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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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Sunday, 25 December 11
THERMAL COAL PRICES GAINED UP TO 4.32 PERCENT
COALspot.com - globalCOAL index gained 4.32 percent to US$106.36 per ton in RBCT, benchmark for South Asia and West Europe markets, for the week end ...
Saturday, 24 December 11
CHINAS LEVEL OF GROWTH TO DETERMINE COURSE OF DRY BULK MARKET IN 2012 SAYS SHIPBROKER - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
In its latest report, shipbroker Intermodal attempted to find a silver lining in the tough year that was 2011, as well as what one could expect from ...
Friday, 23 December 11
SPOT PACIFIC CAPESIZE VESSELS HAVE COMMANDED HIGH PREMIUMS - FEARNLEYS
Handy
Rates in the Atlantic kept stable from last week, with a touch of negativity closer to the end. Less spot cargoes seen, and owners are ...
Friday, 23 December 11
LANCO JOINS HANDS WITH BUKIT ASAM FOR INDONESIAN POWER PROJECT
COALspot.com - PT Tambang Batubara Bukit Asam, Indonesia's state owned coal miner and Indian based Lanco Infratech Ltd plans to build steam power p ...
Thursday, 22 December 11
RI WILL NOT PLAY CATCH-UP WITH GLOBAL COAL DEMAND - THE JAKARTA POST
The Jakarta Post reported that, the International Energy Agency (IEA) has predicted in its Coal Market Report 2011 that over the next five years, gl ...
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Showing 4916 to 4920 news of total 6871 |
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- GVK Power & Infra Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Kaltim Prima Coal - Indonesia
- Attock Cement Pakistan Limited
- Holcim Trading Pte Ltd - Singapore
- Simpson Spence & Young - Indonesia
- ICICI Bank Limited - India
- Sinarmas Energy and Mining - Indonesia
- Antam Resourcindo - Indonesia
- Wilmar Investment Holdings
- Therma Luzon, Inc, Philippines
- Kumho Petrochemical, South Korea
- Larsen & Toubro Limited - India
- South Luzon Thermal Energy Corporation
- Thai Mozambique Logistica
- Bukit Baiduri Energy - Indonesia
- White Energy Company Limited
- Meenaskhi Energy Private Limited - India
- Grasim Industreis Ltd - India
- International Coal Ventures Pvt Ltd - India
- GAC Shipping (India) Pvt Ltd
- Thiess Contractors Indonesia
- OPG Power Generation Pvt Ltd - India
- New Zealand Coal & Carbon
- Mercuria Energy - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Parliament of New Zealand
- Barasentosa Lestari - Indonesia
- Xindia Steels Limited - India
- Bulk Trading Sa - Switzerland
- San Jose City I Power Corp, Philippines
- Georgia Ports Authority, United States
- Pendopo Energi Batubara - Indonesia
- Standard Chartered Bank - UAE
- Meralco Power Generation, Philippines
- Sical Logistics Limited - India
- Energy Link Ltd, New Zealand
- Vijayanagar Sugar Pvt Ltd - India
- PTC India Limited - India
- Toyota Tsusho Corporation, Japan
- Jindal Steel & Power Ltd - India
- Power Finance Corporation Ltd., India
- Renaissance Capital - South Africa
- Agrawal Coal Company - India
- Indogreen Group - Indonesia
- Oldendorff Carriers - Singapore
- Medco Energi Mining Internasional
- Makarim & Taira - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Uttam Galva Steels Limited - India
- Ministry of Mines - Canada
- Cement Manufacturers Association - India
- Bayan Resources Tbk. - Indonesia
- Coalindo Energy - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Independent Power Producers Association of India
- Sindya Power Generating Company Private Ltd
- Commonwealth Bank - Australia
- SN Aboitiz Power Inc, Philippines
- Maheswari Brothers Coal Limited - India
- Ind-Barath Power Infra Limited - India
- Edison Trading Spa - Italy
- Riau Bara Harum - Indonesia
- Malabar Cements Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- Rashtriya Ispat Nigam Limited - India
- LBH Netherlands Bv - Netherlands
- Singapore Mercantile Exchange
- Indian Oil Corporation Limited
- Economic Council, Georgia
- Leighton Contractors Pty Ltd - Australia
- Baramulti Group, Indonesia
- Sarangani Energy Corporation, Philippines
- PowerSource Philippines DevCo
- Kartika Selabumi Mining - Indonesia
- Bhoruka Overseas - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Carbofer General Trading SA - India
- Chettinad Cement Corporation Ltd - India
- Aditya Birla Group - India
- CIMB Investment Bank - Malaysia
- Salva Resources Pvt Ltd - India
- Directorate Of Revenue Intelligence - India
- Pipit Mutiara Jaya. PT, Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Price Waterhouse Coopers - Russia
- Orica Mining Services - Indonesia
- Indika Energy - Indonesia
- Indo Tambangraya Megah - Indonesia
- Tamil Nadu electricity Board
- Chamber of Mines of South Africa
- Metalloyd Limited - United Kingdom
- Bharathi Cement Corporation - India
- Bukit Makmur.PT - Indonesia
- Africa Commodities Group - South Africa
- Maharashtra Electricity Regulatory Commission - India
- PNOC Exploration Corporation - Philippines
- Australian Commodity Traders Exchange
- Madhucon Powers Ltd - India
- Semirara Mining Corp, Philippines
- Vedanta Resources Plc - India
- European Bulk Services B.V. - Netherlands
- Trasteel International SA, Italy
- Cigading International Bulk Terminal - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Bhushan Steel Limited - India
- Binh Thuan Hamico - Vietnam
- Romanian Commodities Exchange
- Anglo American - United Kingdom
- Ambuja Cements Ltd - India
- The University of Queensland
- Directorate General of MIneral and Coal - Indonesia
- Aboitiz Power Corporation - Philippines
- Sakthi Sugars Limited - India
- Straits Asia Resources Limited - Singapore
- Siam City Cement - Thailand
- Heidelberg Cement - Germany
- Kapuas Tunggal Persada - Indonesia
- Bangladesh Power Developement Board
- Iligan Light & Power Inc, Philippines
- Posco Energy - South Korea
- Intertek Mineral Services - Indonesia
- Essar Steel Hazira Ltd - India
- Star Paper Mills Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Central Java Power - Indonesia
- Electricity Generating Authority of Thailand
- ASAPP Information Group - India
- Merrill Lynch Commodities Europe
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Lanco Infratech Ltd - India
- Savvy Resources Ltd - HongKong
- Indian Energy Exchange, India
- Planning Commission, India
- Videocon Industries ltd - India
- Sojitz Corporation - Japan
- Mjunction Services Limited - India
- Energy Development Corp, Philippines
- Billiton Holdings Pty Ltd - Australia
- Global Business Power Corporation, Philippines
- Karaikal Port Pvt Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- TeaM Sual Corporation - Philippines
- London Commodity Brokers - England
- Bhatia International Limited - India
- Minerals Council of Australia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Manunggal Multi Energi - Indonesia
- SMG Consultants - Indonesia
- Banpu Public Company Limited - Thailand
- Formosa Plastics Group - Taiwan
- Kepco SPC Power Corporation, Philippines
- Gujarat Sidhee Cement - India
- Neyveli Lignite Corporation Ltd, - India
- Parry Sugars Refinery, India
- Interocean Group of Companies - India
- AsiaOL BioFuels Corp., Philippines
- IHS Mccloskey Coal Group - USA
- Global Green Power PLC Corporation, Philippines
- Gujarat Electricity Regulatory Commission - India
- Eastern Coal Council - USA
- Vizag Seaport Private Limited - India
- CNBM International Corporation - China
- GMR Energy Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Alfred C Toepfer International GmbH - Germany
- MS Steel International - UAE
- Orica Australia Pty. Ltd.
- Timah Investasi Mineral - Indoneisa
- Rio Tinto Coal - Australia
- Wood Mackenzie - Singapore
- Global Coal Blending Company Limited - Australia
- Central Electricity Authority - India
- McConnell Dowell - Australia
- Jaiprakash Power Ventures ltd
- SMC Global Power, Philippines
- Petron Corporation, Philippines
- Samtan Co., Ltd - South Korea
- Borneo Indobara - Indonesia
- Siam City Cement PLC, Thailand
- The State Trading Corporation of India Ltd
- Coastal Gujarat Power Limited - India
- Indonesian Coal Mining Association
- Ministry of Finance - Indonesia
- Mintek Dendrill Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- India Bulls Power Limited - India
- Miang Besar Coal Terminal - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Karbindo Abesyapradhi - Indoneisa
- Electricity Authority, New Zealand
- TNB Fuel Sdn Bhd - Malaysia
- Tata Chemicals Ltd - India
- Latin American Coal - Colombia
- Altura Mining Limited, Indonesia
- Deloitte Consulting - India
- Ministry of Transport, Egypt
- Coal and Oil Company - UAE
- Mercator Lines Limited - India
- The Treasury - Australian Government
- Marubeni Corporation - India
- Globalindo Alam Lestari - Indonesia
- Eastern Energy - Thailand
- Asia Pacific Energy Resources Ventures Inc, Philippines
- GN Power Mariveles Coal Plant, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Port Waratah Coal Services - Australia
- IEA Clean Coal Centre - UK
- Dalmia Cement Bharat India
- Australian Coal Association
- Semirara Mining and Power Corporation, Philippines
- Kideco Jaya Agung - Indonesia
- VISA Power Limited - India
- Sree Jayajothi Cements Limited - India
- Kobexindo Tractors - Indoneisa
- Goldman Sachs - Singapore
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