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.
|
|
Thursday, 15 March 12
RESOURCE ALAM FY11 PROFIT UP 171% - INSIDER STORIES
Insider Stories reported that, coal mining company PT Resource Alam Indonesia Tbk (KKGI) reported a 171.16% jump in net profit last year on the back ...
Wednesday, 14 March 12
GLOBAL THERMAL TRADE FLOW CHANGES WILL ENSURE SECURITY OF THERMAL COAL SUPPLY, ALBEIT AT A HIGH PRICE - WOOD MACKENZIE
Wood Mackenzie Says Global Thermal Trade Flow Changes Will Ensure Security of Thermal Coal Supply, Albeit At a High Price Seaborne thermal demand by ...
Wednesday, 14 March 12
COKAL TAKES ANOTHER STEP IN DEVELOPING INFRASTRUCTURE TO FACILITATE METALLURGICAL COAL PRODUCTION
Global coal group, Cokal Limited (ASX-CKA), has signed Memorandums of Understanding (MoU’s) to develop two river ports and two small scale coa ...
Tuesday, 13 March 12
CLARIFICATION OF GR 24 OF 2012 REQUIRING DIVESTMENT OF FOREIGN OWNERSHIP OVER TIME
ASX Announcement
Global metallurgical coal group, Cokal Limited (ASX-CKA), is responding to the recent announcement of the Indonesian Ministry of ...
Tuesday, 13 March 12
EUROPEAN COAL CONTANGO: FURTHER STEEPNESS REQUIRED TO MAKE LARGE SCALE PHYSICAL TIME SPREAD ARBITRAGE MORE ATTRACTIVE - MISWIN MAHESH, BARCLAYS CAPITAL
COALspot.com - "With the contango between the Y+1 and M+1 ARA delivered contract now averaging above the $14/t level, there is an increasing in ...
|
|
|
Showing 4806 to 4810 news of total 6871 |
|
 |
|
|
|
|
| |
|
 |
|
|
| |
|
- Sojitz Corporation - Japan
- Bank of Tokyo Mitsubishi UFJ Ltd
- Jorong Barutama Greston.PT - Indonesia
- Chettinad Cement Corporation Ltd - India
- Thai Mozambique Logistica
- Coalindo Energy - Indonesia
- Indonesian Coal Mining Association
- MS Steel International - UAE
- Ministry of Mines - Canada
- Minerals Council of Australia
- Ministry of Transport, Egypt
- Kumho Petrochemical, South Korea
- Cigading International Bulk Terminal - Indonesia
- Chamber of Mines of South Africa
- Petrochimia International Co. Ltd.- Taiwan
- Port Waratah Coal Services - Australia
- San Jose City I Power Corp, Philippines
- Krishnapatnam Port Company Ltd. - India
- Essar Steel Hazira Ltd - India
- Riau Bara Harum - Indonesia
- LBH Netherlands Bv - Netherlands
- Neyveli Lignite Corporation Ltd, - India
- Indian Energy Exchange, India
- Agrawal Coal Company - India
- Formosa Plastics Group - Taiwan
- ICICI Bank Limited - India
- Australian Commodity Traders Exchange
- Planning Commission, India
- Makarim & Taira - Indonesia
- Global Green Power PLC Corporation, Philippines
- Intertek Mineral Services - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Mjunction Services Limited - India
- Electricity Authority, New Zealand
- International Coal Ventures Pvt Ltd - India
- White Energy Company Limited
- Baramulti Group, Indonesia
- Dalmia Cement Bharat India
- Directorate Of Revenue Intelligence - India
- Siam City Cement PLC, Thailand
- Savvy Resources Ltd - HongKong
- Rio Tinto Coal - Australia
- Coastal Gujarat Power Limited - India
- Parry Sugars Refinery, India
- Miang Besar Coal Terminal - Indonesia
- Bharathi Cement Corporation - India
- Binh Thuan Hamico - Vietnam
- Bhatia International Limited - India
- Kaltim Prima Coal - Indonesia
- Salva Resources Pvt Ltd - India
- GVK Power & Infra Limited - India
- Madhucon Powers Ltd - India
- PetroVietnam Power Coal Import and Supply Company
- PowerSource Philippines DevCo
- Petron Corporation, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- SMC Global Power, Philippines
- Marubeni Corporation - India
- Sree Jayajothi Cements Limited - India
- Medco Energi Mining Internasional
- Eastern Coal Council - USA
- Karbindo Abesyapradhi - Indoneisa
- Wilmar Investment Holdings
- Jaiprakash Power Ventures ltd
- Deloitte Consulting - India
- Gujarat Sidhee Cement - India
- Posco Energy - South Korea
- CIMB Investment Bank - Malaysia
- Jindal Steel & Power Ltd - India
- Orica Mining Services - Indonesia
- Attock Cement Pakistan Limited
- Simpson Spence & Young - Indonesia
- Bayan Resources Tbk. - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Orica Australia Pty. Ltd.
- Meralco Power Generation, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Interocean Group of Companies - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- London Commodity Brokers - England
- Barasentosa Lestari - Indonesia
- Thiess Contractors Indonesia
- SMG Consultants - Indonesia
- Tamil Nadu electricity Board
- Kobexindo Tractors - Indoneisa
- CNBM International Corporation - China
- Commonwealth Bank - Australia
- Aditya Birla Group - India
- Therma Luzon, Inc, Philippines
- Anglo American - United Kingdom
- Globalindo Alam Lestari - Indonesia
- Central Java Power - Indonesia
- VISA Power Limited - India
- McConnell Dowell - Australia
- Singapore Mercantile Exchange
- Renaissance Capital - South Africa
- Videocon Industries ltd - India
- Lanco Infratech Ltd - India
- Australian Coal Association
- Ind-Barath Power Infra Limited - India
- Indian Oil Corporation Limited
- Bukit Makmur.PT - Indonesia
- Sarangani Energy Corporation, Philippines
- Sical Logistics Limited - India
- Sakthi Sugars Limited - India
- Straits Asia Resources Limited - Singapore
- Billiton Holdings Pty Ltd - Australia
- Electricity Generating Authority of Thailand
- Star Paper Mills Limited - India
- Bhoruka Overseas - Indonesia
- Kepco SPC Power Corporation, Philippines
- PTC India Limited - India
- Indo Tambangraya Megah - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Bulk Trading Sa - Switzerland
- Sinarmas Energy and Mining - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Global Business Power Corporation, Philippines
- OPG Power Generation Pvt Ltd - India
- PNOC Exploration Corporation - Philippines
- Borneo Indobara - Indonesia
- IEA Clean Coal Centre - UK
- Uttam Galva Steels Limited - India
- Eastern Energy - Thailand
- TeaM Sual Corporation - Philippines
- Mercuria Energy - Indonesia
- Banpu Public Company Limited - Thailand
- ASAPP Information Group - India
- New Zealand Coal & Carbon
- IHS Mccloskey Coal Group - USA
- Pendopo Energi Batubara - Indonesia
- European Bulk Services B.V. - Netherlands
- Indogreen Group - Indonesia
- Vedanta Resources Plc - India
- Central Electricity Authority - India
- Economic Council, Georgia
- GAC Shipping (India) Pvt Ltd
- Timah Investasi Mineral - Indoneisa
- Gujarat Electricity Regulatory Commission - India
- Malabar Cements Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- India Bulls Power Limited - India
- Aboitiz Power Corporation - Philippines
- Georgia Ports Authority, United States
- Vijayanagar Sugar Pvt Ltd - India
- Kideco Jaya Agung - Indonesia
- Mercator Lines Limited - India
- Africa Commodities Group - South Africa
- Standard Chartered Bank - UAE
- Toyota Tsusho Corporation, Japan
- Coal and Oil Company - UAE
- Power Finance Corporation Ltd., India
- Siam City Cement - Thailand
- Bangladesh Power Developement Board
- Global Coal Blending Company Limited - Australia
- Parliament of New Zealand
- Ambuja Cements Ltd - India
- AsiaOL BioFuels Corp., Philippines
- Kapuas Tunggal Persada - Indonesia
- Maheswari Brothers Coal Limited - India
- Price Waterhouse Coopers - Russia
- Energy Link Ltd, New Zealand
- GMR Energy Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Antam Resourcindo - Indonesia
- Grasim Industreis Ltd - India
- Trasteel International SA, Italy
- Alfred C Toepfer International GmbH - Germany
- Semirara Mining Corp, Philippines
- Merrill Lynch Commodities Europe
- Oldendorff Carriers - Singapore
- Goldman Sachs - Singapore
- Altura Mining Limited, Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Ceylon Electricity Board - Sri Lanka
- Mintek Dendrill Indonesia
- The Treasury - Australian Government
- Bahari Cakrawala Sebuku - Indonesia
- The State Trading Corporation of India Ltd
- Heidelberg Cement - Germany
- Carbofer General Trading SA - India
- Tata Chemicals Ltd - India
- South Luzon Thermal Energy Corporation
- Samtan Co., Ltd - South Korea
- Iligan Light & Power Inc, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Metalloyd Limited - United Kingdom
- Kartika Selabumi Mining - Indonesia
- Bhushan Steel Limited - India
- Latin American Coal - Colombia
- Karaikal Port Pvt Ltd - India
- Rashtriya Ispat Nigam Limited - India
- Larsen & Toubro Limited - India
- Semirara Mining and Power Corporation, Philippines
- Romanian Commodities Exchange
- Energy Development Corp, Philippines
- Meenaskhi Energy Private Limited - India
- Xindia Steels Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Cement Manufacturers Association - India
- Indika Energy - Indonesia
- Edison Trading Spa - Italy
- Vizag Seaport Private Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- SN Aboitiz Power Inc, Philippines
- Wood Mackenzie - Singapore
- The University of Queensland
- Leighton Contractors Pty Ltd - Australia
- Bukit Baiduri Energy - Indonesia
- Manunggal Multi Energi - Indonesia
- Independent Power Producers Association of India
- Directorate General of MIneral and Coal - Indonesia
- Ministry of Finance - Indonesia
- Sindya Power Generating Company Private Ltd
|
| |
| |
|
