SINGAPORE, Dec 5 (Reuters) – Singapore’s refinery margins for making gasoline have fallen to their weakest levels in seven years – so low that churning out this key motor fuel has become a loss-making business.
Seen as a benchmark across Asia, Singapore margins for 92 RON gasoline against Brent crude oil GL92-SIN-CRK hit minus $1.44 a barrel on their last close on Tuesday, the lowest level since November 2011.
That means margins have slumped 112.5 percent from their 2018 peaks, hit in August.
Gasoline, once the preferred fuel of refiners, has come under intense pressure from swelling supply, and despite a one-third plunge in the cost of crude oil – a refinery’s main feedstock – since early October.
“The market should brace itself for more outflows from China with the recent release of additional export quotas,” said Sri Paravaikkarasu, director of Asia Oil at energy consultancy FGE in Singapore.
China’s government has released an additional 2 million tonnes of refined fuel export quotas for this year, mostly gasoline and diesel, taking total quotas for 2018 to about 48 million tonnes.
In South Korea, another Asian refinery hub, gasoline output and inventories are also high, said Nevyn Nah of energy consulting firm Energy Aspects.
Meanwhile, import demand in Vietnam has shrunk because of the start-up of the country’s Nghi Son oil refinery, while output in the Middle East is set to increase, Nah said.
The losses from making gasoline are weighing on overall refining profits, now at their lowest levels since August 2016 at just $2.93 a barrel, data in Refinitiv Eikon showed. DUB-SIN-REF
Adding to the supply overhang are concerns over an economic slowdown that could soon dent fuel consumption.
In an unusual move, China’s state council on Wednesday issued guidance to support employment as the economy slows, saying the country should pay “high attention” to the impact on employment from increasing economic headwinds.
Such as slowdown is also visible in the world’s biggest car market, China, where sales of new automobiles are on track for the first annual fall since at least 1990.
With supplies continuing to outpace demand growth in the coming months, “there is limited scope for any significant recovery in Singapore,” said FGE’s Sri.
A SUBSIDIARY of engineering-services provider Acromec is diversifying into the renewable-energy sector, having inked a letter of intent (LOI) with egg producer Chew’s Agriculture to operate a waste-to-energy power plant that will use chicken manure as feedstock. (see amendment note)
Acropower, an 80:20 joint venture between Acromec and Malaysian alternative energy company Green Energy Resources, will build, own and operate (BOO) the plant, while Chew’s Agriculture, will supply the manure.
Under the LOI, Chew’s Agriculture will purchase electricity from Acropower to power a new farm for a 15-year period, at no more than a 10 per cent discount to the prevailing Energy Market Authority electricity tariff rate. Chew’s Agriculture has committed to purchasing at least 0.5 megawatt hour (MWh), “with scalability, should the new farm ramp up its egg production beyond the level of production of its existing farm”, said Acromec in a filing to the Singapore Exchange.
The plant, which is slated to start operations by March 1, 2020, will be built on the upcoming farm as Chew’s Agriculture relocates to Neo Tiew Road, off Lim Chu Kang.
Lim Say Chin, Acromec’s managing director, said: “This LOI is an important first step in our drive into the renewable-energy business. It has expanded the horizon of our value chain for our controlled-environments engineering business, and will differentiate us from our competitors.”
As it is planning to grow its renewable-energy business in the coming financial year, a separate team has been assigned – together with its partner Green Energy Resources – to see the project through.
Since the deal marks a departure from Acromec’s core businesses, it will convene an extraordinary general meeting to seek its shareholders’ approval for its diversification plans. The Catalist-listed group presently designs and constructs facilities requiring controlled environments, such as laboratories and medical facilities.
In an interview with The Business Times, Mr Lim highlighted that the company’s strategy to diversify into renewable energy will help deliver sustainable revenue and recurring income streams. It has approached banks and financial institutions for funds for the project.
The-joint venture company is expected to receive at least S$1.5 million a year in revenue from the sale of electricity to Chew’s Agriculture.
Once the project is up and running, Acromec is keen to try and replicate the business model with other companies in Singapore, as well as take it beyond Singapore’s borders to markets such as Malaysia, Vietnam and Thailand.
For the financial year ended Sept 30, Acromec reported a net loss of S$2.62 million, narrowing from a loss of S$4.59 million a year ago. Revenue dipped three per cent year on year to S$42.31 million.
Acromec isn’t the only Singapore-based company venturing into the renewable-energy space. Environmental solutions provider ecoWise Holdings has two biomass power plants, one each at Sungei Kadut and at Gardens by the Bay. These use horticultural and wood waste as biomass fuel, which is used to generated electrical power and heat energy.
An attempt by ecoWise to operate a biomass plant in China to turn farm waste into steam and electricity for factories in the Shandong province stalled after the facility was unable to achieve the targets set out under the engineering, procurement and construction contract.
Shares in Acromec were halted at around noon on Tuesday pending the announcement.
Amendment note: An earlier version of this story stated that Chew’s Agriculture is a wholly owned subsidiary of Chew’s Group. Acromec has clarified that Chew’s Agriculture is no longer a subsidiary of Chew’s Group.
TOKYO: * Tokyo Gas Co has signed a joint development agreement with Philippines’ First Gen Corp to build and operate a liquefied natural gas (LNG) receiving terminal in the Philippines, its first foray into energy infrastructure development in Southeast Asian country
* A Tokyo Gas spokesman declined to comment on the investment amount
* The Philippines in October had short-listed three different groups of companies, including the Tokyo Gas partnership with First Gen, to build and operate its first LNG import terminal
* First Gen, which owns about 60 percent of the gas-fired power plants in the Philippines, is the biggest natural gas user in the country, Tokyo Gas said in a statement
Much of the growth in Asian green bond issuance is in China, with Southeast Asian countries gaining momentum. What can the finance industry do to boost green investments in developing nations in Southeast Asia?
While the global market for green bonds reached a record of more than US$155 billion last year, there are still only a few banks in developing countries in Southeast Asia that have issued such bonds, which fund projects that have environmental benefits.
The main reason for Southeast Asia’s luke warm reception to green bonds is because foreign investors are “not familiar” with the banks in the region, no matter how high their credit risk ratings are, said Ephyro Luis B. Amatong, commissioner of the Philippines Securities and Exchange Commission (SEC).
Among the developing countries in the region only Indonesia and the Philippines have issued green bonds, while Vietnam, Cambodia, and Laos have nascent or no bond market just yet.
Last month, Thailand issued a US$100 million sustainability bond—which differentiates itself from a green bond by financing projects that not only bring environmental but social-economic benefits as well.
Amatong said that lenders like International Finance Corporation (IFC), the private development arm of the World Bank Group, have to act as “anchor investors” for these banks to spur the growth of green bond markets in developing countries.
“What we would appreciate is for IFC to introduce these banks to a wider investor base so that when investors see that the quality of the issued bond is investment grade, they might buy it at a premium,” Amatong told Eco-Business on the sidelines of a corporate governance forum in Pasay City, Philippines in October.
Amatong cited the fund IFC set up with Amundi, Europe’s biggest listed asset manager, as an example of how the agency can further increase the number of investors for banks in developing countries that issue green bonds. The fund, which closed in March, raised US$1.42 billion, of which IFC contributed US$256 million, and is expected to encourage more financial institutions in emerging markets to issue green bonds.
The inclusion of IFC as a major investor in a bank’s green bond serves as a “signaling mechanism” to foreign investors that the bank is credible, added Amatong.
IFC has the international expertise that will ensure that the investment goes to climate-financed projects, as it co-developed the global framework for issuing green as well as social and sustainable bonds, he said.
“What we would appreciate is for IFC to introduce these banks to a wider investor base so that when investors see the quality of the issued bond is investment grade, they might buy it at a premium.”
Ephyro Luis B. Amatong, commissioner, Philippines Securities and Exchange Commission (SEC)
Aileen Ruiz Zarate, a senior investment officer of IFC’s financial institutions group, clarified that it is also IFC’s goal to help banks widen their investor base in funding green projects, but it is still the issuing bank’s decision if they want to do so.
The issuance of US$150 million in green bonds by the Philippines’ seventh largest bank Chinabank last October was made directly to IFC, rather than offered to the public. Before that, IFC also invested in the first green bond issued by the country’s largest bank, BDO Unibank Inc., in December last year.
“BDO and Chinabank’s bond issuances were private placements. It was their choice to have it that way for their first [green bond] issuances,” Zarate told Eco-Business. “If we were to do the next one with the same banks, we would rather have it made public.”
The emerging green opportunity
Although the uptake of green bonds has started slowly in developing countries in this part of Asia, East Asian cities could attract up to US$17.5 trillion in climate-related investments over the next decade, IFC said in a report on Thursday.
The study said that green bonds could be used to narrow the financing gap for climate-smart projects like green buildings, electric vehicles, and climate-smart water, which is water resources and infrastructure that is resilient to the stresses of climate change.
The report stated: “Debt financing instruments such as green bonds have great potential to drive climate-smart investment by allowing cities to acquire long-term debt at stable prices.”
Source: International Finance Corporation
In a table detailing the region’s green investment potential, the report showed that the bulk of the opportunity will be in green buildings with US$16 trillion in investment. Southeast Asia’s second largest’s city, Jakarta, has US$16 billion of investment potential in green buildings, which is expected to save energy, costs and reduce emmissions.
Indonesia’s capital aims to build at least 1,000 low-cost residential towers by 2020 to house people who have been relocated from informal settlements in the low-lying, flood-prone riverbank area, according to the report.
IFC’s study also pointed to the priority given to water by cities in the region for communities and new businesses that rely on the resource for their operations, as reflected by the US$461 billion opportunity in climate-smart water.
The report found that climate-smart water and wastewater management projects had the biggest investment potential for Jakarta after green buildings. Heavily criticised for not providing residents with access to clean water, the government requires an estimated US$3 billion investment to secure piped water instead of extracting water from the ground.
The report also detailed a US$569 billion potential for investment in electric vehicles in the region. IFC estimated that Jakarta will have an investment opportunity of US$660 million in public transport and almost US$7 billion in electric vehicles by 2030 for the city to achieve its plans to create a sustainable transport system.
Hydropower is the foundation of the Chinese transition from fossil fuels to renewable energy sources. In the past two decades it has added more than 300GW of hydroelectricity to its grid. China sees itself as a global leader in the development of hydropower and is willing to help finance and build hydropower projects abroad. Those projects are often controversial, however, as regional actors are unsure of Beijing’s true intentions
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Indian security analysts are concerned about China’s reasons for damming Tibetan rivers. They believe that dams could allow China to assert control over disputed regions (such as Arunachal Pradesh) and reduce water flows to India.
India is also competing with China for influence in Nepal. In November 2017, the previous Nepalese Government cancelled a Chinese loan for the construction of the Budhi Gandaki hydropower project; a decision that was reversed by Prime Minister Khadga Prasad Sharma Oli in September. His government is likely to continue to attempt to play off the two Asian powers against one another, to derive benefits for Nepal.
There is also growing speculation that China wishes to restart the Myitsone Dam project in Myanmar. The project was suspended by the Thein Sein administration after months of protests in 2011. The Chinese State Power Investment Corporation is reportedly ‘ramping up efforts to lobby residents’ to overcome objections to the project. Myanmar has recently resurfaced as a piece of the Chinese influence building strategy in the Indian Ocean region, with the negotiation of an agreement for the development of a deep-water port at Kyaukphyu. As the Myitsone Dam project remains unpopular in Myanmar, however, any attempt to restart it is likely to lead to an increase in protests.
It is not only geostrategic concerns that call Chinese hydropower projects into question. The International Energy Agency and the Intergovernmental Panel on Climate Change continue to see hydropower as a vital component of the transition away from fossil fuels, but others see it as a costly and inefficient source of renewable energy. While hydropower development continues to increase globally, the rate of growth has declined to its lowest level in more than a decade. That suggests that there is a growing global uncertainty about the long-term utility of the technology.
Advances in solar and wind power, and energy storage technologies, mean that hydropower is not always the most appropriate renewable energy source. Furthermore, there are often delays and cost overruns in the construction of hydropower projects, as well as large environmental and social costs once they are built. While hydropower remains a contentious energy option, there are studies that suggest that, in most cases, ‘large hydropower dams will be too costly in absolute terms and take too long to build to deliver a positive risk-adjusted return’. Increased competition for water and declining river flows, caused in part by climate change, are also likely to weaken the power generating potential of hydropower projects.
Chinese hydropower projects are likely to continue to be controversial in Asia. Due to uncertainty about Beijing’s real intentions and the continuing development of alternative renewable sources of energy, it is questionable whether they will actually be built.
Officials cited factors such as lower supply for hydropower plants and gas fields.
The Ministry of Industry and Trade (MOIT), as well as Vietnam Electricity (EVN), indicated that some factors that could raise the prices of power in Vietnam are growing, local newspaper VnExpress reported.
MOIT’s Electricity Regulatory Authority (ERA) is developing a power supply plan for 2019, which includes four different scenarios based on the predicted growth rates of electrical load as well as the predicted amount of water to be received by power plants.
According to ERA head Nguyen Anh Tuan, all the scenarios point to an increase in electricity prices as the total electricity generated by coal-powered thermal power plants would rise by 116 million kWh and place pressure on EVN. EVN general director Dinh Quang Tri said that EVN is considering four to five different options for electricity prices next year.
ERA expects hydropower plant reservoirs to receive less water and gas field supply to decline. It asked EVN coal suppliers to consider imports in calculating the amount of fuel they can supply.
Total hydropower output is expected to drop by 4 billion kWh, so EVN would have to raise the output of thermal power plants powered by coal and oil.
The 5% increase to coal prices would also come into effect in December and could affect coal prices as well, Tuan said. “Coal accounts for a significant proportion of electricity production cost so this exerts a huge pressure on the electricity industry. When developing a scenario for electricity prices we have to take all these costs into account.”
Higher demand is another factor that could raise the price of electricity which, VnExpress reports, is still above 10% and is “skyrocketing” in some areas. EVN proposed to promote household installations of rooftop solar to curb the pricing challenge next year.
December 5 (Renewables Now) – Finnish consulting and engineering firm Poyry Plc (HEL:POY1V) said on Monday it has entered into a three-year framework agreement for the development of various renewable energy projects in Indonesia, including hybrid schemes.
The contract was awarded by PT Indonesia Power, a unit of state-owned power distributor PT PLN, and covers wind, solar photovoltaic (PV) and battery storage projects, as well as hybrid combinations with diesel or gas engines. The deal calls for starting with four renewable energy projects. It contains about 40 different combinations of different types of studies including wind campaigns, according to the announcement.
Poyry noted that its customer is looking to become a green power generation company, while it currently has over 10 GW of coal-fired power plants, hydroelectric facilities, combined cycle power stations and geothermal plants.
The two parties already teamed up once in 2016, when they worked together on conventional thermal power projects. This is a continuation of that deal, Poyry said.
Indonesia is one of the world’s largest emitters of greenhouse gases, but manages to fly well below the radar.
World leaders are gathered this month in Katowice, Poland, for COP24, the most important global meeting on climate change since the 2015 UN Climate Conference in Paris. At the top of agenda: getting countries to agree on rules to implement the Paris climate accords for 2020, when the pact goes into effect.
The meeting serves as a reminder of troubling facts — President Donald Trump still intends to withdraw the United States from the accord, and the most recent UN Intergovernmental Panel on Climate Change (IPCC)’s warns that we have just 12 years to limit average global warming to 1.5 degrees Celsius.
But flying well below the radar in all of this is Indonesia, currently the world’s fifth biggest emitter of greenhouse gases, which come mainly from land use, land use change, and forestry. Today Indonesia stands out for how little it has done to implement policies that would enable it to meet its commitment under the Paris agreement: cutting emissions from deforestation by 29 percent below business-as-usual projections by 2030.
“To really achieve the climate targets … there is a need to come up with new policies that are more ambitious,” Hanny Chrysolite, the forest and climate program officer with the World Resources Institute Indonesia, said.
In fact, Indonesia is moving in the opposite direction. The government plans to build more than 100 coal-fired power plants, and expand the production of palm oil for local biofuel consumption, which will involve further deforestation of carbon-rich tropical forests. Add the expansion of a car-centric transportation infrastructure, a growing middle class and very little investment in renewables, and you have the recipe for a climate disaster.
If Indonesia fails to reduce emissions and build a clean energy infrastructure, there is little hope for the world to meet its global climate goals. Like the US, China, India, and Europe, Indonesia is crucially important to the success of the Paris agreement. What’s needed now, climate experts on the ground say, is a rapid mobilization from the Indonesian government, the private sector, and the global community to shift the country to a new climate-conscious paradigm.
A palm oil plantation supplying Mars, Nestlé, PepsiCo and Unilever in Papua, Indonesia.Ulet Ifansasti/Greenpeace
Indonesia’s forests are crucially important carbon stocks
Worldwide, emissions from land are responsible for about a quarter of all greenhouse gas emissions, according to data from the World Bank. Indonesia is the largest global contributor to these emissions, spewing 240 to 447 million tons of CO2 annually from agriculture, the conversion of carbon-rich forests to plantations and other uses, according to data from Global Forest Watch.
Tropical rainforests and peatlands — wetland ecosystems that contain peat, a spongy, organic material formed by partially decayed plants — store huge amounts of carbon. According to a Nature Communications paper published in June, one hectare of rainforest converted into a palm oil plantation in Indonesia results in 174 lost tons of carbon.
“The quantity of carbon released when just one hectare of forest is cleared to grow oil palms is roughly equivalent to the amount of carbon produced by 530 people flying from Geneva to New York in economy class,” Thomas Guillaume, one of the authors, said in a statement.
Back in 2015, an extremely dry rainy season connected to a strong El Nino event led to massive fires across the archipelago, particularly on the islands of Sumatra and Kalimantan. They emitted more greenhouse gases into the atmosphere than the United Kingdom does in an entire year.
Indonesia’s forests are still being cut down and fires are still burning
Unfortunately, there has been little progress towards reducing land-based emissions in Indonesia thus far. Despite the creation of a peatland restoration agency in 2016, followed by the extension of a moratorium on partial forest clearing, satellite monitoring shows that palm oil and paper plantations — the key drivers of deforestation and fires — continue to expand, with at least 10,000 square miles of primary forest and peatland disappearing since 2011, according to an civil society coalition.
“They are doing some good things, but it is not enough,” said Teguh Surya with Yayasan Madani Berkelanjutan, an Indonesian environmental NGO. “Palm oil expansion is still in planning, and on the ground we found some peat areas still open for plantation, there is still weaknesses in law enforcement.”
Essentially, efforts to reduce fires after the 2015 event have had too little an impact thus far, and current plans could make things a lot worse. More than 10 percent of the Indonesian population lives below the poverty line, and the country wants to build 3 million hectares of oil palm and sugar plantation in Papua. If these go forward, advocates worry that they could bring fire problems to the only part of the country with native forests intact and increase the country’s agricultural greenhouse gas emissions even more.
Indonesia’s growing economy and energy demands could make things much, much worse
Here’s where things get even more concerning. Even if all the plans to reduce deforestation succeed, fires are eliminated, and palm oil production is shifted towards sustainable practices, it might not be enough. Indonesia’s fast-growing middle class has an increasing demand for energy. In fact, WRI projects that by 2026 or 2027, energy, not land, will be the largest contributor of Indonesian emissions.
There are two facets to this challenge. One is electricity generation. Indonesia has vast coal reserves, mostly in Borneo, where coal mining is also a cause of deforestation. However, the global coal market has a glut, and Indonesian imports to places like China, South Korea, and India are falling. In response, the Indonesian government had a simple plan; replace this foreign demand with local consumption, through the construction of over 100 new coal-fired power plants throughout the country, 10,000MW of power generation capacity, on top of the existing current 42, making Indonesia one of the last places in the world pushing forward on coal energy.
Then there’s transportation. Indonesia is building new highways and car ownership is growing. Oil imports tripled between 2004-2012, and that’s despite the country’s fairly large oil and gas production capability.
The real tragedy is that Indonesia has immense renewable capacity, with ample wind, solar, hydro and geothermal resources across its many islands. Yet, currently, it is only utilizing a paltry 2 percent of that capacity, and even that is mostly from large-scale hydro — a poor choice for a number of reasons.
Some small signs of hope
One bright spot: the Indonesian government is finally ready to begin accepting payments as part of the Reducing Emissions from Deforestation and Forest Degradation (REDD+) program. REDD+ provides direct payments for preserving intact forests, and Norway has already pledged $1 billion specifically to protect Indonesian forests.
If climate finance can get scaled up, this could be a tool to provide substantial funds into forest protection. Jonah Busch, an environmental economist with the Earth Innovation Institute, thinks that Brazil, which dramatically pared its own deforestation between 1996 and 2010 (though the trend has been worrying since then), could be a model for Indonesia to reduce its own deforestation.
“Five, ten, or twenty billion [dollars] for protecting forests would have a much bigger impact,” said Busch. “That would happen when rich countries get much more serious about addressing climate change than they currently are.”
There is potential for clean energy too. A new parliamentary Green Economy Caucus has been created, and there are calls for a renewable energy law, which could level the playing field with fossil fuels. It may not take much support to allow alternatives like solar, wind, and geothermal to compete. In nearby China, India, and Thailand, clean energy is already competing with and beating fossil fuel, years ahead of projections. Indonesia could follow.
“Indonesia recently said that they won’t be contracting for more coal-fired power plants, already too many in the pipeline, and will focus on renewable energy targets and revising air emissions standards,” said Lauri Myllyvirta, an Asian coal and air pollution expert for Greenpeace. “A lot of positive things are happening.”
“The US not taking climate seriously gives a big excuse for the Indonesian government to not take it seriously either”
The question: Can these changes happen fast enough for Indonesia to hit the global targets? Right now, Indonesia’s policies are allowing for deforestation, and are far too fossil-fuel centric. Globally, climate investments and global funds like the maligned Green Climate Fund, which could further incentivize forest protection alongside REDD+, have yet to materialize, with disbursements far behind what was promised at Paris.
Meanwhile, the Trump administration’s abdication of responsibility on climate change means that countries like Indonesia will be less inclined to make the hard decisions essential to radically drawing down emissions.
“The US not taking climate seriously gives a big excuse for the Indonesian government to not take it seriously either,” said Busch. “They have lots of other domestic concerns.”
One thing that could help is stronger requirements from countries that import commodities responsible for deforestation and fires, such as palm oil. Europe — after years of grandstanding — is finally going to revise its biofuels policy to reduce imports of climate-intensive alternative fuels like palm oil. If more countries follow, this could force Indonesia to make the palm oil industry more sustainable.
Financial institutions can also play a greater role. Right now, many foreign banks, particularly those from Japan, are the chief funders of coal-fired power plants. Shifting those investments away from coal and towards clean energy projects could help hasten Indonesia’s move towards clean energy alternatives.
Indonesia can’t solve climate change on its own. But the world can’t stop climate change without Indonesia. Global financial institutions, including banks, funders, and foreign governments, need to do more to reduce deforestation, restore degraded land, and ensure the country does not get locked into decades of burning fossil fuels.
Nithin Coca is an Asia-focused freelance journalist covering environment, human rights, and politics issues across the region.
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