquire new knowledge and continue to make improvements on details of the design. We are particularly interested to further explore technical aspects and validate the performance of our direct cooling principle via the special floating membrane.”

According to the official public information arm of the Philippines government, the 52-metre floating ring could be expanded to 450 hectares if testing goes smoothly.

Dr. Bjørneklett said that he could not confirm the future size of the project, but that “by putting up several floater units it’s possible to expand to a sizable utility installation of several hundred MWs. There is strong interest to do this if the pilot tests are positive.”

Two hundred and fifty miles south of Magat, a solar testbed is under construction in Laguna Lake, Southeast Asia’s third-largest lake. Philippines renewable energy developer SunAsia Energy completed the first segment of this 20.5kW floating PV testbed in March. It also hopes to demonstrate how the floating technology, combined with a screw piling method, can withstand typhoons.

Energy Cooperation

Laos, Russia announce cooperation in numerous fields

16 July 2019

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Lao PDR

Lao Minister of Planning and Investment, Dr Souphanh Keomixay, and Minister of Digital Development, Communications and Mass Media of the Russian Federation, Mr Konstantin Noskov, signed an agreement to cooperate in these areas, during Dr Souphanh’s visit to the Russian Federation last week.

Under the agreement, the two parties will implement the agreed areas of cooperation through joint participation.

The measures will be taken in the period between Sessions of the Commission on strengthening the legal base of bilateral relations.

These include the signing of an agreement on Cooperation between the Executive Office of the Security Council of the Russian Federation and the Committee on Defence and Security of the Central Committee of the Lao People’s Revolutionary Party, according to a report provided to the ministry.

Both sides agreed to take measures to further improve the legal basis of Russian-Lao cooperation by working towards finalising the following drafts of bilateral documents which are now under consideration.

These are the Treaty between the Russian Federation and the Lao PDR on legal assistance in criminal matters; Agreement between the Government of the Russian Federation and the Government of the Lao PDR on cooperation in the use of nuclear energy for peaceful purposes; and a Memorandum between the Ministry of Natural Resources and Environment of the Russian Federation and the Ministry of Energy and Mines of Laos on cooperation in geological exploration and subsoil development.

In addition, the two sides committed to work towards a programme of cooperation in education between the Ministry of Science and Higher Education of the Russian Federation and the Ministry of Education and Sports of the Lao PDR for the years 2019-2024.

They will also create a Working Group for the realisation of an agreement between the Government of the Russian Federation and the Government of the Lao PDR on Mutual Intellectual Property Protection in the Course of Military-Technical Cooperation, which was signed in December 2016.

Both sides expressed interest in the early ratification by Laos of the Treaty on Transfer of Sentenced Persons between the Russian Federation, signed on September 26, 2017, in Moscow.

The Lao side informed the Russian side that this treaty has been submitted to the National Assembly for consideration of its ratification.

Both sides welcomed the signing of a Memorandum of Understanding (MOU) between the State Atomic Energy Corporation “Rosatom” of the Russian Federation and the Ministry of Energy and Mines of Laos on cooperation in shaping positive public opinion on nuclear energy and an MOU on cooperation in nuclear energy training and skills development in Laos during the 15th Session of the Commission.