We welcome article submissions from experts in the areas of coal, mining,
shipping, etc.
To Submit your article please click here.
|
|
|
Friday, 23 December 11
CONTENTIOUS ISSUES IN CONTRACT RENEGOTIATION - THE JAKARTA POST
 The government has been renegotiating mining contracts, especially those 30-40 years old, with almost all mining companies, including PT Freeport Indonesia, which has been operating since 1967. This is a major step the government is taking and of course will affect the climate of mining investment in the future. If not carefully planned and executed, renegotiation might severely harm the prospects of the national mining industry.
That is why it is important for the government to choose the most important points to be brought to the negotiating table and to ensure that the results are beneficial to both sides, i.e., the mining enterprises and the government.
The basis for renegotiation is Law No. 4 /2009 on mining, which has changed the mining-concession regime by introducing a new licensing system. The law replaces mining authorizations (Kuasa Pertambangan or KP) as well as contracts of work (CoWs) and contracts of coal mining work (CCoW or PKP2B). The government acknowledges all CoWs/CCoWs that have been awarded before the law was promulgated; however all CoWs/CCoWs still need to be renegotiated.
The fundamental difference between the concession and licensing regimes lies in a number of points. Most important is the difference in the legal nature. While concession is based on civil law and the source of law is the agreement itself, licensing is public and legislation is the source of law. The application of a “concession” is the agreement between the two parties, the mining enterprises and the government, while a “license” is based on permission from the government.
In terms of rights and obligations, a licensing regime puts the government in a more dominant position. Settlement of disputes is through international arbitration for concession agreements but is via a state administrative court for licensing regimes.
These differences, of course, will be perceived differently by different mining enterprises. Large-scale mining companies and international enterprises prefer arbitration as a legal option, because arbitration is considered to be more fair and free from political intervention. Given that perception, the new regime is seen to generate potentially larger political risks.
Moreover, the bilateral nature of the contract system is believed to provide more protection against future changes in the law than a unilateral licensing system.
For small or national mining companies, however, licensing regimes might be seen to be friendlier as they provide equal opportunities to both domestic and foreign investors in applying for licenses.
Renegotiation is needed to adjust the content of contracts, which have been running since before the Mining Law came into being. These contracts need to be adapted to be in accordance with the new law. Renegotiation began in the fourth quarter of 2009 for CoWs and early 2010 for CCoWs.
Philosophically, however, renegotiation aims at restoring the country’s sovereignty over its natural resources as well as providing a better use of the resources for the people. This is reflected in a number of articles to adjust CoWs and CCoWs, to increase the added value for minerals and coal by imposing an obligation on contractors to establish downstream industrial facilities, to enhance state revenue through rate adjustments for royalties and production fees and to prioritize the use of local and national services.
Based on the notion of providing a better use of resources, a number of strategic issues are being brought to the negotiation table, such as the limitation of mining areas, contract extension, state revenue, divestment obligations for foreign investors that hold full-ownership in local mining firms, the obligation of processing and refining in the country’s smelters, as well as the obligations of the use of domestic goods and services.
As expected, the most prominent issue during the renegotiation is about the augmented state revenue — the first contentious issue. State revenue refers to mining taxes and profit-sharing schemes. The government is tightening tax regulations to enhance national revenue. This is the reason why the tax authority is involved in the renegotiation and assesses whether or not an enterprise is losing money.
Renegotiation on profit-sharing might not be necessary with those enterprises that are losing money. But the key point here is transparency — the enterprises must reveal their income — as the fundamental purpose of the renegotiation is for the results to be fair and transparent.
The limitation of mining areas is the second contentious issue. According to the law, all areas of work that exceed the maximum limit of 100,000 hectares (ha) for minerals and 50,000 ha for coal should be returned to the state. This has proven to be difficult, since most of the large mining enterprises have been working areas beyond this threshold. Freeport has a working area of up to 1.8 million ha, and Arutmin about 70,000 ha, and Inco about 180,000 ha.
The third contentious issue is extension of concession contracts. A concession contract is terminated when it expires. After that, the management must submit to the state, represented by state or local enterprises, a proposal to obtain a new mining license. Contract extension with the old contractor can be achieved only if the contractor is a minority shareholder.
These three issues are problems for both the government and the enterprises to resolve. Currently, there are about 113 plans to renegotiate mining contracts, of which 37 CoWs are in the mining of metals and minerals and 76 are contracts of coal mining work (CCoWs). The majority of the mining enterprises seem to be in the “Partially Agree” mode for CoWs and in the “Agree to All Amendment Articles” mode for CCoWS.
The results must be beneficial to both sides, promoting transparency and fairness. Mining has been contributing greatly to the country’s economy, as well as wealth to a number of mining enterprises. In 2010, mining accounted for about 11.15 percent of GDP for Indonesia overall, and a much higher percentage for provinces such as Papua, Bangka-Belitung, West Nusa Tenggara and East Kalimantan. Mining also accounted for 16.91 percent of Indonesian exports, providing Rp 9.7 trillion of government revenue.
But annual average mining investment is not growing as expected. Only in the coal sector has any large-scale new production capacity been developed in recent years. The vast majority of the investment is for the replacement of mining infrastructure to sustain capacity.
Given the long lead times to find and develop new mines, production declines will be inevitable unless the renegotiation can enhance transparency and the mining policy environment is improved.
We have to remember that the country has some of the most prospective geological areas and according to one international survey, only some areas of Canada and Australia have better mineral prospects. Thus, it is possible for mining to make a much larger economic contribution at the local, provincial and national levels.
The renegotiation process cannot be allowed to hinder this contribution. We have to avoid losing our competitiveness at a time when other countries are seeking new mining investment.
By: Montty Girianna
Source: The Jakarta Post
The writer is director for energy, mineral resources and mining at the National Development Planning Agency (BAPPENAS).
If you believe an article violates your rights or the rights of others, please contact us.
|
|
Sunday, 10 September 23
CHINA AUGUST COAL IMPORTS OF 44.3 MLN T HIT RECORD - REUTERS
China, the world’s top coal consumer, imported 44.3 million metric tons of the fuel last month, customs data showed, the highest amount in an ...
Tuesday, 22 August 23
CHINA'S COAL PRODUCTION LOGS STEADY GROWTH IN JANUARY-JULY: XINHUA
China’s output of raw coal went up 3.6 percent year on year in the first seven months of this year, official data showed.
The ...
Sunday, 13 August 23
THE COMMODITIES FEED: LNG SUPPLY RISKS LINGER - ING
Energy – OPEC sees deficit over remainder of 2023
Oil prices came under some pressure yesterday with ICE Brent settling a litt ...
Wednesday, 09 August 23
COAL TRADE TO RETURN TO 2019 LEVELS - BALTIC EXCHANGE
The International Energy Agency’s mid-year Coal Market Update for 2023 brings both positive and concerning news for the global coal industry. ...
Sunday, 23 July 23
ANALYSIS-INDIA'S COAL MINING BET STUMBLES AS WARY BANKS WEIGH RISING RISKS - REUTERS
India’s drive to ramp up coal output to meet growing energy demand is faltering due to banks’ reluctance to finance newly auctioned min ...
|
|
|
Showing 86 to 90 news of total 6871 |
|
 |
|
|
|
|
| |
|
 |
|
|
| |
|
- Jorong Barutama Greston.PT - Indonesia
- Energy Development Corp, Philippines
- The University of Queensland
- ICICI Bank Limited - India
- Port Waratah Coal Services - Australia
- Meenaskhi Energy Private Limited - India
- Orica Australia Pty. Ltd.
- Romanian Commodities Exchange
- London Commodity Brokers - England
- Metalloyd Limited - United Kingdom
- Attock Cement Pakistan Limited
- Directorate General of MIneral and Coal - Indonesia
- Semirara Mining Corp, Philippines
- Madhucon Powers Ltd - India
- Energy Link Ltd, New Zealand
- Pipit Mutiara Jaya. PT, Indonesia
- Bangladesh Power Developement Board
- Karbindo Abesyapradhi - Indoneisa
- Petron Corporation, Philippines
- Planning Commission, India
- Timah Investasi Mineral - Indoneisa
- Mjunction Services Limited - India
- Indika Energy - Indonesia
- Makarim & Taira - Indonesia
- Chettinad Cement Corporation Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Larsen & Toubro Limited - India
- India Bulls Power Limited - India
- Carbofer General Trading SA - India
- Samtan Co., Ltd - South Korea
- Sakthi Sugars Limited - India
- Gujarat Mineral Development Corp Ltd - India
- SMG Consultants - Indonesia
- Formosa Plastics Group - Taiwan
- Alfred C Toepfer International GmbH - Germany
- Agrawal Coal Company - India
- Price Waterhouse Coopers - Russia
- Orica Mining Services - Indonesia
- Borneo Indobara - Indonesia
- Bhatia International Limited - India
- Sindya Power Generating Company Private Ltd
- Kobexindo Tractors - Indoneisa
- Bhushan Steel Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Parry Sugars Refinery, India
- Xindia Steels Limited - India
- Bulk Trading Sa - Switzerland
- Riau Bara Harum - Indonesia
- Economic Council, Georgia
- Krishnapatnam Port Company Ltd. - India
- Coalindo Energy - Indonesia
- Heidelberg Cement - Germany
- Kideco Jaya Agung - Indonesia
- PNOC Exploration Corporation - Philippines
- Electricity Authority, New Zealand
- Ambuja Cements Ltd - India
- Electricity Generating Authority of Thailand
- Tamil Nadu electricity Board
- Intertek Mineral Services - Indonesia
- Bukit Baiduri Energy - Indonesia
- Ministry of Transport, Egypt
- Altura Mining Limited, Indonesia
- Siam City Cement PLC, Thailand
- New Zealand Coal & Carbon
- European Bulk Services B.V. - Netherlands
- Interocean Group of Companies - India
- Bhoruka Overseas - Indonesia
- The Treasury - Australian Government
- Global Coal Blending Company Limited - Australia
- Star Paper Mills Limited - India
- Wood Mackenzie - Singapore
- Semirara Mining and Power Corporation, Philippines
- Chamber of Mines of South Africa
- Directorate Of Revenue Intelligence - India
- Baramulti Group, Indonesia
- Banpu Public Company Limited - Thailand
- Marubeni Corporation - India
- ASAPP Information Group - India
- Sree Jayajothi Cements Limited - India
- Gujarat Electricity Regulatory Commission - India
- Indogreen Group - Indonesia
- Ind-Barath Power Infra Limited - India
- Standard Chartered Bank - UAE
- Bahari Cakrawala Sebuku - Indonesia
- Oldendorff Carriers - Singapore
- Eastern Coal Council - USA
- Asmin Koalindo Tuhup - Indonesia
- Wilmar Investment Holdings
- Ministry of Mines - Canada
- TeaM Sual Corporation - Philippines
- Renaissance Capital - South Africa
- Bukit Asam (Persero) Tbk - Indonesia
- Edison Trading Spa - Italy
- Siam City Cement - Thailand
- Billiton Holdings Pty Ltd - Australia
- Vijayanagar Sugar Pvt Ltd - India
- Anglo American - United Kingdom
- Kartika Selabumi Mining - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Globalindo Alam Lestari - Indonesia
- Africa Commodities Group - South Africa
- Kumho Petrochemical, South Korea
- Global Green Power PLC Corporation, Philippines
- Dalmia Cement Bharat India
- Aboitiz Power Corporation - Philippines
- Straits Asia Resources Limited - Singapore
- Videocon Industries ltd - India
- SMC Global Power, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Kalimantan Lumbung Energi - Indonesia
- Mintek Dendrill Indonesia
- Lanco Infratech Ltd - India
- South Luzon Thermal Energy Corporation
- SN Aboitiz Power Inc, Philippines
- Sarangani Energy Corporation, Philippines
- Barasentosa Lestari - Indonesia
- Salva Resources Pvt Ltd - India
- Jindal Steel & Power Ltd - India
- Sojitz Corporation - Japan
- Thai Mozambique Logistica
- PetroVietnam Power Coal Import and Supply Company
- Parliament of New Zealand
- Coastal Gujarat Power Limited - India
- Indian Energy Exchange, India
- IEA Clean Coal Centre - UK
- Independent Power Producers Association of India
- Coal and Oil Company - UAE
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Leighton Contractors Pty Ltd - Australia
- Cigading International Bulk Terminal - Indonesia
- Indo Tambangraya Megah - Indonesia
- Deloitte Consulting - India
- Bukit Makmur.PT - Indonesia
- The State Trading Corporation of India Ltd
- IHS Mccloskey Coal Group - USA
- Pendopo Energi Batubara - Indonesia
- Cement Manufacturers Association - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Grasim Industreis Ltd - India
- Mercuria Energy - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Neyveli Lignite Corporation Ltd, - India
- Rashtriya Ispat Nigam Limited - India
- Kepco SPC Power Corporation, Philippines
- Jaiprakash Power Ventures ltd
- Simpson Spence & Young - Indonesia
- Goldman Sachs - Singapore
- Gujarat Sidhee Cement - India
- CIMB Investment Bank - Malaysia
- San Jose City I Power Corp, Philippines
- Bayan Resources Tbk. - Indonesia
- Tata Chemicals Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Central Electricity Authority - India
- Antam Resourcindo - Indonesia
- PTC India Limited - India
- Indian Oil Corporation Limited
- Savvy Resources Ltd - HongKong
- Merrill Lynch Commodities Europe
- Manunggal Multi Energi - Indonesia
- Aditya Birla Group - India
- Binh Thuan Hamico - Vietnam
- Minerals Council of Australia
- CNBM International Corporation - China
- Thiess Contractors Indonesia
- Rio Tinto Coal - Australia
- Toyota Tsusho Corporation, Japan
- Maharashtra Electricity Regulatory Commission - India
- AsiaOL BioFuels Corp., Philippines
- Sical Logistics Limited - India
- Ceylon Electricity Board - Sri Lanka
- International Coal Ventures Pvt Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Australian Coal Association
- Indonesian Coal Mining Association
- Bharathi Cement Corporation - India
- White Energy Company Limited
- GAC Shipping (India) Pvt Ltd
- Offshore Bulk Terminal Pte Ltd, Singapore
- Ministry of Finance - Indonesia
- Meralco Power Generation, Philippines
- Mercator Lines Limited - India
- OPG Power Generation Pvt Ltd - India
- GVK Power & Infra Limited - India
- Maheswari Brothers Coal Limited - India
- Therma Luzon, Inc, Philippines
- Georgia Ports Authority, United States
- Miang Besar Coal Terminal - Indonesia
- Medco Energi Mining Internasional
- Vedanta Resources Plc - India
- Commonwealth Bank - Australia
- VISA Power Limited - India
- Posco Energy - South Korea
- Kaltim Prima Coal - Indonesia
- Power Finance Corporation Ltd., India
- Singapore Mercantile Exchange
- Australian Commodity Traders Exchange
- Trasteel International SA, Italy
- Vizag Seaport Private Limited - India
- Global Business Power Corporation, Philippines
- MS Steel International - UAE
- Kapuas Tunggal Persada - Indonesia
- Iligan Light & Power Inc, Philippines
- Essar Steel Hazira Ltd - India
- Eastern Energy - Thailand
- Central Java Power - Indonesia
- GMR Energy Limited - India
- Sinarmas Energy and Mining - Indonesia
- Uttam Galva Steels Limited - India
- PowerSource Philippines DevCo
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Malabar Cements Ltd - India
- Karaikal Port Pvt Ltd - India
- Latin American Coal - Colombia
- McConnell Dowell - Australia
- LBH Netherlands Bv - Netherlands
|
| |
| |
|
