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.
|
|
Tuesday, 07 February 12
DRY BULK MARKET FINALLY STOPS DECLINE, POSTS FIRST RISE IN MORE THAN A MONTH - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
After falling to near record lows, not seen since the mid-80s the dry bulk market has finally stopped its path to "hell", with the industr ...
Saturday, 04 February 12
SUPRAMAX DELIVERY SOUTH CHINA FOR TRIPS VIA INDONESIA WERE REPORTED AROUND $ 6,000 PER DAY - VISTAAR
COALspot.com - The markets continued to soften which dropped by almost 11 pct and BDI closing at 647 points.
The drop in BDI was mainly due to dr ...
Thursday, 02 February 12
NO RELIEF YET FOR DRY BULK SHIP OWNERS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
Although at the start of 2012 nobody can claim that the global seaborne trade has suddenly come to a halt, quite the contrary, it seems that the dry ...
Wednesday, 01 February 12
KRISHNAPATNAM PORT - GOING DEEP TO SOAR HIGH
COALspot.com - Krishnapatnam Port now rightfully claims as the deepest draft port in India, as it has started accepting vessels with maximum permiss ...
Wednesday, 01 February 12
IN JAMBI, MOST MINING COMPANIES LACK 'CLEAR-AND-CLEAN' PERMITS - JP
More than three-quarters of the 386 mining companies in Jambi lack “clear-and-clean” certifications from the government, according to an ...
|
|
|
Showing 4861 to 4865 news of total 6871 |
|
 |
|
|
|
|
| |
|
 |
|
|
| |
|
- Bhushan Steel Limited - India
- Indogreen Group - Indonesia
- Eastern Energy - Thailand
- Mercuria Energy - Indonesia
- Altura Mining Limited, Indonesia
- Alfred C Toepfer International GmbH - Germany
- Kapuas Tunggal Persada - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Thai Mozambique Logistica
- Siam City Cement - Thailand
- Goldman Sachs - Singapore
- Sindya Power Generating Company Private Ltd
- Lanco Infratech Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- Star Paper Mills Limited - India
- OPG Power Generation Pvt Ltd - India
- Kaltim Prima Coal - Indonesia
- Indonesian Coal Mining Association
- Tamil Nadu electricity Board
- Central Electricity Authority - India
- The State Trading Corporation of India Ltd
- Cigading International Bulk Terminal - Indonesia
- Indo Tambangraya Megah - Indonesia
- Merrill Lynch Commodities Europe
- Mjunction Services Limited - India
- Electricity Generating Authority of Thailand
- Bulk Trading Sa - Switzerland
- Deloitte Consulting - India
- VISA Power Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Kideco Jaya Agung - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Coalindo Energy - Indonesia
- Vizag Seaport Private Limited - India
- Ministry of Mines - Canada
- Parliament of New Zealand
- Posco Energy - South Korea
- Directorate General of MIneral and Coal - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Trasteel International SA, Italy
- AsiaOL BioFuels Corp., Philippines
- European Bulk Services B.V. - Netherlands
- Vijayanagar Sugar Pvt Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Wilmar Investment Holdings
- Wood Mackenzie - Singapore
- Australian Commodity Traders Exchange
- GN Power Mariveles Coal Plant, Philippines
- Orica Australia Pty. Ltd.
- Bharathi Cement Corporation - India
- Energy Development Corp, Philippines
- PTC India Limited - India
- Central Java Power - Indonesia
- New Zealand Coal & Carbon
- Coastal Gujarat Power Limited - India
- Indika Energy - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Jorong Barutama Greston.PT - Indonesia
- London Commodity Brokers - England
- Bukit Baiduri Energy - Indonesia
- Toyota Tsusho Corporation, Japan
- Simpson Spence & Young - Indonesia
- Antam Resourcindo - Indonesia
- GVK Power & Infra Limited - India
- Indian Energy Exchange, India
- Global Coal Blending Company Limited - Australia
- Krishnapatnam Port Company Ltd. - India
- Dalmia Cement Bharat India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Metalloyd Limited - United Kingdom
- Tata Chemicals Ltd - India
- Miang Besar Coal Terminal - Indonesia
- Xindia Steels Limited - India
- Interocean Group of Companies - India
- IEA Clean Coal Centre - UK
- Ministry of Finance - Indonesia
- Maheswari Brothers Coal Limited - India
- Iligan Light & Power Inc, Philippines
- Vedanta Resources Plc - India
- Petron Corporation, Philippines
- Siam City Cement PLC, Thailand
- Global Business Power Corporation, Philippines
- CIMB Investment Bank - Malaysia
- Medco Energi Mining Internasional
- Kepco SPC Power Corporation, Philippines
- Price Waterhouse Coopers - Russia
- Minerals Council of Australia
- Karbindo Abesyapradhi - Indoneisa
- Kalimantan Lumbung Energi - Indonesia
- Salva Resources Pvt Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Bhatia International Limited - India
- Latin American Coal - Colombia
- Renaissance Capital - South Africa
- PowerSource Philippines DevCo
- Kobexindo Tractors - Indoneisa
- SN Aboitiz Power Inc, Philippines
- Independent Power Producers Association of India
- Videocon Industries ltd - India
- CNBM International Corporation - China
- Bahari Cakrawala Sebuku - Indonesia
- Sarangani Energy Corporation, Philippines
- Attock Cement Pakistan Limited
- ICICI Bank Limited - India
- Rashtriya Ispat Nigam Limited - India
- MS Steel International - UAE
- Mintek Dendrill Indonesia
- Sojitz Corporation - Japan
- Anglo American - United Kingdom
- Pipit Mutiara Jaya. PT, Indonesia
- Savvy Resources Ltd - HongKong
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Jaiprakash Power Ventures ltd
- Indian Oil Corporation Limited
- Neyveli Lignite Corporation Ltd, - India
- Bangladesh Power Developement Board
- White Energy Company Limited
- India Bulls Power Limited - India
- Malabar Cements Ltd - India
- Coal and Oil Company - UAE
- Uttam Galva Steels Limited - India
- Kartika Selabumi Mining - Indonesia
- Straits Asia Resources Limited - Singapore
- GAC Shipping (India) Pvt Ltd
- SMC Global Power, Philippines
- PetroVietnam Power Coal Import and Supply Company
- Larsen & Toubro Limited - India
- Gujarat Electricity Regulatory Commission - India
- Heidelberg Cement - Germany
- Economic Council, Georgia
- Chamber of Mines of South Africa
- Madhucon Powers Ltd - India
- Thiess Contractors Indonesia
- TeaM Sual Corporation - Philippines
- The Treasury - Australian Government
- Ministry of Transport, Egypt
- Samtan Co., Ltd - South Korea
- PNOC Exploration Corporation - Philippines
- Georgia Ports Authority, United States
- Grasim Industreis Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Energy Link Ltd, New Zealand
- Kumho Petrochemical, South Korea
- Carbofer General Trading SA - India
- Chettinad Cement Corporation Ltd - India
- Mercator Lines Limited - India
- Port Waratah Coal Services - Australia
- Holcim Trading Pte Ltd - Singapore
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Aboitiz Power Corporation - Philippines
- Bhoruka Overseas - Indonesia
- Meralco Power Generation, Philippines
- Electricity Authority, New Zealand
- International Coal Ventures Pvt Ltd - India
- Sree Jayajothi Cements Limited - India
- Intertek Mineral Services - Indonesia
- Cement Manufacturers Association - India
- Directorate Of Revenue Intelligence - India
- Essar Steel Hazira Ltd - India
- Oldendorff Carriers - Singapore
- Timah Investasi Mineral - Indoneisa
- Therma Luzon, Inc, Philippines
- Jindal Steel & Power Ltd - India
- IHS Mccloskey Coal Group - USA
- Romanian Commodities Exchange
- Marubeni Corporation - India
- Bukit Makmur.PT - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Asmin Koalindo Tuhup - Indonesia
- Commonwealth Bank - Australia
- Power Finance Corporation Ltd., India
- Edison Trading Spa - Italy
- Eastern Coal Council - USA
- LBH Netherlands Bv - Netherlands
- Parry Sugars Refinery, India
- Borneo Indobara - Indonesia
- Baramulti Group, Indonesia
- Singapore Mercantile Exchange
- TNB Fuel Sdn Bhd - Malaysia
- Aditya Birla Group - India
- Global Green Power PLC Corporation, Philippines
- Bayan Resources Tbk. - Indonesia
- Rio Tinto Coal - Australia
- Riau Bara Harum - Indonesia
- Semirara Mining Corp, Philippines
- Globalindo Alam Lestari - Indonesia
- Orica Mining Services - Indonesia
- Banpu Public Company Limited - Thailand
- Sical Logistics Limited - India
- SMG Consultants - Indonesia
- The University of Queensland
- Africa Commodities Group - South Africa
- Barasentosa Lestari - Indonesia
- Formosa Plastics Group - Taiwan
- Gujarat Sidhee Cement - India
- Karaikal Port Pvt Ltd - India
- Sinarmas Energy and Mining - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Standard Chartered Bank - UAE
- ASAPP Information Group - India
- Agrawal Coal Company - India
- Australian Coal Association
- McConnell Dowell - Australia
- Manunggal Multi Energi - Indonesia
- Pendopo Energi Batubara - Indonesia
- GMR Energy Limited - India
- South Luzon Thermal Energy Corporation
- Planning Commission, India
- Binh Thuan Hamico - Vietnam
- Ind-Barath Power Infra Limited - India
- Meenaskhi Energy Private Limited - India
- Sakthi Sugars Limited - India
- San Jose City I Power Corp, Philippines
- Makarim & Taira - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Ambuja Cements Ltd - India
|
| |
| |
|
