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  • Oil & Gas
13 August 2019

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  • Malaysia

KUALA LUMPUR: Malaysia on Tuesday said the Johor PortAuthority was working to develop a 2 billion ringgit ($477 million) oil storage and ship refueling site in the country’s south.

That marks the latest step in a push to turn Malaysia’s southern peninsular state of Johor into an oil and gas hub that could one day rival Singapore, currently Asia’s main oil centre.

The “Bunker Island Development” is set to have the capacity to store about 1.2 million cubic metres of various oil and gas products, the transport ministry said. It will be used for storage, blending and redistribution.

The ministry added that the project would also be used to promote cleaner marine fuel in accordance with International Maritime Organization (IMO) rules that will require lower sulphur content in shipping fuel from 2020.

Johor is where state energy firm Petronas has begun operating its oil refinery and petrochemical project known as Pengerang Refining and Petrochemical (PrefChem).

The transport ministry said in its statement that Johor Port Authority had signed a sublease agreement with Smart Crest Sdn Bhd, which is funding the development.

  • Others
13 August 2019

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  • Singapore

Every day after his morning run, Adam Reutens-Tan washes under a half-full camping shower hooked on the ceiling of his bathroom.

The modified shower, which uses just four litres of water, is one of several ways the Reutens-Tans family conserve water as part of a countrywide push to cut Singapore’s daily consumption by 8% by 2030.

The nation currently uses 141 litres per person each day – about enough for two typical eight-minute U.S. showers, according to Harvard University statistics.

Singapore, a steamy, low-lying island city-state, is the fifth most likely country in the world to face extremely high water stress by 2040, according to the U.S.-based World Resources Institute.

And it is hardly alone.

U.N. data shows 2 billion people – a quarter of the world’s population – now use water much faster than the planet can replenish natural sources, such as groundwater.

Singapore gets about half of its water from neighbouring Malaysia, according to local water experts, importing supplies from the Johor River under deals dating back to 1927.

But the current import agreement is due to expire in 2061 – and the price Singapore pays for Malaysian water has been a source of friction between the neighbours for years.

Singapore buys river water from Malaysia for 3 sen – less than a tenth of a U.S. cent – per 1,000 gallons, then treats it and sells some of it back to Malaysia’s Johor state at 50 sen per 1,000 gallons.

Malaysia’s prime minister has called the price Singapore pays to import Malaysian water “ridiculous”.

  • Electricity/Power Grid
13 August 2019

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  • Vietnam

HCM City (VNS/VNA) – With power transmission lines and sub-stations getting overloaded in some provinces, authorities and experts have urged the Government to allow renewable energy investors to install transmission systems and transfer them to the Vietnam Electricity (EVN) for operation.

Transmission lines, especially in Ninh Thuan and Binh Thuan provinces, have become overloaded after several renewable power plants went online. Ninh Thuan wants the Government to allow them to build transmission infrastructure.

Many experts agreed with this, saying besides adjusting zoning plans for renewable energy, the Government should create a mechanism for private investment in transmission systems.

Assoc Prof Dr Bui Quang Tuan, Director of the Vietnam Institute of Economics, said this would address the lack of capital.

Phuong Hoang Kim, Director of the Ministry of Industry and Trade’s Electricity and Renewable Energy Authority, told Nguoi Lao Dong (The Labourer) newspaper that with huge sums needed for electricity development and the Government no longer guaranteeing loans for power projects, the private sector should be allowed to invest in some stages.

The Electricity Law stipulates a Government monopoly in transmission, meaning the Government installs, manages and operates transmission systems, he said.

Therefore, the private sector is not allowed to do so. “Even if enterprises … build transmission lines and hand over at zero VND, the electricity industry has no mechanism to receive these assets,” he said.

The law also stipulates transmission costs should be less than 100 VND/KWh and subsidised by the Government to keep electricity prices under control.

If the private sector invests in transmission, it would determine the price, which cannot be as cheap as State-regulated rates, but it is not easy to sharply raise electricity prices since they are fixed by the State, he explained.

From the perspective of energy security, Prof Dr Tran Dinh Long, Vice Chairman of the Vietnam Electrical Engineering Association, said in many countries power transmission remains a monopoly of the Government because this is the “backbone” of the electrical system.

So, if Vietnam has a plan to allow the private sector into power transmission, there should be a thorough discussion in the National Assembly before laws are amended, he said.

Transmission lines of 220KV and above should remain a Government preserve, he said.

Transmission lines of 110KV and less and lines from power projects far from existing transmission lines could be opened to the private sector, he said.

In addition to quickly building transmission lines in areas where they are overloaded, the electricity sector also needs to balance transmission from various sources, he said.

For instance, from 8am to 4pm it is preferable for solar plants to transmit power to the grid.

According to EVN, as of the end of June the country had 89 solar power plants with a total capacity of 4,543 MW, far in excess of the 850 MW by 2020 envisaged in the power plan.-VNS/VNA

  • Renewables
13 August 2019

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  • Indonesia

JAKARTA (Reuters) – Indonesia may require an estimated $15 billion (£12.43 billion) in investment to meet its target of reaching 7.2 gigawatts (GW) of geothermal power capacity by 2025 and is studying ways to reduce project costs, an energy ministry official said on Tuesday.

The capacity would be an increase from less than 2 GW of geothermal power currently, the Ministry of Energy and Mineral Resources’s Director General of Renewable Energy F.X. Sutijastoto told reporters at a conference on geothermal energy.

Earlier at the conference, Indonesian Vice President Jusuf Kalla said during a speech that progress in geothermal power development in the past decade has been “very slow” and the dependency on coal power has caused air pollution around the capital Jakarta.

Coal currently makes up around 60% of the country’s energy mix versus about 5% from geothermal power, according to data from state utility company PT Perusahaan Listrik Negara (PLN).

The energy ministry is drafting up plans to accelerate ongoing projects to meet the target, Sutijastoto said, including reviewing the possibility of the government reimbursing some part of the development costs.

“We will see, things such as infrastructure, may be possible to be reimbursed by the government,” he said, referring to items such as roads or bridges built by the company to reach the geothermal power site.

PT Pertamina Geothermal Energy, a unit of state energy company PT Pertamina, is aiming to invest $2.7 billion in geothermal power through 2026, President Director Ali Mundakir told reporters at the conference.

The company aim to increase its geothermal capacity to 1.1 GW by 2026 from 672 megawatts currently.

(Reporting by Wilda Asmarini; Writing by Fransiska Nangoy; Editing by Christian Schmollinger)

  • Energy-Climate & Environment
12 August 2019

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  • Malaysia

Kuala Lumpur (CNN Business)The world is heating up, making us rethink not just how we live but where we live and work too.

Buildings account for nearly 40% of greenhouse gas emissions worldwide, and more renewable energy will be needed to meet targets mandated by the Paris climate accord, according to Architecture 2030, a nonprofit group that works with construction companies.
Malaysia is tackling the challenge head-on. Architects have to take into account a year-round tropical climate in addition to the effect of carbon emissions from their projects.
Air conditioning is central to the debate. In a place like Malaysia it’s essential. But it’s also powered by huge amounts of energy that significantly heats up the planet.
Placing air conditioning vents on the floor rather than higher up can slash the amount of energy used.

Dr. Tan Loke Mun, an architect based in Kuala Lumpur, has spent years thinking about how to ensure homes and offices offer comfort without adding to the climate crisis.
Inside his home, an airy tree-lined property, he’s come up with simple upgrades to provide all the functions residents expect while saving energy.
The first thing to address is what he describes as low-hanging fruit.
Instead of installing air conditioning on the wall or ceiling, for example, vents are installed in the floor. Simply placing the system there can save a building about 30% to 50% of energy used, he said.
Materials also play an important role. The windows in Tan’s home are made from a type of glass that “lets in the light, but not the heat,” the architect said.
The most important feature is the roof, because that’s where about 60% to 80% of the heat in a building typically escapes, Tan said.
In colder climates, architects and builders focus on insulating the roof to keep heat inside and lower fuel consumption. In Malaysia, they’re trying to do the reverse — encourage more heat to flow out through the roof.
For his home, Tan designed a large, overhanging roof and placed wind turbines on top to draw more hot air out, and cool air in.
Tan, who teaches architecture at a local university, says he has seen students embrace sustainable design.
“I think the next generation will change the world,” he said. “Green is not a style … [it’s] the right thing to do.”
  • Bioenergy
12 August 2019

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  • Indonesia

Indonesia currently has a mandatory B20 program that Widodo told a cabinet meeting could save the country around $5.5 billion dollars per year in fuel imports, if it was implemented consistently, according to the Cabinet Secretary.

The Indonesian government has been ramping up efforts to boost domestic use of palm oil, the feedstock for its biodiesel, as the vegetable oil has seen sluggish demand due to import duties imposed by top buyer India and restrictions in European Union markets because of environmental concerns.

The Cabinet Secretary’s statement said Widodo will personally check the implementation of the mandatory B20 program, which was expanded in September last year, as well as the plan to switch to B30.

“All parties must be aware that Indonesian crude palm oil is in a depressed position due to global demand, so everyone must have the same commitment, same desire, that the domestic market can solve this problem,” it said.

The president also said he wanted to possibly increase palm content in the biodiesel program further by the end of 2020, according to a statement from the palace.

FX Sutijastoto, director general of renewable energy at the energy ministry, said separately that the government is looking into creating a fuel made from a mix of palm fatty acid methyl ester (FAME), fossil fuel and another diesel fuel made entirely from palm oil.

State energy-company PT Pertamina [PERTM.UL] is currently conducting studies to process palm oil into fuels.

The president also has asked ministers to study further the possibility of mixing palm oil-based fuel with jet fuel, the statement said.

The government is currently conducting road tests for diesel vehicles running on B30 fuel.

The country could consume up to 9.6 million kilolitres (kl) of fatty acid methyl ester, the palm content in the biodiesel, in 2020 with the B30 program, deputy energy minister Arcandra Tahar said last month. That’s more than a 50% increase from an estimated consumption of 6.2 million kl this year.

Sutijastoto said the government is currently drafting detailed plans on developing its palm energy sector.

  • Oil & Gas
12 August 2019

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  • Indonesia

Pragmatism is winning out over ambition, at least as far as energy reform in Indonesia is concerned. When he assumed office in 2014, Indonesian President Joko “Jokowi” Widodo promised big changes for both the upstream and downstream energy sectors in an effort to attain greater local control of hydrocarbon production and stanch the flow of state funds into expensive consumer fuel subsidies. With this, Jokowi hoped to foster long-term self-reliance in extraction and production while channeling subsidy savings into much-needed infrastructure improvements, right-sizing fuel demand and lowering the country’s reliance on imported fuel. All of the changes were part of Jokowi’s overall bid to foster an economy based on manufacturing and industry, rather than raw commodity exports.

The Big Picture

Long a major hydrocarbon producer, Indonesia has struggled to lessen reliance on imported fuels since losing its net exporter status in 2004. But Indonesian President Joko Widodo’s ambitious energy reforms have hit numerous snags over the past five years. While his objectives to shore up local control of production and curb reliance on foreign imports remain, his second term will feature a continued slow, pragmatic approach to reform.

Five years on, the results have been mixed. On the downstream side, Jokowi did move quickly to scrap key gasoline subsidies and cap diesel subsidies right after taking office in 2014, making painful cuts to a decades-old system that had long sapped government budgets. But even as Indonesia proved willing to cut prices and give market forces a greater role after oil prices began to fall in 2014, the government was not willing to continue them after oil prices began to recover. Instead, Jokowi’s government has taken a more cautious approach out of fears of a public backlash and economic repercussions, compelling gasoline prices to remain flat for long stretches and dramatically raising diesel subsidies in 2018 (albeit with a resolution to drop them in 2020). On the upstream side, Jokowi’s efforts to recentralize a large share of oil and natural gas production in state-owned Pertamina has also stumbled. The Indonesian behemoth has managed to secure operatorship of key blocks, but the government has put the brakes on giving Pertamina further responsibilities due to its lack of expertise, financing constraints and resulting production declines — to say nothing of Jakarta’s fears of alienating vital foreign oil majors in the process. Through it all, oil price volatility has not helped either.

Together, it means that caution will be the watchword for Jokowi going forward. The president will continue to pursue his goals of rationalizing the downstream fuel market and indigenizing hydrocarbon extraction in the long term — but not at the cost of jeopardizing economic growth or setting a pace that unduly disrupts production.

A Cautious Approach to Upstream Reforms

Indonesia’s hydrocarbon sector has deep roots and a long history of foreign partnerships, yet it has suffered in recent years from declining production and skyrocketing domestic demand. With this in mind, Jokowi is aiming to expand exploration and production to fill the gaps left by declining blocks. On the production side, his government wants to empower Pertamina to play a stronger role in the domestic industry and move into overseas markets. This effort to expand Pertamina’s production role at the expense of international companies is part of Jokowi’s overall strategy of resource nationalism to localize control of these resources and move up the value chain.

Indonesia was a net oil exporter until 2004 when it became a net importer. Indeed, OPEC suspended the country in 2009 because of the earlier loss of its net exporter status. Jakarta briefly rejoined in 2015, only to refreeze its membership a year later in resistance to OPEC-mandated production cuts. By 2018, consumption was more than twice as high as production — a state of affairs that is unlikely to change with hydrocarbon blocks declining and Indonesia’s growing economy ever-hungrier for energy.

This graph shows the gap between Indonesia's newly confirmed hydrocarbon reserves and current oil production.

Natural gas, by contrast, has assumed an increasingly larger share of Indonesia’s hydrocarbon production, rising to 60 percent of oil and gas production in 2018. By 2020, it is set to rise to 70 percent and then to 86 percent by 2050. Still, major oil and natural gas fields face longer-term decline, requiring more robust exploration (and therefore investment), particularly in more challenging deep-water blocks in the east. While Pertamina is capable of tackling aging fields, the deep-water blocks will require greater international involvement and larger spending commitments.

Jokowi’s reform objectives still stand, but the past five years have brought headwinds and adjustments for Indonesia. Overall, the 2013-2018 period resulted in greater volatility both for Indonesia and the global oil sector, particularly in the wake of the 2015 oil price drop and subsequent fluctuations. Factors such as continued oil price volatility and uncertainty about Indonesia’s energy reforms dragged total oil and natural gas investment down by nearly half from 2014 to 2017. Exploration and development constituted much of the drop — raising particular worries for Jokowi’s energy hopes. In 2017, Indonesia drew just $10.3 billion in investment; it attracted more last year ($11.9 billion), but that was still far less than the $17.4 billion targeted. 2019 is not shaping up to be much better either, as investments totaled a mere $5.2 billion. Indonesia’s resource nationalism has also decreased investor returns, reducing international interest. This is worrisome for Indonesia given that many international companies that have left — or been pushed out of — the Indonesian market are unlikely to come back readily even if Jakarta offers incentives.

Between 2014 and 2025, 27 hydrocarbon block contracts are set to expire — providing an opportunity for the government to hand over operations to Pertamina. But given the company’s inefficiency and lack of expertise, as well as fears about the potential disruption to production, Jakarta has hesitated to allocate more blocks to the company.

Three big blocks, in particular, illustrate Jakarta’s wariness: the Rokan oil block on Sumatra, the Mahakam oil and gas block offshore in the Makassar Strait and the Corridor oil and natural gas block on South Sumatra. Taken together, these comprise a substantial proportion of the country’s output. In Mahakam and Rokan — the country’s largest natural gas-producing block and second-largest oil-producing block, respectively — Pertamina beat out foreign majors to grab the blocks.

The graph shows Indonesia's consumption and production of oil and gas.

As Jokowi embarked upon his second term, however, he changed his approach on the Corridor block — likely because of Pertamina’s poor performance, declining investment figures and his new political strength following the elections. Noting that Pertamina’s takeover of Mahakam had precipitated a production decline of over 25 percent, Jakarta took a much more pragmatic and measured approach to balance resource nationalism and foreign investment.

Corridor’s production-sharing contract among U.S.-based ConocoPhillips, Spain’s Repsol and Pertamina was set to expire in 2023, but last month, Jakarta refused to hand over operations to its state-owned company as part of a 20-year contract extension. Instead, the government only raised Pertamina’s share from 10 percent to 30 percent, while dropping ConocoPhillips’ stake from 54 percent to 46 percent. And though the contract includes a technical transition period beginning in 2026 in which Pertamina will gradually take over operations, the deal will not culminate in the state-owned company assuming a controlling share of the block. With this, Indonesia is trying to balance foreign company interest with its resource nationalist goals.

The Indonesian government has made other efforts to sweeten the pot for continued foreign participation. In 2017, it introduced new contract terms, known as the gross-split scheme, which have brought greater predictability to the process and added tax breaks and incentives for extraction in difficult environments. And, in March 2018, the government eliminated 22 of 51 restrictions on energy sector business licenses and eased the corporate tax burden on select projects. There are some signs that this has already borne fruit amid improvements in the country’s “reserve replacement ratio,” an index measuring new, proven hydrocarbon reserves compared to current production. The ratio hit as low as 55 percent in 2017, but greater certainty about regulations and incentives raised the figure to 106 percent in 2018 — which outstripped even government targets in hitting a seven-year high.

Jokowi’s reform objectives still stand, but the past five years have brought headwinds and adjustments for Indonesia.

But much will depend on how Jokowi proceeds with the long-delayed replacement of the country’s 2001 oil and gas law, which the government implemented after Indonesia’s transition to democracy in 1998 to regulate hydrocarbon extraction. The new law would both enhance stability in the sector and potentially dissuade foreign participation by formalizing some of the government’s push to regain greater control over the sector. Drafts of the bill indicate that it would increase Pertamina’s role and limit that of private companies by giving energy business licenses to a new state-run operator. Additionally, it would cement Pertamina’s right of first refusal on new blocks and, after 50 years, another chance to assume control over them. Downstream, meanwhile, the law would allow the government to increase the amount of oil and natural gas it can compel operators to sell on the domestic market.

Falling Back on Subsidies Downstream

But upstream reforms are only part of the picture. Jokowi’s promises on energy reform also encompass the consumer end of the energy sector, as he has pledged to impose tough cuts on fuel subsidies to reduce runaway consumption and a growing reliance on foreign imports so as to free up government revenue for health care, infrastructure and education. At the start of his first term, Jokowi made headway in eliminating key gasoline subsidies and limiting those for diesel, reducing such expenditures by 2.3 percent of gross domestic product in 2014 to between 0.3 and 0.7 percent from 2015 to 2019. Thanks to the savings, Jokowi’s government raised infrastructure spending from 1.7 percent of GDP in 2014 to 2.2 percent in 2015 and toward 3 percent since 2017. But since his initial success, Jokowi has failed to maintain the pace amid concerns that rising fuel prices could dampen economic growth, raise the cost of living and hurt his political fortunes. In short, it was much easier for Jakarta to cut subsidies when global oil prices were low than when those prices recovered.

These charts show Indonesia's spending on subsidies and infrastructure.

In the end, the government has retained a major hand in setting fuel prices, retaining veto power over quarterly price changes and compelling Pertamina (which controls the lion’s share of fuel retailing) to provide implicit subsidies on gasoline by selling it below actual world market prices. This sapped the massive company’s funds because it had to shoulder the costs of the difference — particularly when oil prices rose. Because this has burdened Pertamina, the government announced in November 2018 that it would compensate the firm $1.3 billion for fuel sale costs in 2017. Elsewhere, however, the government has struggled to stop illegal deviation from fuel prices at the government-mandated price in far-flung regions.

Pertamina has also found it difficult to fulfill promises to refine more fuel domestically to feed markets in Indonesia. One of the company’s divisions, PT Pertamina (Persero), is still the major player in retail fuel because of its distribution network and because it owns seven of Indonesia’s nine oil refineries. The government, however, launched the Refinery Development Master Plan in an effort to raise this refining capacity, which currently sits at 1.1 million barrels per day, to 2 million barrels per day by 2024. Pertamina has pledged $7 billion per year from 2021 for this purpose, but it has so far failed to even reach its 2019 target of $5.5 billion.

And as 2019 presidential elections approached, Jokowi took an even more cautious approach to fuel prices. In March 2018, he publicly instructed ministers to keep fuel prices stable for two years. A month later, the government expanded its powers to control fuel prices. Then, in mid-2018, Jakarta announced plans to quadruple diesel subsidies to keep prices low. At the end of last year, the government announced plans that it would, in fact, raise premium gasoline prices, only to abandon the plan and drop prices across the board due to protests.

Indonesia’s president faces a dilemma: Higher prices jeopardize economic growth, but sustaining lower prices is expensive, thereby requiring either higher taxes or government spending cuts.

Jokowi’s Dilemma

Although Jokowi’s goal of higher and more liberalized fuel prices remains, he faces a dilemma: Higher prices jeopardize economic growth, but sustaining lower prices is expensive, thereby requiring either higher taxes or government spending cuts. Faced with such a difficult choice, Jokowi opted to prioritize lower prices in his 2019 budget, which included a 65.6 percent increase in energy-related subsidies over the 2019 figure. Accordingly, Jokowi only succeeded in raising the infrastructure budget by 2.4 percent from 2018, representing the slowest growth since 2014. With overall expenditures in the 2019 budget rising nearly 10 percent, Jokowi has promised to make up the difference with increased tax revenue, although that might prove a tall order given that Indonesia collected less than half of its targeted tax revenue in 2018. Still, now that Jokowi has secured a second term, the government has announced plans to cut the diesel fuel subsidy in 2020 to raise more funds to support liquefied petroleum gas development and also made easier by the fact that recently increased nationwide biodiesel requirements will result in a higher proportion of domestically produced palm oil in diesel blends.

Nevertheless, the trend is to maintain subsidies — something that does not bode well for Jokowi’s erstwhile ambitions to enact downstream reforms. The global slowdown and the U.S.-China trade war have dampened Indonesia’s non-oil and gas trade, widening the current account deficit to $31.1 billion in 2019 amid forecasts of further falls this year and next. This puts greater pressure on Indonesia to decrease its ballooning hydrocarbon imports. And while factors like the trade war, U.S. oil production growth and declines in global demand are all pulling down oil prices, supply-side disruptions and geopolitical tensions could raise it — raising the cost of Jokowi’s price controls and the risks that hydrocarbon poses to Indonesia’s bottom line on trade.

  • Oil & Gas
11 August 2019

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  • Philippines

MANILA, Philippines — Oil companies, led by Phoenix Petroleum Philippines, have reduced pump prices in step with the decline in global crude prices in the past trading week.

Phoenix Petroleum said it reduced gasoline prices by P0.50 per liter and diesel by P1.10 per liter effective 2 p.m. yesterday.

Cleanfuel will implement the same cut at 4 p.m. today.

In another advisory, Caltex Philippines said it would lower gasoline prices by P0.55 per liter, diesel by P1.10 per liter and kerosene by P1.30 per liter starting 12:01 a.m. on Tuesday.

Other oil firms have yet to announce their price reductions.

Global oil prices fell for most of the trading week – even tumbling to a seven-month low – due to the escalating US-China trade war, Reuters reported.

The 2.4-million barrel buildup in US crude stockpiles also weighed down oil prices.

However, the worsening trade war between the US and China supported expectations that the Organization of Petroleum Exporting Countries could lead to more production cuts.

Last week, oil companies did not implement price changes.

Department of Energy data showed year-to-date adjustments stand at a net increase of P5 per liter for gasoline, P3.95 per liter for diesel and P2.15 per liter for kerosene.

Read more at https://www.philstar.com/headlines/2019/08/11/1942306/oil-companies-roll-back-pump-prices#A9HDyAsFwAGtB74q.99

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