• 5 minutes Mike Shellman's musings on "Cartoon of the Week"
  • 11 minutes Permian already crested the productivity bell curve - downward now to Tier 2 geological locations
  • 17 minutes WTI @ 67.50, charts show $62.50 next
  • 17 hours The Discount Airline Model Is Coming for Europe’s Railways
  • 5 hours Pakistan: "Heart" Of Terrorism and Global Threat
  • 2 mins Desperate Call or... Erdogan Says Turkey Will Boycott U.S. Electronics
  • 58 mins Saudi Fund Wants to Take Tesla Private?
  • 1 hour Starvation, horror in Venezuela
  • 10 hours Venezuela set to raise gasoline prices to international levels.
  • 2 hours Renewable Energy Could "Effectively Be Free" by 2030
  • 1 day Batteries Could Be a Small Dotcom-Style Bubble
  • 4 hours Are Trump's steel tariffs working? Seems they are!
  • 2 days Don't Expect Too Much: Despite a Soaring Economy, America's Annual Pay Increase Isn't Budging
  • 2 days Newspaper Editorials Across U.S. Rebuke Trump For Attacks On Press
  • 2 days France Will Close All Coal Fired Power Stations By 2021
  • 1 day WTI @ 69.33 headed for $70s - $80s end of August
Alt Text

Does This Signal The End Of The Gold Rally

Gold has been a bright…

Alt Text

This Breakthrough Could Spark An Oil Sands Revival

This innovative oil sands and…

Alt Text

Market Insiders Baffled By Low Platinum Prices

Platinum prices are at their…

Dave Forest

Dave Forest

Dave is Managing Geologist of the Pierce Points Daily E-Letter.

More Info

Trending Discussions

Will A New Law Ensure The Death Of This Energy Sector?

It’s amazing how government often works the exact opposite of business.

And one example last week in the energy sector shows this out-of-stepness perfectly. In the Indonesian coal industry.

As I’ve discussed, the global coal business is facing a dire situation at the moment. With prices having fallen off a cliff, demand moderating from key markets like China, and production largely having continued to chug out at a brisk rate.

Coal miners have thus been moving to cut costs in order to stay alive. Major producer Anglo American recently said it may sell mines in Australia to raise funds. And this week Indonesian producer Garda Tujuh Buana said it is suspending coal output entirely until prices recover.

Related: This Continent’s Mining Industry Could Crumble This Week

But at the same time as Indonesia’s miners are rationalizing, the country’s government is apparently looking for more cash. With plans on the books to raise royalties for the sector.

Bloomberg reported this week that officials at Indonesia’s Energy and Mineral Resources ministry have confirmed new laws coming for higher royalties. With the plan calling for a significant rise from current rates.

Low-calorie coals (less than 5,100 kcal) will now be subject to 7% royalties, up from a previous 3%. Medium-grade coal will jump to 9%, from 5%. And high-quality shipments with greater than 6,100 kcal will see rates soar to 13.5%, from 7%.

The big increase reportedly has nothing to do with energy regulators themselves. But rather is a result of a direct request from Indonesia’s parliament that the government raise its revenue from mining taxes by 49%, to $4.1 billion. Related: Does This Discovery Show An Exploration Hotspot Rising?

This is almost certainly a result of the general economy in the country slowing down, as key sectors like coal decelerate. With the royalty increases representing a last-ditch effort to milk more cash, and fill the gap.

But the timing is absolutely awful for the mining sector. Many operations are barely making a profit at today’s prices — and at up to 6.5% higher royalties, a number of mines will likely be pushed into the red.

This is of course, potentially good news for the global coal sector. Suggesting that output from Indonesia may fall soon — with the new royalties expected to become effective no later than April. After that date, watch for mine closures and supply contraction here.

Here’s to ill timing,
Dave Forest

More Top Reads From Oilprice.com:

 




Back to homepage

Trending Discussions


Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News