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.
|
|
Wednesday, 21 June 23
CHINA'S MAY COAL IMPORTS FROM AUSTRALIA RECOVER TO PRE-BAN LEVELS - REUTERS
Australian coal sales to China increased in May, as trade resumed between them even as overall coal demand weakened against an uncertain macroecono ...
Monday, 19 June 23
DROUGHT-DEPLETED HYDROPOWER DRIVES CHINA TO TURN TO COAL - REUTERS
China has leant hard on coal-fired power plants as well as wind and solar generators to make up for a shortfall in hydroelectric generation as a re ...
Monday, 19 June 23
CHINA COAL OUTPUT UP 4.2 PCT IN MAY - XINHUA
China’s raw coal output posted steady growth in May, official data showed.
The country produced 390 million tonnes of raw coal ...
Wednesday, 24 May 23
AMMONIA-FUELLED BULK CARRIERS WITHIN FIVE YEARS - BALTIC EXCHANGE
Within five years, ships powered by clean ammonia could be a feature on the iron ore trade routes between West Australia and East Asia.
A study ...
Tuesday, 23 May 23
CHINA'S APRIL COAL OUTPUT LEAPS 11% ON YEAR, BUT DEMAND DOWNTURN LOOMS - REUTERS
China’s daily coal output in April jumped 11% from the same month a year earlier, boosted by Beijing’s order to increase supply to ensu ...
|
|
|
Showing 96 to 100 news of total 6871 |
|
 |
|
|
|
|
| |
|
 |
|
|
| |
|
- PTC India Limited - India
- Medco Energi Mining Internasional
- Kaltim Prima Coal - Indonesia
- TeaM Sual Corporation - Philippines
- Romanian Commodities Exchange
- Jaiprakash Power Ventures ltd
- Vizag Seaport Private Limited - India
- Trasteel International SA, Italy
- Lanco Infratech Ltd - India
- CNBM International Corporation - China
- Orica Australia Pty. Ltd.
- Krishnapatnam Port Company Ltd. - India
- Bangladesh Power Developement Board
- Iligan Light & Power Inc, Philippines
- Electricity Generating Authority of Thailand
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Indian Energy Exchange, India
- Coal and Oil Company - UAE
- Larsen & Toubro Limited - India
- Heidelberg Cement - Germany
- Semirara Mining and Power Corporation, Philippines
- Neyveli Lignite Corporation Ltd, - India
- The University of Queensland
- Globalindo Alam Lestari - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- SMC Global Power, Philippines
- Standard Chartered Bank - UAE
- Australian Coal Association
- Asmin Koalindo Tuhup - Indonesia
- Independent Power Producers Association of India
- Power Finance Corporation Ltd., India
- Malabar Cements Ltd - India
- South Luzon Thermal Energy Corporation
- VISA Power Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Renaissance Capital - South Africa
- Global Business Power Corporation, Philippines
- SN Aboitiz Power Inc, Philippines
- Indika Energy - Indonesia
- Parry Sugars Refinery, India
- Sarangani Energy Corporation, Philippines
- Eastern Energy - Thailand
- Edison Trading Spa - Italy
- San Jose City I Power Corp, Philippines
- Aboitiz Power Corporation - Philippines
- Alfred C Toepfer International GmbH - Germany
- GVK Power & Infra Limited - India
- Interocean Group of Companies - India
- McConnell Dowell - Australia
- Orica Mining Services - Indonesia
- Aditya Birla Group - India
- Xindia Steels Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- ICICI Bank Limited - India
- Coalindo Energy - Indonesia
- Jindal Steel & Power Ltd - India
- Sojitz Corporation - Japan
- Posco Energy - South Korea
- Leighton Contractors Pty Ltd - Australia
- Tamil Nadu electricity Board
- Africa Commodities Group - South Africa
- Petron Corporation, Philippines
- LBH Netherlands Bv - Netherlands
- Port Waratah Coal Services - Australia
- Eastern Coal Council - USA
- Pipit Mutiara Jaya. PT, Indonesia
- Therma Luzon, Inc, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- European Bulk Services B.V. - Netherlands
- Central Electricity Authority - India
- Simpson Spence & Young - Indonesia
- Mercator Lines Limited - India
- Cement Manufacturers Association - India
- India Bulls Power Limited - India
- Planning Commission, India
- Kalimantan Lumbung Energi - Indonesia
- Thai Mozambique Logistica
- CIMB Investment Bank - Malaysia
- Global Coal Blending Company Limited - Australia
- Timah Investasi Mineral - Indoneisa
- Price Waterhouse Coopers - Russia
- Sakthi Sugars Limited - India
- PNOC Exploration Corporation - Philippines
- Maheswari Brothers Coal Limited - India
- Pendopo Energi Batubara - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Global Green Power PLC Corporation, Philippines
- Directorate Of Revenue Intelligence - India
- White Energy Company Limited
- Bukit Asam (Persero) Tbk - Indonesia
- Barasentosa Lestari - Indonesia
- Tata Chemicals Ltd - India
- Ind-Barath Power Infra Limited - India
- AsiaOL BioFuels Corp., Philippines
- Sical Logistics Limited - India
- Indian Oil Corporation Limited
- Bukit Baiduri Energy - Indonesia
- Bayan Resources Tbk. - Indonesia
- Attock Cement Pakistan Limited
- Grasim Industreis Ltd - India
- Carbofer General Trading SA - India
- Riau Bara Harum - Indonesia
- Karaikal Port Pvt Ltd - India
- SMG Consultants - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Baramulti Group, Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- International Coal Ventures Pvt Ltd - India
- Ministry of Transport, Egypt
- Toyota Tsusho Corporation, Japan
- Kobexindo Tractors - Indoneisa
- The Treasury - Australian Government
- Mjunction Services Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Borneo Indobara - Indonesia
- Bhushan Steel Limited - India
- Billiton Holdings Pty Ltd - Australia
- ASAPP Information Group - India
- Anglo American - United Kingdom
- Bharathi Cement Corporation - India
- Indo Tambangraya Megah - Indonesia
- Dalmia Cement Bharat India
- Ceylon Electricity Board - Sri Lanka
- Kumho Petrochemical, South Korea
- IHS Mccloskey Coal Group - USA
- Chettinad Cement Corporation Ltd - India
- Bukit Makmur.PT - Indonesia
- Meenaskhi Energy Private Limited - India
- Merrill Lynch Commodities Europe
- Salva Resources Pvt Ltd - India
- Wilmar Investment Holdings
- GN Power Mariveles Coal Plant, Philippines
- London Commodity Brokers - England
- Gujarat Sidhee Cement - India
- OPG Power Generation Pvt Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Siam City Cement PLC, Thailand
- Madhucon Powers Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Cigading International Bulk Terminal - Indonesia
- Bhoruka Overseas - Indonesia
- Antam Resourcindo - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Star Paper Mills Limited - India
- MS Steel International - UAE
- Ministry of Finance - Indonesia
- Kartika Selabumi Mining - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Kepco SPC Power Corporation, Philippines
- Savvy Resources Ltd - HongKong
- Indonesian Coal Mining Association
- Ambuja Cements Ltd - India
- Rio Tinto Coal - Australia
- Binh Thuan Hamico - Vietnam
- Intertek Mineral Services - Indonesia
- Agrawal Coal Company - India
- Mercuria Energy - Indonesia
- New Zealand Coal & Carbon
- Ministry of Mines - Canada
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Minerals Council of Australia
- Jorong Barutama Greston.PT - Indonesia
- PowerSource Philippines DevCo
- Singapore Mercantile Exchange
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Miang Besar Coal Terminal - Indonesia
- Essar Steel Hazira Ltd - India
- Parliament of New Zealand
- Marubeni Corporation - India
- Gujarat Mineral Development Corp Ltd - India
- Indogreen Group - Indonesia
- Altura Mining Limited, Indonesia
- Australian Commodity Traders Exchange
- Mintek Dendrill Indonesia
- Sindya Power Generating Company Private Ltd
- Economic Council, Georgia
- Goldman Sachs - Singapore
- Rashtriya Ispat Nigam Limited - India
- Uttam Galva Steels Limited - India
- Sinarmas Energy and Mining - Indonesia
- IEA Clean Coal Centre - UK
- GAC Shipping (India) Pvt Ltd
- Latin American Coal - Colombia
- Metalloyd Limited - United Kingdom
- Central Java Power - Indonesia
- Electricity Authority, New Zealand
- Bhatia International Limited - India
- Commonwealth Bank - Australia
- Thiess Contractors Indonesia
- Energy Development Corp, Philippines
- Coastal Gujarat Power Limited - India
- Georgia Ports Authority, United States
- Makarim & Taira - Indonesia
- Banpu Public Company Limited - Thailand
- Vedanta Resources Plc - India
- Samtan Co., Ltd - South Korea
- Manunggal Multi Energi - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Kideco Jaya Agung - Indonesia
- Semirara Mining Corp, Philippines
- Siam City Cement - Thailand
- PetroVietnam Power Coal Import and Supply Company
- Straits Asia Resources Limited - Singapore
- Chamber of Mines of South Africa
- Bulk Trading Sa - Switzerland
- Deloitte Consulting - India
- Videocon Industries ltd - India
- Energy Link Ltd, New Zealand
- GMR Energy Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Wood Mackenzie - Singapore
- Offshore Bulk Terminal Pte Ltd, Singapore
- Meralco Power Generation, Philippines
- The State Trading Corporation of India Ltd
- Oldendorff Carriers - Singapore
- Sree Jayajothi Cements Limited - India
- Formosa Plastics Group - Taiwan
|
| |
| |
|
