Indonesia elections and impact on energy and mining and metals sectors

As Indonesia heads for the polls on 17 April, Wood Mackenzie's research director Andrew Harwood provides the following commentary:

"We predict that President Jokowi will once again defeat his 2014 opponent, Prabowo Subianto, and secure a second five-year term.

"‘Energy sovereignty' will remain the government’s rallying cry and curbing costly oil imports a policy priority. This suggests that restrictions on crude exports will remain in place.

"The election will not reverse a statist trend in the upstream oil and gas sector. PERTAMINA will remain in pole position to take over upcoming expiring PSCs.

"Recent efforts to improve the investment environment may be too little, too late, as many large operators have already exited or scaled back their ambitions in Indonesia. Slow progress in projects of national strategic importance, such as the transfer of the Rokan PSC and approval of the Abadi LNG development, also provide mixed signals for investors.

"The perennial debate on a revised Oil and Gas Law will continue, but there are no signs that ending years of legal uncertainty is a priority for the next administration.

"Thermal coal will remain a mainstay in Indonesia’s energy mix, despite support for growing the contribution of renewables."

Verisk Maplecroft's senior politics analyst Hugo Brennan adds:

"The incoming administration will hold steady on plans to implement a full ban on the export of unprocessed minerals, which is scheduled to come into effect in January 2022. Any decision to push back the deadline again will likely be taken at the eleventh hour.

"The government will continue to show Indonesia Asahan Aluminium (Inalum) preferential treatment, as part of its bid to turn the state-owned mining ‘champion’ into a global player.

"Forced divestment requirements for foreign miners are extremely unlikely to be rolled back, which will continue to deter greenfield investment. All eyes will be on how Freeport McMoRan gets on operating the Grasberg copper mine now that it only holds a minority stake.

"Elements with the House of Representatives will seek to revise the Mineral and Coal Mining Law 2009, but these attempts will not be supported by the executive."

Find out more about elections in Asia Pacific.