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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).
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Thursday, 29 December 11
NEW VESSELS DELIVERED ARE FLOODING THE OCEANS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
As expected 2011 has been the year that newbuilding deliveries peaked and kept "flooding" the market, thus supressing freight rates and er ...
Tuesday, 27 December 11
MINERS MAKE CASE FOR RESUMING CONTRACT NEGOTIATIONS - THE JAKARTA POST
The Jakarta Post reported that, problems with the renegotiation of mining contracts in the country are far from over, as agreements on several cruci ...
Tuesday, 27 December 11
COAL SHIPMENT OF TIANJIN PORT REACHED 6.72 MLN TONNES IN NOVEMBER - STEEL HOME / HELLENIC SHIPPING
Tianjin port shipped 6.72 million tonnes of coal in November, decreasing 600,000 tonnes versus 7.32 million tonnes in October, while up 21.09% or 1. ...
Tuesday, 27 December 11
NEW CLAUSE PUBLISHED FOR SLOW STEAMING - BIMCO
Many owners and operators faced with high bunker prices are considering implementing slow steaming regimes to save fuel and to assist with capacity ...
Monday, 26 December 11
NEW EXPORT TAX PLAN GREETED WITH PRAISE AND CRITICISM - THE JAKARTA POST
The Jakarta Post, one of the Indonesia's leading english news paper reported that, both praise and criticism showered the government’s plan t ...
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Showing 4911 to 4915 news of total 6871 |
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- Meralco Power Generation, Philippines
- Uttam Galva Steels Limited - India
- Bangladesh Power Developement Board
- Coal and Oil Company - UAE
- Gujarat Mineral Development Corp Ltd - India
- McConnell Dowell - Australia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Jindal Steel & Power Ltd - India
- Anglo American - United Kingdom
- Indian Oil Corporation Limited
- PNOC Exploration Corporation - Philippines
- Kalimantan Lumbung Energi - Indonesia
- Global Coal Blending Company Limited - Australia
- Chettinad Cement Corporation Ltd - India
- Orica Mining Services - Indonesia
- Australian Coal Association
- Port Waratah Coal Services - Australia
- India Bulls Power Limited - India
- Straits Asia Resources Limited - Singapore
- Tamil Nadu electricity Board
- Cigading International Bulk Terminal - Indonesia
- White Energy Company Limited
- Timah Investasi Mineral - Indoneisa
- The State Trading Corporation of India Ltd
- The University of Queensland
- Borneo Indobara - Indonesia
- Barasentosa Lestari - Indonesia
- SN Aboitiz Power Inc, Philippines
- Kohat Cement Company Ltd. - Pakistan
- IEA Clean Coal Centre - UK
- Metalloyd Limited - United Kingdom
- Gujarat Electricity Regulatory Commission - India
- New Zealand Coal & Carbon
- International Coal Ventures Pvt Ltd - India
- Kaltim Prima Coal - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Oldendorff Carriers - Singapore
- Price Waterhouse Coopers - Russia
- Samtan Co., Ltd - South Korea
- Carbofer General Trading SA - India
- Xindia Steels Limited - India
- Indika Energy - Indonesia
- Madhucon Powers Ltd - India
- London Commodity Brokers - England
- Pendopo Energi Batubara - Indonesia
- Central Java Power - Indonesia
- Sindya Power Generating Company Private Ltd
- The Treasury - Australian Government
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Bukit Makmur.PT - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Cement Manufacturers Association - India
- Gujarat Sidhee Cement - India
- Vizag Seaport Private Limited - India
- Aditya Birla Group - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Kartika Selabumi Mining - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Sinarmas Energy and Mining - Indonesia
- Manunggal Multi Energi - Indonesia
- Vedanta Resources Plc - India
- Globalindo Alam Lestari - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Electricity Authority, New Zealand
- Romanian Commodities Exchange
- CIMB Investment Bank - Malaysia
- Karbindo Abesyapradhi - Indoneisa
- Videocon Industries ltd - India
- SMC Global Power, Philippines
- Electricity Generating Authority of Thailand
- Coalindo Energy - Indonesia
- MS Steel International - UAE
- Asmin Koalindo Tuhup - Indonesia
- GMR Energy Limited - India
- Bulk Trading Sa - Switzerland
- Vijayanagar Sugar Pvt Ltd - India
- AsiaOL BioFuels Corp., Philippines
- Ministry of Mines - Canada
- Neyveli Lignite Corporation Ltd, - India
- South Luzon Thermal Energy Corporation
- Attock Cement Pakistan Limited
- Independent Power Producers Association of India
- Kobexindo Tractors - Indoneisa
- Siam City Cement - Thailand
- Parliament of New Zealand
- Coastal Gujarat Power Limited - India
- Eastern Coal Council - USA
- Karaikal Port Pvt Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Antam Resourcindo - Indonesia
- Sojitz Corporation - Japan
- Edison Trading Spa - Italy
- OPG Power Generation Pvt Ltd - India
- Medco Energi Mining Internasional
- Planning Commission, India
- Baramulti Group, Indonesia
- Toyota Tsusho Corporation, Japan
- Parry Sugars Refinery, India
- TNB Fuel Sdn Bhd - Malaysia
- Africa Commodities Group - South Africa
- Indo Tambangraya Megah - Indonesia
- Essar Steel Hazira Ltd - India
- Ambuja Cements Ltd - India
- GAC Shipping (India) Pvt Ltd
- SMG Consultants - Indonesia
- Petron Corporation, Philippines
- LBH Netherlands Bv - Netherlands
- Bhoruka Overseas - Indonesia
- Maheswari Brothers Coal Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Global Green Power PLC Corporation, Philippines
- Energy Link Ltd, New Zealand
- Krishnapatnam Port Company Ltd. - India
- Sree Jayajothi Cements Limited - India
- European Bulk Services B.V. - Netherlands
- Semirara Mining and Power Corporation, Philippines
- Commonwealth Bank - Australia
- Bharathi Cement Corporation - India
- Formosa Plastics Group - Taiwan
- Semirara Mining Corp, Philippines
- Directorate Of Revenue Intelligence - India
- Mintek Dendrill Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Deloitte Consulting - India
- Georgia Ports Authority, United States
- Kapuas Tunggal Persada - Indonesia
- PowerSource Philippines DevCo
- Agrawal Coal Company - India
- Latin American Coal - Colombia
- Aboitiz Power Corporation - Philippines
- Kumho Petrochemical, South Korea
- Ministry of Transport, Egypt
- Billiton Holdings Pty Ltd - Australia
- Lanco Infratech Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Wood Mackenzie - Singapore
- Standard Chartered Bank - UAE
- Global Business Power Corporation, Philippines
- Merrill Lynch Commodities Europe
- Holcim Trading Pte Ltd - Singapore
- Economic Council, Georgia
- Kideco Jaya Agung - Indonesia
- Renaissance Capital - South Africa
- Goldman Sachs - Singapore
- Bhatia International Limited - India
- VISA Power Limited - India
- Miang Besar Coal Terminal - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Minerals Council of Australia
- PTC India Limited - India
- Jaiprakash Power Ventures ltd
- Iligan Light & Power Inc, Philippines
- San Jose City I Power Corp, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Marubeni Corporation - India
- Orica Australia Pty. Ltd.
- Bhushan Steel Limited - India
- Thai Mozambique Logistica
- Simpson Spence & Young - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Thiess Contractors Indonesia
- Indonesian Coal Mining Association
- Ind-Barath Power Infra Limited - India
- Dalmia Cement Bharat India
- GN Power Mariveles Coal Plant, Philippines
- Eastern Energy - Thailand
- Kepco SPC Power Corporation, Philippines
- Savvy Resources Ltd - HongKong
- Trasteel International SA, Italy
- Sakthi Sugars Limited - India
- Bayan Resources Tbk. - Indonesia
- Posco Energy - South Korea
- Altura Mining Limited, Indonesia
- Wilmar Investment Holdings
- Jorong Barutama Greston.PT - Indonesia
- Therma Luzon, Inc, Philippines
- Star Paper Mills Limited - India
- Malabar Cements Ltd - India
- GVK Power & Infra Limited - India
- ICICI Bank Limited - India
- Mjunction Services Limited - India
- Singapore Mercantile Exchange
- IHS Mccloskey Coal Group - USA
- Bukit Baiduri Energy - Indonesia
- Salva Resources Pvt Ltd - India
- Intertek Mineral Services - Indonesia
- Mercuria Energy - Indonesia
- Ministry of Finance - Indonesia
- Mercator Lines Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Indogreen Group - Indonesia
- Power Finance Corporation Ltd., India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Energy Development Corp, Philippines
- Larsen & Toubro Limited - India
- Central Electricity Authority - India
- Chamber of Mines of South Africa
- Makarim & Taira - Indonesia
- Indian Energy Exchange, India
- ASAPP Information Group - India
- Siam City Cement PLC, Thailand
- Binh Thuan Hamico - Vietnam
- CNBM International Corporation - China
- Sarangani Energy Corporation, Philippines
- Australian Commodity Traders Exchange
- Interocean Group of Companies - India
- Leighton Contractors Pty Ltd - Australia
- TeaM Sual Corporation - Philippines
- Banpu Public Company Limited - Thailand
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Sical Logistics Limited - India
- Tata Chemicals Ltd - India
- Riau Bara Harum - Indonesia
- Grasim Industreis Ltd - India
- Rio Tinto Coal - Australia
- Heidelberg Cement - Germany
- Meenaskhi Energy Private Limited - India
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