Resources and energy to Indonesia
Trends and opportunities
Indonesia is one of the world’s largest exporters of thermal coal, and a significant producer of copper, gold, nickel, tin and bauxite. It is the location of the largest gold mine, second largest copper mine, and two of the five largest coal mines in the world, measured by annual production. Global mining companies continue to rank Indonesia highly in terms of coal and mineral prospects, although regulatory challenges remain. The modest uptick in global commodity prices over the last two years has improved the outlook of the sector. Indonesia’s commitment to substantially is increasing its level of infrastructure investment and should also reduce costs over time in getting commodities to market.
Indonesia’s scale and prospectively has ensured that the resources sector continues to attract significant foreign interest. Australian METS companies and miners enjoy a reputation as industry leaders in quality and innovation – this reputation is a valuable asset for Australian miners. Asian equipment suppliers generally retain the largest market share across the resources sector, while suppliers from Australia are perceived as being of higher quality but also higher cost. Demonstrating your product or service’s productivity or efficiency benefits is key.
Indonesia is one of the world’s major producers and exporters of oil and gas products such as crude oil and LNG. Indonesia is currently focusing on building its energy security, spreading resources income across the regions and improving its taxation and regulatory framework to encourage investment in the sector.
With over 17,000 islands spread across the archipelago, securing resources and energy infrastructure to sustain economic growth is a challenge for the government. Spreading the balance of development outside Java and Sumatera is a priority for the government to reduce regional inequality.
One key budgetary reform was the cut to fuel subsidies implemented early in President Joko Widodo’s term. With this move the government aims to shift its spending budget allocation toward infrastructure including power generation. The ambitious 35,000 GW power generation target is expected to support the Indonesian Government’s economic growth targets, however this initiative will be potentially deferred to 2029 for completion. On the other hand, improving the country’s regulatory framework is vital. With the level of ease of doing business improving slowly, Indonesia may move to encourage more investment realisation in the resources and energy sector. With all these factors, Australia’s expertise in resources and energy sector, from both technical and innovation perspective will be a strong proposition to the sector.
Mining Company Profile
Read a mining company profile on PT Vale Indonesia TBK
Areas of opportunities include:
Mining, engineering, technology, and services (METS)
Australian METS companies still have significant opportunities to build market share in Indonesia. Opportunities exist for providers of mining technology who can clearly demonstrate productivity gains to Indonesian miners. Like Australia, Indonesian miners are grappling with lower prices for commodities, so demand is strong for savings, productivity enhancements and operation optimisation. The broad increase in sophistication and standards across Indonesia mining create a corresponding need for more highly skilled workers which producing opportunities linked to the professional and technical workforce as well as upskilling workers onsite from non-professional backgrounds. Demand also remains strong for safety-related training, systems and technology, environmental management and waste solutions. Moreover, policy interventions (ore exports ban) for smelter development and downstream processing have triggered opportunities across feasibility, design, construction and operation of them.
The Government of Indonesia has announced a series of ambitious targets for the construction of new energy generation capacity. The proposed energy mix sees coal playing a key role. As new generation capacity is rolled out, domestic demand for Indonesian coal is likely to increase, generating more opportunities for METS companies.
Indonesia is a useful springboard for exploring other ASEAN mining markets, with many Jakarta headquartered miners having strong connections in other key regional mining markets.
Power sector capabilities
There are opportunities within the power industry for Australian companies with capability in designing, implementing, EPC and commissioning. Indonesia’s ambition to increase its electrification ratio may increase the scope of opportunities for Australian business.
Exploration for new concessions in renewables, oil and gas
Indonesian energy demand is predicted to grow strongly over the medium term. According to research published by McKinsey and Company, Indonesia’s middle class will expand dramatically over the next decade and a half – by 2030 Indonesia will be the world’s seventh largest economy. This will put extreme pressure on Indonesia’s creaking energy infrastructure and make identifying new energy sources increasingly important for sustaining growth.
In the medium term this is likely to see a greater emphasis on encouraging exploration in oil and gas and unconventional energy. The government has already signalled it wants to see a substantial expansion of renewables, oil and gas exploration in particular. Australian companies providing exploration services should continue to monitor developments in Indonesia.
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