The importance of Chinese Funded Contractor for Electric Power in Indonesian Market Recent Years Project Overview

The largest trading partner for seven consecutive years, Premier Li Keqiang visited Indonesia, this is a staring contract major event in this South East Asia market!

First, it actively promoted the two iconic projects of the Jakarta-Bandung High Speed Rail and the Indonesian Economic Corridor. The second is to continue to strenghtening China-Indonesia trade and investment cooperation and encourage Chinese-funded enterprises to expand investment in Indonesia.

Indonesia has maintained its position as the world’s fourth largest project contracting market for many years. Among them, Chinese-funded enterprise’s newly signed contracts for infrastructure construction projects in Indonesia amounted to nearly 17 billion U.S. dollars, rising by 60% from a year ago.

The world’s fourth most populous country, as the country with the largest total economic volume in Southeast Asia, has enjoyed rapid economic development because of its political stability in recent years.

In 2014, Indonesia’s President Joko, since took office, has
made great efforts to develop electric power, transportation and other infrastructure, made major reductions in fuel subsidies, and increased government infrastructure investment budgets.

He plans to raise the average annual infrastructure investment from US$40 billion to US$80 billion within five years. At that time, the shortage of government funds led to limited government infrastructure investment and few government bidding projects. The infrastructure investment plan is US$80 billion, but the government could invest only about US$20 billion with a gap of US$60 billion. Many projects were transformed into pure project financing, which also prompted the contractor to extend the investment upstream.

The Indonesian engineering contracting market is a market in which several forces such as European and American companies, Japanese and South Korean companies, Chinese companies, and Indonesian domestic companies compete on the same platform. The market structure is relatively diverse and the competition is fierce.

The current Indonesia’s infrastructure
On the whole, Indonesia’s economic power infrastructure is lagging behind, its development potential is large, construction funds are insufficient, and its initiation is slow, market competition is fierce.

1. Power Industry
As the largest engineering contracting industry in Indonesia, the most prominent feature of the Indonesian engineering contracting market is that it gives its first place to investment and drives power station contracting market with investment.

After the 10,000 MW power station project, the Indonesian government gradually changed the way of power station development from government investment to private investment, and the independent power Producer (IPP) model will become the dominant mode of future power station construction.

More than 20,000 megawatts of power station projects have been developed in the IPP approach in the new government’s planned 35,000 MW power station construction plan. The main participants in the Indonesian power plant project have gradually shifted from former power contractors to power investors.

The power investment companies in China, Japan and South Korea, Europe, the United States, and Indonesia will constitute the main pattern of the Indonesian power market in the future. In response to the government’s policy of cutting fuel and power subsidies, the State Power Corporation proposed to adjust the energy structure in the power development plan to replace oil-burning with coal-burning, clean renewable energy to generate electricity.

Therefore, in the next few years, the key development directions of the Indonesian power industry will mainly include high-grade and large-capacity clean coal-fired power plant projects (e.g., 600 MW class supercritical coal-fired power station, 1,000 MW class ultra-supercritical coal-fired power station), gas power station, medium and large hydropower stations, geothermal power stations and photovoltaic power stations, etc.


2. Indonesia’s 35,000 MW Power Development Plan
In order to solve the dual contradictions between the growth of electricity demand and insufficient supply of electricity, and to create conditions for economic development, Indonesia’s President Jokowi proposed to develop 35,000 megawatts of power station installation within five years from 2015 to 2019, with an average annual installation capacity of 7,000 megawatts.

Perusahaan Listrik Negara (The National Power Company) (PLN) issued a list of projects including 74 IPP projects and 35 PLN-invested EPC projects with a total installation capacity of 36,585 MW. Added: Indonesian Infrastructure Indonesia is rich in natural resources and has great potential for development.

However, the backward infrastructure conditions have severely limited the economic development. The number of transportation facilities in Indonesia is small and their grades are low. Most of them were built before the 1990s, and some were even built during the Dutch colonial period. They are old and damaged, and the design capacity is far from meeting the requirements of development.

Indonesia has nearly 7,000 kilometers of railways, and its railway network density is 36.7 kilometers per 10,000 square kilometers, which is far less than China’s 97.1 kilometers, and less than Europe and the United States.

The total length of the road is 430,000 kilometers, of which the asphalt pavement is less than 200,000 kilometers, and the highway is only 1,000 kilometers, half of which is built in the last five years; There are 179 airports, of which only 23 are in line with international standards. Most of them are in disrepair.

In the 1970s, Jakarta Soekarno-Hatta International Airport was the eighth busiest airport in the world with a passenger flow of 60 million passengers per year which is three times the designed passenger flow; There are 25 major ports, which are far from meeting the demand for the circulation of people and goods in the archipelago countries.

The largest port in the country is the Tanjung Priok Port in Jakarta, with a designed throughput of 2.5 million containers, which actually exceeds 7 million.

Chinese-Funded Energy Companies in IndonesiaThe
China has developed a great deal of cooperation with Indonesia in oil, gas, coal, electricity, new energy and other fields:

In oil and gas fields, in 2016, Indonesia’s oil and gas exports to China totaled more than 19.2 billion U.S. dollars, accounting for 90.4% of Indonesia’s total exports to China. The scale of cooperation is continuously expanding and the industrial chain is also continuously expanding.

In the coal field, Indonesia has long been China’s largest source of imported coal. In 2017, China imported 80.79 million tons of coal from Indonesia, an increase of 17%.

Which energy companies of China are the most active in Indonesia?

1. China Datang Corporation
In November 2017, Huainan Tianhe Electric Power Engineering Corporation, a subsidiary of Datang Huainan Luohe Power Station, successfully signed the subcontract with relevant authorized unit for training coaching for Pangkalan Susu No. 3 and No. 4, two 200-megawatt coal-fired power projects in Indonesia.

2.China National Petroleum Corporation (CNPC)
In November 2017, CNPC signed a Memorandum of Understanding with Indonesian National Oil Company (INOC) in Jakarta. PetroChina entered Indonesia in 2002 and established PetroChina International (Indonesia) Corporation.

In the past 15 years, the company’s oil and gas production has grown at an average annual rate of 11%, making it the seventh largest oil company in Indonesia. At present, the company has 9 contract regions in Indonesia, produces oil and gas products covering crude oil, LPG and natural gas, etc., and are sold to South East Asian countries, making active efforts and contribution to ensure energy safety in South East Asia, including Indonesia itself.

In May 2017, PetroChina International (Indonesia) Corporation signed a gas supply agreement with a local power plant in Indonesia eight years later. In June 2017, the Indonesian Geophysical Exploration Department of PetroChina Daqing Oilfield International Engineering Co., Ltd. received a notification of successful bid from INOC for the year 2017 to 2018. The contract amount was equivalent to RMB 300 million.

3. China Gezhouba Group Corporation (CGGC)
In July 2017, in the Indonesian capital Jakarta, Gezhouba Energy Heavy Industry Corporation and Indonesia BK Corporation signed an overseas supply and guidance installation service contract for the 100MW, as well as 200MW dual-fuel internal combustion engine power plant projects of INOC. 

4. China Energy Engineering Group Corporation, Limited (CEEGC)
In April 2017, the 1×670 MW supercritical coal-fired power plant in Banten, Indonesia, which was designed by Guangdong Institute of CEEGC, constructed by Beijing Power Construction Corporation, successfully passed a 720hour test run.

The project is located in West Java Island, Banten Province, Indonesia. It is the first of the Indonesian government’s 3,5000 MW five-year power plan (2015-2019) and is the only IPP power plant project that entered the commercial operation. It is also the first large-scale coal-fired plant design project of Guangdong Institute in Indonesia with a total installation capacity of 670 MW.

5. China Nuclear Engineering and Construction Group Corporation, Limited
(CNEC)
In August 2016, it signed the Joint Project Agreement between CNEC and the Indonesian Agency of Atomic Energy for the High-Temperature Gas-cooled Reactor Development Program in Indonesia with the Indonesian IAEA Chairman. The signing of the joint project agreement would clarify the cooperation intentions of the two parties on the high-temperature gas-cooled experimental reactor project and training in Indonesia.

6. China National Building Materials Group Corporation (CNBM)
In March 2017, CNBM and PT Nelly Energi Lestarindo of Indonesia signed a cooperation framework agreement for a 150 MW chain-type biomass power plant, which confirmed the strategic cooperation for the joint development of the Indonesian market and the development of a chaintype biomass power generation project.

7. China Water Resources and Hydropower 8th Engineering Bureau Corporation, Limited (CWRHEEB)
In February 2017, Indonesia’s Dongjia No. 2 unit, which was built by the CWRHEEB, was signed and agreed by the owners and put into commercial operation.

8. GCL Group
In August 2017, Suzhou GCL Group started the construction of its first coal-fueled power generation project, Kaba Phase I, in Indonesia. Phase I of the project plans to build two 100,000-kilowatt coal-fueled generating units, which are expected to be completed by 2020. This is the first power generation project in which China’s private enterprises lauched in Indonesia and a formal purchase and sale agreement was signed.

9. China General Nuclear Power Group (CGN)
In March 2017, China Guangdong Nuclear Technology Dasheng Accelerator Technology Corporation, Limited, a subsidiary of CGN, and PT ENERGI STERILA HIGIENA (PT. ESH) of Indonesia successfully signed the contract for an industrial electronic accelerator and X-Ray irradiation system supply.

This is the first industrial electron accelerator system equipped with an X-ray conversion system in Indonesia. It is also the 7th country that CGN successfully entered after the United States, India, South Korea, and Brazil, etc.

10. China National Electric Engineering Corporation (CNEEC)
In February 2017, the Northeastern Institute of CNEEC and Harbin Electric and Gas International Corporation had a signing ceremony for the consultation and design contract for the Tangxi A (2 sets of 660,000 kW) coal-fueled power stations in Indonesia. The project is located in West Java, Indonesia and is a key project of Indonesia’s 35 million-kilowatt power project.

11. China National Offshore Oil Corporation (CNOOC)
In February 2017, Indonesia’s Western Asian Donggu Project, which CNOOC holds a 13.9% interest, accumulated production of LNG (liquefied natural gas) in 2016 exceeded 7.5 million tons for the first time, with an increase of 1.3% from the year 2015.

At present, Donggu Project’s production facilities include two onshore LNG production lines, two offshore platforms and 13 production wells with a designed capacity of 7.6 million tons per year.

Posted from: Go Out Information