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, 24 January 12
BUKIT ASAM FY11 NET PROFIT SURGES 50% - INSIDER STORIES
Insider Stories reported that, the state-controlled PT Bukit Asam Tbk (PTBA) estimated to book Rp3 trillion (approximately US$ 335,570,469) net prof ...
Sunday, 22 January 12
FREIGHT MARKET DROPPED TO THE LOWEST LEVEL SINCE 2008
COALspot.com - "The markets continued to soften almost reaching 2008 levels breaking the 1,000 point mark", said Capt. Reddy of Vistaar Sh ...
Saturday, 21 January 12
ASIAS PREMIER COMPREHENSIVE OPEN CUT MINING CONFERENCE SCHEDULED FOR FEBRUARY 2012
As the only such conference in the region for miners and service providers, IBC Asia’s Open Cut Mine Planning & Operational Excellence con ...
Saturday, 21 January 12
COAL MARKETS CELEBRATES A DECADE OF BRINGING BUYERS & SELLERS TOGETHER
In 2012, IBC Asia’s premier Coal Markets conference series – Asia’s only globally focused coal import, export and supply chain eve ...
Saturday, 21 January 12
SAMIN TAN COMPLETES BUMI PLC TAKEOVER - INSIDER STORIES
Insider Stories reported that, Indonesian coking coal miner PT Borneo Lumbung Energi & Metal Tbk (BORN), that is controlled by stellar businessm ...
|
|
|
Showing 4876 to 4880 news of total 6871 |
|
 |
|
|
|
|
| |
|
 |
|
|
| |
|
- Alfred C Toepfer International GmbH - Germany
- TeaM Sual Corporation - Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Kumho Petrochemical, South Korea
- The University of Queensland
- Kapuas Tunggal Persada - Indonesia
- Sindya Power Generating Company Private Ltd
- CIMB Investment Bank - Malaysia
- Rashtriya Ispat Nigam Limited - India
- Meenaskhi Energy Private Limited - India
- Eastern Energy - Thailand
- Banpu Public Company Limited - Thailand
- Minerals Council of Australia
- Bahari Cakrawala Sebuku - Indonesia
- Georgia Ports Authority, United States
- Central Electricity Authority - India
- Siam City Cement PLC, Thailand
- Bhatia International Limited - India
- Coal and Oil Company - UAE
- Anglo American - United Kingdom
- Ministry of Finance - Indonesia
- Meralco Power Generation, Philippines
- LBH Netherlands Bv - Netherlands
- Economic Council, Georgia
- Barasentosa Lestari - Indonesia
- AsiaOL BioFuels Corp., Philippines
- London Commodity Brokers - England
- PowerSource Philippines DevCo
- Cigading International Bulk Terminal - Indonesia
- Wilmar Investment Holdings
- Madhucon Powers Ltd - India
- Eastern Coal Council - USA
- Rio Tinto Coal - Australia
- Semirara Mining and Power Corporation, Philippines
- Heidelberg Cement - Germany
- Ceylon Electricity Board - Sri Lanka
- Price Waterhouse Coopers - Russia
- Kobexindo Tractors - Indoneisa
- Energy Link Ltd, New Zealand
- OPG Power Generation Pvt Ltd - India
- Africa Commodities Group - South Africa
- Cement Manufacturers Association - India
- Bangladesh Power Developement Board
- Kaltim Prima Coal - Indonesia
- Mercator Lines Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- European Bulk Services B.V. - Netherlands
- Mintek Dendrill Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Attock Cement Pakistan Limited
- Mercuria Energy - Indonesia
- Videocon Industries ltd - India
- Indogreen Group - Indonesia
- Planning Commission, India
- Agrawal Coal Company - India
- Directorate Of Revenue Intelligence - India
- Miang Besar Coal Terminal - Indonesia
- Deloitte Consulting - India
- Leighton Contractors Pty Ltd - Australia
- Global Coal Blending Company Limited - Australia
- Global Green Power PLC Corporation, Philippines
- Sical Logistics Limited - India
- Sarangani Energy Corporation, Philippines
- Vizag Seaport Private Limited - India
- Timah Investasi Mineral - Indoneisa
- Coastal Gujarat Power Limited - India
- GMR Energy Limited - India
- San Jose City I Power Corp, Philippines
- Marubeni Corporation - India
- Medco Energi Mining Internasional
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Altura Mining Limited, Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Uttam Galva Steels Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Malabar Cements Ltd - India
- Tata Chemicals Ltd - India
- Karaikal Port Pvt Ltd - India
- Lanco Infratech Ltd - India
- Antam Resourcindo - Indonesia
- Globalindo Alam Lestari - Indonesia
- Ministry of Transport, Egypt
- Binh Thuan Hamico - Vietnam
- Kalimantan Lumbung Energi - Indonesia
- Posco Energy - South Korea
- Commonwealth Bank - Australia
- Carbofer General Trading SA - India
- Xindia Steels Limited - India
- Bhoruka Overseas - Indonesia
- Tamil Nadu electricity Board
- Directorate General of MIneral and Coal - Indonesia
- GAC Shipping (India) Pvt Ltd
- Mjunction Services Limited - India
- Goldman Sachs - Singapore
- Indian Energy Exchange, India
- Chamber of Mines of South Africa
- Energy Development Corp, Philippines
- Bayan Resources Tbk. - Indonesia
- Sakthi Sugars Limited - India
- Central Java Power - Indonesia
- CNBM International Corporation - China
- Larsen & Toubro Limited - India
- Wood Mackenzie - Singapore
- Ind-Barath Power Infra Limited - India
- Samtan Co., Ltd - South Korea
- Metalloyd Limited - United Kingdom
- Maharashtra Electricity Regulatory Commission - India
- Holcim Trading Pte Ltd - Singapore
- Kideco Jaya Agung - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Borneo Indobara - Indonesia
- Ministry of Mines - Canada
- Billiton Holdings Pty Ltd - Australia
- IHS Mccloskey Coal Group - USA
- Vijayanagar Sugar Pvt Ltd - India
- Indika Energy - Indonesia
- Standard Chartered Bank - UAE
- Formosa Plastics Group - Taiwan
- Indo Tambangraya Megah - Indonesia
- Port Waratah Coal Services - Australia
- Global Business Power Corporation, Philippines
- Renaissance Capital - South Africa
- Asmin Koalindo Tuhup - Indonesia
- Trasteel International SA, Italy
- Aboitiz Power Corporation - Philippines
- PTC India Limited - India
- Riau Bara Harum - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Australian Coal Association
- Sree Jayajothi Cements Limited - India
- White Energy Company Limited
- Jindal Steel & Power Ltd - India
- Chettinad Cement Corporation Ltd - India
- Orica Mining Services - Indonesia
- Iligan Light & Power Inc, Philippines
- Electricity Authority, New Zealand
- Gujarat Sidhee Cement - India
- Parry Sugars Refinery, India
- Straits Asia Resources Limited - Singapore
- Therma Luzon, Inc, Philippines
- Kepco SPC Power Corporation, Philippines
- Gujarat Electricity Regulatory Commission - India
- Latin American Coal - Colombia
- Dalmia Cement Bharat India
- GVK Power & Infra Limited - India
- Merrill Lynch Commodities Europe
- Star Paper Mills Limited - India
- Romanian Commodities Exchange
- Interocean Group of Companies - India
- Bukit Makmur.PT - Indonesia
- Sojitz Corporation - Japan
- Sinarmas Energy and Mining - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Indian Oil Corporation Limited
- Maheswari Brothers Coal Limited - India
- McConnell Dowell - Australia
- Neyveli Lignite Corporation Ltd, - India
- Jorong Barutama Greston.PT - Indonesia
- South Luzon Thermal Energy Corporation
- Bulk Trading Sa - Switzerland
- Bharathi Cement Corporation - India
- Bhushan Steel Limited - India
- Bukit Baiduri Energy - Indonesia
- International Coal Ventures Pvt Ltd - India
- The Treasury - Australian Government
- Grasim Industreis Ltd - India
- Toyota Tsusho Corporation, Japan
- Oldendorff Carriers - Singapore
- Coalindo Energy - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Edison Trading Spa - Italy
- Parliament of New Zealand
- Australian Commodity Traders Exchange
- Bank of Tokyo Mitsubishi UFJ Ltd
- Indonesian Coal Mining Association
- The State Trading Corporation of India Ltd
- SN Aboitiz Power Inc, Philippines
- Ambuja Cements Ltd - India
- Thai Mozambique Logistica
- Independent Power Producers Association of India
- India Bulls Power Limited - India
- PetroVietnam Power Coal Import and Supply Company
- TNB Fuel Sdn Bhd - Malaysia
- New Zealand Coal & Carbon
- PNOC Exploration Corporation - Philippines
- Karbindo Abesyapradhi - Indoneisa
- Savvy Resources Ltd - HongKong
- Petron Corporation, Philippines
- MS Steel International - UAE
- Semirara Mining Corp, Philippines
- Essar Steel Hazira Ltd - India
- VISA Power Limited - India
- Manunggal Multi Energi - Indonesia
- SMC Global Power, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Vedanta Resources Plc - India
- Siam City Cement - Thailand
- Makarim & Taira - Indonesia
- Baramulti Group, Indonesia
- Power Finance Corporation Ltd., India
- ICICI Bank Limited - India
- Salva Resources Pvt Ltd - India
- SMG Consultants - Indonesia
- Electricity Generating Authority of Thailand
- ASAPP Information Group - India
- Kartika Selabumi Mining - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Orica Australia Pty. Ltd.
- Thiess Contractors Indonesia
- Pendopo Energi Batubara - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Singapore Mercantile Exchange
- Aditya Birla Group - India
- Simpson Spence & Young - Indonesia
- Jaiprakash Power Ventures ltd
- IEA Clean Coal Centre - UK
- Intertek Mineral Services - Indonesia
|
| |
| |
|
