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Coal

Pertamina, Bukit Asam ink coal gasification deal in US

15 November 2018

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Indonesia

State-owned energy holding company Pertamina and state-owned coal mining firm PT Bukit Asam (PTBA) have inked a partnership with chemical company Air Products and Chemicals Inc. on coal gasification.

Under the agreement, the United States-based company would build a facility to produce coal derivative products, like dimethylether (DME) and synthetic natural gas (SNG) at the Peranap Coal Mine in Riau, which is owned by PTBA.

The agreement was signed on Wednesday in Allentown, US, attended by the president directors of the two state-owned enterprises (SOE) and SOE Minister Rini Soemarno.

“The downstream development in the mining sector will have a major impact on the Indonesian economy, especially to narrow our current account deficit,” she said in a press statement received by the media on Thursday.

Pertamina president director Nicke Widyawati said the partnership would help reduce Indonesia’s dependency on liquefied petroleum gas (LPG), noting that 70 percent of nationwide demand for the energy source was currently met through imports.

“In 2017, Indonesia consumed no less than 7 million tons of LPG. Therefore, the development of coal gasification is a national strategic project,” she said.

Meanwhile, PTBA president director Arviyan Arifin said the coal gasification facility in Penarap was expected to operate in 2022 with a capacity of 400,000 tons of DME annually and 50 million metric standard cubic feet per day (mmscfd) of SNG.

Air Products and Chemicals Inc. president and CEO Seifi Ghasemi said his company, a patent holder of coal gasification technology since 2018, was committed to fully supporting Indonesia in producing coal derivatives. (bbn)

Gatchalian asks DOE to add energy security, sufficiency in 30-year plan

15 November 2018

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Philippines

Senator Sherwin T. Gatchalian, chairman of the Senate energy committee, urged on Thursday the Department of Energy (DOE) to include energy security in its Philippine Energy Plan as the soaring energy prices have contributed to the country’s nine-year-high inflation rate.

Sen. Sherwin T. Gatchalian
(Senate of the Philippines / MANILA BULLETIN)

During a recent hearing of the Senate energy committee on the country’s energy security issue, Gatchalian pointed out that the DOE has failed to articulate energy security in its Philippine Energy Plan (PEP) 2017-2044 despite the agency’s mandate to put it at the forefront of its energy direction.

‘’In fact, the Philippines seemed to be going the wrong direction when it comes to energy sufficiency and energy security,’’ he said.

“I think it’s really admirable that energy security is at the forefront of the DOE’s energy direction… However, energy security has never been articulated in the PEP. In fact, there’s no section in the PEP about energy security and energy sufficiency. If you look at the projections, we will not achieve any security, any sufficiency,” he added.

“Going by the DOE’s strategic direction that energy security is number one, it seems to me that there is inconsistency between the strategic direction and also the projections here in the PEP,” he pointed out.

To prove his point, Gatchalian noted the country’s poor performance in the World Economic Council (WEC) Energy Trilemma Index, which ranks the performance of each country based on energy security, energy equity, and environmental sustainability.

For 2018, the Philippines ranked 74 out of 125 countries, down from its 70th place ranking in 2017, after garnering “C” ratings for energy security and energy equity, and an “A” rating for environmental sustainability. Out of 22 Asian countries, the country ranked 11th.

Gatchalian said data from the DOE showed that the Philippines remains heavily dependent on external sources for its petroleum supplies, importing 94 percent of its oil requirements.

The DOE recently reported that the country’s total import bill jumped to $9.89 billion in 2017, a 31.2 percent increase from the $7.54 billion import bill in 2016.

`The DOE, on the other hand, paints a grim picture for the renewable energy sector as the share of fossil fuels in the country’s energy mix continues to grow.

Under the DOE’s Business as Usual Scenario, the share of renewables in the energy mix – including geothermal, biomass, and hydro – is projected to drop to 17 percent in 2040 from 36 percent in 2017.

Citing the projections made by the DOE, Gatchalian lamented that the country’s installed renewable energy capacity is only expected to grow at a dismal pace of 1.5 percent over the 24 years, in contrast with the 6.5 percent and 6.7 percent growth rates of installed capacity of oil and coal plants, respectively.

“So with these growth figures, I don’t think we will reach any security by 2040 or any sufficiency for 2040… by that alone, it raises a lot of question marks whether we’re putting all our eggs in one basket,” he said.

Gatchalian said the DOE needs to develop concrete plans to achieve energy self-sufficiency and security from 2018 to 2040, as well as to quantify these policies.

“In my view, energy security should be a paramount concern of our nation. I think the reason for that really is to insulate consumers from price volatility. It also has an effect on our economic well-being by importing less,” he added.

Coal

Geo Energy inks coal off take, equity investment with Australia’s Macquarie Bank

15 November 2018

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Indonesia

INDONESIAN coal miner Geo Energy Resources has scored a three-in-one with Australia’s Macquarie Bank that will see the Singapore-listed firm secure more than US$75 million in fresh funds by way of a pre-payment for a coal offtake deal for its mine and proposed equity investment alongside a trade finance facility for which the sum was not disclosed.

Macquarie was selected based on its scale, international presence and experience in commodity trading; and Geo Energy will tap Macquarie’s expertise to develop a market for PT Tanah Bumbu Resources’ (TBR) coal, said Geo Energy executive chairman Charles Antonny Melati in an announcement on Thursday.

In the statement, the coal miner – founded and majority owned by Indonesia’s Melati family – said that its wholly owned unit Geo Coal International (HK) Limited (GCIHK) has inked a life-of-mine offtake contract with Macquarie for its mine in South Kalimantan.

In conjunction with the deal to buy TBR’s entire coal production subject to the Indonesian Domestic Market Obligation (DMO), Macquarie will make available to GCIHK a multi-year prepayment totalling US$60 million in three tranches and extend a trade finance facility to support its coal exports.

In addition, the bank – wholly owned by Australian-listed Macquarie Group, a diversified financial group with a A$40 billion market value – plans to subscribe for 70 million new Geo Energy shares representing 5 per cent of its enlarged capital at 29 Singapore cents apiece or for a total of S$20.3 million. Macquarie has agreed to hold the shares for at least one year.

Under the proposed subscription, Macquarie Bank also plans to subscribe for 74 million non-listed, transferable, free warrants in Geo Energy exercisable within two years from the issue date with each warrant carrying the right to subscribe for one Geo Energy share at an exercise price of 33 Singapore cents per share.

The price tag for the new shares and exercise price of the warrants represent a premium of 28.9 per cent and 46.7 per cent respectively to Geo Energy’s volume weighted average share price of 22.5 Singapore cents last Friday, prior to Monday’s trading halt pending the major announcement.

These proposed transactions that are inter-conditional will add a new substantial shareholder and investor and provide additional long-term recurrent revenue, said Geo Energy.

Upon subscribing to the equity and if Macquarie exercises the warrants, Geo Energy’s net gearing will be cut from 38.6 per cent as at end-June 2018 to 16.4 per cent. “As such, the prepayment and equity investment will strengthen our existing cash balance and balance sheet and will put us in a good position to grow our revenue base,” it added.

The proforma financial effects of the proposed transactions based on the group’s audited accounts for financial year ended December 2017 will see earnings per share reduced to 2.5 US cents (post issue of new subscription shares and warrant shares) from 2.8 US cents.

Coal

Indonesia hauling ban could paralyse South Sumatra coal mining : Assoc

15 November 2018

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Indonesia

Indonesia is the world’s top thermal coal exporter, and South Sumatra’s total output of the fuel this year was expected to be 48.5 million tonnes, the Indonesian Independent Power Producers Association (APLSI) said in an emailed statement.

New Delhi: Indonesia’s South Sumatra province plans to ban coal transporters from using public roads from Nov. 8, an industry association said, in a move estimated to cut the province’s annual coal sales by 23 million tonnes.

“All trucks use public roads from the mines to railway substations and special roads. This threatens total paralysis (of the industry),” APLSI spokesman Rizal Calvary said in a statement.

“All coal transporters face the threat of being unable to operate, and are readying to cut supplies to powerstations,” he added, estimating the move to cost the province $1.2 billion a year, resulting from a forecast 23-million-tonne drop in coal sales.

The move could also lead to blackouts in Java and Sumatra that are “heavily dependent” on coal supply from South Sumatra, he said.

APLSI has urged South Sumatra administration to overturn the policy.

Meanwhile, according to Indonesian Coal Mining Association (ICMA) Chairman Pandu Sjahrir, the policy was “too harsh” and would work better with a 6-9 month transition period allowing miners time to develop alternative hauling strategies.

“Trains are probably the most logical and best for the area,” Sjahrir told Reuters by telephone. “The big issue with some of the smaller players is the high capital cost because they also have to invest (in infrastructure).”

ICMA is also holding discussions with South Sumatra government, and has proposed that local banks help finance coal miners infrastructure investments, Sjahrir said.

Oil & Gas

Analysis: Trans-ASEAN gas projects losing relevance amid the fast-paced LNG growth

12 November 2018

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ASEAN

An ambitious project to link Southeast Asia with a network of natural gas pipelines is losing relevance to a much faster build-out of LNG import terminals as the region leans increasingly towards seaborne supplies.

The Trans-ASEAN Gas Pipeline was first conceived in the 1980s to boost the region’s energy security using Southeast Asia’s own prolific gas reserves, but was slow to progress like most politically driven large-scale energy projects.
In 2012, the “strategic direction” of the “pipeline” project was expanded to include LNG with the advent of seaborne gas. The decline in regional gas production, failure to build pipelines connecting more than two countries and the growth of the LNG market has made the original idea of a regional gas pipeline doubtful.

“Quite apart from the inherent challenges that all large-scale multilateral cross-border infrastructure projects face, the TAGP now faces a more basic question of relevance,” Tilak Doshi, managing consultant at Muse, Stancil & Co, said.

He said the prospects of an actual pipeline that cuts through Southeast Asia is subject to supply and demand fundamentals of a gas market that have changed profoundly since the project was first conceived.

The TAGP was already over-ambitious when it was first mooted among ASEAN planners and diplomats, and now seems threatened by redundancy due to fast-paced developments in the natural gas industry.

Moreover, pipeline projects between countries need political platforms like ASEAN, but commercially viable LNG projects do not.

NO GAS FOR GAS PIPELINES
One of the cornerstones for the TAGP pipeline project was the giant Natuna D Alpha gas field in East Natuna Basin in Indonesia, which holds around 42 trillion cubic feet of methane, according to the US Geological Survey.

The development of East Natuna, one of the world’s largest gas reserves, has struggled due to territorial disputes in the South China Sea, high exploration costs, technical issues and the departure of oil majors like ExxonMobil.

Oil industry executives have joked that East Natuna should be called a carbon dioxide reserve instead as it contains more CO2 than natural gas. CO2-heavy fields are expensive to develop as they need advanced CO2 separation and sequestration technology to prevent the CO2 from entering the atmosphere.

Southeast Asia’s existing gas production is also depleting. The region is projected to become a net gas importer as soon as 2025, with almost one-quarter of demand imported (over 60 billion cu m) in 2040, from being a large exporter of over 50 billion cu m (including pipeline and LNG), according to the International Energy Agency.

Indonesia and Malaysia accounted for 70% of Southeast Asia’s 8.1 trillion cu m of proven reserves and two-thirds of its 220 billion cu m of production in 2016, according to the International Energy Agency. But both are in decline, and are themselves mulling higher LNG imports.

TAGP’s progress isn’t just held back by gas shortages. Till date, Southeast Asia has only succeeded in building bilateral gas pipelines that run between two countries–one buyer and one seller. As of 2015, the region had 13 bilateral gas pipeline projects with a total length of 3,673 km commissioned.

Any negotiations involving a third country typically needs much more cooperation that extends to the creation of a market, beyond just buyer-seller relationships. It is also politically more challenging.

Here’s a list of Southeast Asia’s gas pipelines

**Singapore – Malaysia, 5 km, 1991
**Myanmar – Thailand 470 km, 1999
**Myanmar – Thailand 340 km, 2000
**West Natuna, Indonesia -Singapore, 660 km, 2001
**West Natuna, Indonesia – Duyong, Malaysia, 100 km, 2001
**Malaysia/Vietnam Commercial Arrangement Area (CAA) -Malaysia, 270 km, 2002
**South Sumatra, Indonesia -Singapore, 470 km, 2003
**Malaysia/Vietnam CAA – Vietnam, 330 km, 2007
**Malaysia – Thailand/Malaysia Joint Development Area (JDA), 270 km, 2005
**Singapore – Malaysia, 4 km, 2006
**Thailand/Malaysia JDA -Thailand, 100 km, 2009
**Zawtika Block M9, Myanmar -Thailand, 302 km, 2013
**Block 17 (Thailand/Malaysia JDA) to Kerteh, Terengganu, Malaysia, 352 km, 2015

LNG AKA VIRTUAL PIPELINE
Last week, Paramate Hoisungwan, chairman of the ASEAN Council on Petroleum’s Policy Research and Capability Building Taskforce, said TAGP now views regasification terminals as virtual pipelines to supplement pipeline gas supply.

Southeast Asia currently has LNG import capacity of around 36.3 million mt/year, and this is expected to grow to 64.3 million mt/year with the current LNG project pipeline, the council’s data showed.

The main LNG importers currently are Thailand, Singapore, Malaysia and Indonesia, but by the middle of the next decade, Philippines, Myanmar and Vietnam will join the list. Thailand’s capacity expansion alone will total 14 million mt/year and account for half of the growth.

The private sector has also thrown its weight behind the LNG wave, even though it remains to be seen whether cost parity with pipeline gas can be achieved. Pipeline gas prices tend to be lower and less volatile than LNG.

John Ng, chief executive of Singapore LNG Corp. suggested that the growing gas ecosystem within ASEAN be underpinned by piped natural gas and to look at the greater flexibility and spare capacity of the LNG market for growth.

“The ecosystem will consist of buyers, sellers, traders, markets for small-scale LNG, LNG bunkering and perhaps even LNG trucking as well,” Ng said.

Electricity/Power Grid

Sarawak awaits MoE to power 113 schools

12 November 2018

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Malaysia

KUCHING: The Sarawak government is still waiting for consent from the Ministry of Education (MoE) in Putrajaya to implement electricity connections to 113 schools in Sarawak.

Assistant Minister of Education, Science and Technological Research Dr Annuar Rapaee said although the ministry had replied to their letter, their consent had not been given.

He said the State Cabinet had approved RM50 million to connect these schools to the electricity grid but consent to do so must be given by the MoE since education is the federal government’s responsibility.

“Our minister wrote to the federal minister on Aug 8, and the reply only came on Oct 24 which is about two and a half months, asking whether the RM50 million is a grant to the MoE.

“It is not a grant. It’s our money that has been committed by the Sarawak government to help the 113 schools.

“We have replied their letter, and we are now waiting for them (MoE) to give us the consent to connect the electricity,” he said in reply to Gerald Rentap Jabu (PBB-Layar).

Rentap had earlier brought the attention of the august House to the problem faced by SK Nanga Lawih, which is still dependent on generator set despite being situated close to the electricity grid.

According to Dr Annuar again, SK Nanga Lawih is one of 113 schools identified for the electricity connection project.

He said the cost of connecting electricity to the school was estimated at RM233,500, which would to be implemented by Sarawak Energy Berhad once consent is given.

He also said basic needs like electricity supply had to be addressed first before other matters, such as providing e-textbooks, could be extended.

Making ends meet for Vietnam’s growing energy sector

12 November 2018

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Vietnam

Coal takes centre stage with 35% market share, whilst renewables deals are stuck at pre-investment even with electricity demand poised to grow by 8% until 2025.

As Vietnam’s energy sector expands, the role of the private sector and foreign investment is increasing, taking the form of build-operate-transfer (BOT). Some newly licensed BOTs include Nam Dinh 1 and Van Phong 1, with a number of BOT projects currently being negotiated, including Quang Tri 1 and Song Hau 2.

After the southern region suffered a severe energy shortage of 15 billion kWh in the last year, the government has been pressured to find solutions to the country’s energy problems. Energy demand is anticipated to grow 10% annually, with electricity demand accounting for most of it. In fact, electricity demand is expected to grow at 8% annually until 2035.

Power-hungry Vietnam has been the result of increasing industrialisation and positive economic growth in the last decade. Households may have reduced their share thanks to energy efficiency, whilst the industry and construction sectors are expected to remain as the country’s leading power consumers.

With the widening gap between demand and supply, the country has to avoid a quick fix and seek a sustainable long-term solution. However, the Revised National Power Master Plan (PDP VII) highlights coal as the main contributor to the future expansion of capacity, trumping hydropower as the primary source of generation.

In 2017, 37% of electricity generation came from hydropower, a little more than the 34% from coal energy. Over the next few years, the country’s fossil import will likely increase due to Vietnam’s limited domestic oil and coal resources. StoxPlus analysts said coal imports have rapidly increased due to some coal thermal power plants being put into operation.

Vietnam pinned greater hopes on coal as an energy resource. The first three months of 2018 saw over 3 million tonnes of coal imported, amounting to $384m. The number of coal thermal power plants has reached 19, with several companies under Vietnam Electricity (EVN) proposing the import of coal to save costs.

From 2000 to 2015, biomass and hydro’s share in the total primary energy supply dropped to 24% from 53% even as coal share grew from 14% to 35% of the supply. Vietnam has 20 coal-fired power plants with a total capacity of over 13,000MW. S&P Global Platts also reported that Vietnam’s coal imports hit a record of 2.25 million tonnes this year, up 132.5% YoY.

Despite the PDP VII planning for increased renewables in the country’s energy mix whilst reducing that of hydropower and gas, the majority of renewable energy projects are stuck at the pre-investment stage, taking long months, and multiple agreements to go through each stage. Vinh Quoc Nguyen, partner, Tilleke and Gibbins, said that except hydropower, other renewable sources like solar and wind are in a very early stage.

Decision 2068 has set out several non-binding targets, such as the ratio of renewable energy to total consumer primary energy at 31% in 2020, 32.3% in 2030, and 44% in 2050. Volumes are expected to reach 101 billion kWh in 2020, 186 billion kWh in 2030, and 452 billion kWh in 2050.

“The main obstacles to the development of renewable energy include: lack of capital funding; the price offered to renewable power producers is low, whilst investment costs for production of renewable energy are high, which is not attractive to investors,” said Nguyen. “EVN has no motivation to purchase the electricity from the renewable energy generators at a higher price, as it is reportedly selling the generated electricity to consumers at a loss and the lack of human resources specialising in RE.”

Analysts place coal and natural gas as the second and third largest source of electricity generation in the country. However, hydropower, which is the main source, and natural gas are already reaching full capacity, leaving Vietnam with coal as the solution to short-term woes.

The total capacity of foreign-invested power producers accounted for 2,800MW in 2015 and has continued to increase over the last three years. At present, EVN acts as a single buyer of all electricity generated from on-grid independent power projects. Going forward, the Vietnamese government aims to divide EVN-owned power plants and generation companies into independent generators, wholesalers, and retailers.

What are the woes in Myanmar’s energy mix?

12 November 2018

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Myanmar

No new MOA or PPA has yet to be concluded for two years already.

It has already been two years since Myanmar’s newly democratised government came to political power, but much to the frustration of energy firms, a new MOA or PPA has yet to be concluded to increase another kind of power in the country: electrical power.

As OWL Energy’s Greater Mekong manager Jeff Miller put it, “Nothing has been signed since democracy came.”

For the past 17 years, Myanmar’s electricity demand has more than doubled mostly due to hydropower, said IHS Markit senior research analyst Joo Yeow Lee. Installed hydropower capacity has grown five-fold since 2000 to 3,000MW in 2017. “However, this puts the system at risk to seasonal swings,” he added.

Moreover, development has been met with strong public objections due to the displacement of communities, as well as the impact on livelihood and the environment.

Can it meet targets?
Myanmar has set its electrification target to 100%, and so far, it has reached 37% (one of the lowest in Southeast Asia), slightly higher from 30% in 2016. It currently has 5GW of installed capacity, mainly composed of hydropower and gas.

According to Lee, capacity is set to grow as demand has risen from over 6TWh in 2010 to almost 16TWh in 2016, setting the yearly rate at 10%.

Lee is excited over Myanmar’s gas sector as four notices to proceed (NTP) – the equivalent of MOUs in other countries – have been issued to fast-track development of plants with total capacity of 3,111MW. As of 2016, the total capacity of gas has reached 1,824MW.

Young government’s policy woes
However, Miller said that this also raises questions about where the power will be sent. He added that these gas to power projects are far from where most the consumers are. “It’s going to need transmission lines as well,” he said.

“Gas and power plants are not fully operated due to poor maintenance,” he added. Reserves will also need five to 10 years to develop. “LNG is a short-term option, but gas laws need updating.”

There are also no policies to incentivise renewables. According to a note by Edwin Vanderbruggen of VDB Loi, the government is also still confused in implementing a furnished approval process, whilst NTPs can only serve to fast-track the completion of deals.

“A lack of experience on the government side, and I suppose a lack of familiarity with Myanmar on the sponsor side, is a commonly held notion to explain the slow progress,” he said.

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