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.
|
|
Monday, 27 February 12
INDONESIAN COAL EXPORTS TO CHINA DROPS 39.76 PERCENT IN JANUARY 2012
COALspot.com: Indonesia, the world largest coal exporter, shipped 28.21* mln mt of coal in January 2012, slightly lower than its December 2011 ...
Monday, 27 February 12
WEEKLY DRY MARKET OVERVIEW - MARIA BERTZELETOU, HELLENIC SHIPPING
The pessimism in the dry market persists with the Baltic Dry Index still trying to find a steady pace of growth and average time charter earnings fo ...
Sunday, 26 February 12
THE FREIGHT RATES FOR INDONESIA TO INDIA IS LIKELY TO BE FIRM FOR NEXT 2/3 WEEKS - VISTAAR
COALspot.com – “There was not much change in the BDI and other indices this week except for the Panamax which was down by 11.91 pc ...
Friday, 24 February 12
DRY BULK MARKET POSTS FIRST REBOUND IN A WEEK - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
As was expected since mid-week, the dry bulk market's benchmark, the BDI (Baltic Dry Index) has managed to put a stop in a 6-day losing rally, endi ...
Thursday, 23 February 12
2.5 PANAMAX VESSELS PER AVAILABLE CARGO FOR MARCH DATES - FEARN BULK
Handy
Another depressing week for Supras in both basins. Lack of fresh business and over-supply of tonnage in the Atlantic pushed rates south. Cont ...
|
|
|
Showing 4836 to 4840 news of total 6871 |
|
 |
|
|
|
|
| |
|
 |
|
|
| |
|
- Sinarmas Energy and Mining - Indonesia
- Singapore Mercantile Exchange
- Petron Corporation, Philippines
- Interocean Group of Companies - India
- Riau Bara Harum - Indonesia
- Xindia Steels Limited - India
- Rio Tinto Coal - Australia
- Ministry of Mines - Canada
- Larsen & Toubro Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Eastern Coal Council - USA
- Essar Steel Hazira Ltd - India
- Jindal Steel & Power Ltd - India
- Sojitz Corporation - Japan
- Semirara Mining and Power Corporation, Philippines
- Medco Energi Mining Internasional
- Gujarat Electricity Regulatory Commission - India
- OPG Power Generation Pvt Ltd - India
- Chamber of Mines of South Africa
- Maharashtra Electricity Regulatory Commission - India
- Sarangani Energy Corporation, Philippines
- Gujarat Sidhee Cement - India
- Parry Sugars Refinery, India
- Coalindo Energy - Indonesia
- GVK Power & Infra Limited - India
- Indogreen Group - Indonesia
- McConnell Dowell - Australia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Merrill Lynch Commodities Europe
- Pendopo Energi Batubara - Indonesia
- Independent Power Producers Association of India
- Gujarat Mineral Development Corp Ltd - India
- Manunggal Multi Energi - Indonesia
- Kobexindo Tractors - Indoneisa
- Semirara Mining Corp, Philippines
- Savvy Resources Ltd - HongKong
- Iligan Light & Power Inc, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Goldman Sachs - Singapore
- Straits Asia Resources Limited - Singapore
- Electricity Generating Authority of Thailand
- Global Business Power Corporation, Philippines
- Madhucon Powers Ltd - India
- Kumho Petrochemical, South Korea
- Port Waratah Coal Services - Australia
- Carbofer General Trading SA - India
- Alfred C Toepfer International GmbH - Germany
- AsiaOL BioFuels Corp., Philippines
- Mercuria Energy - Indonesia
- San Jose City I Power Corp, Philippines
- Agrawal Coal Company - India
- Karaikal Port Pvt Ltd - India
- PTC India Limited - India
- Planning Commission, India
- Siam City Cement - Thailand
- Pipit Mutiara Jaya. PT, Indonesia
- Aditya Birla Group - India
- European Bulk Services B.V. - Netherlands
- Thai Mozambique Logistica
- Rashtriya Ispat Nigam Limited - India
- Cigading International Bulk Terminal - Indonesia
- Makarim & Taira - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Indonesian Coal Mining Association
- SN Aboitiz Power Inc, Philippines
- Meenaskhi Energy Private Limited - India
- Baramulti Group, Indonesia
- Holcim Trading Pte Ltd - Singapore
- Mjunction Services Limited - India
- Sical Logistics Limited - India
- Electricity Authority, New Zealand
- Maheswari Brothers Coal Limited - India
- Banpu Public Company Limited - Thailand
- Australian Commodity Traders Exchange
- Bhatia International Limited - India
- Antam Resourcindo - Indonesia
- Bharathi Cement Corporation - India
- Latin American Coal - Colombia
- Star Paper Mills Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Aboitiz Power Corporation - Philippines
- Coastal Gujarat Power Limited - India
- Parliament of New Zealand
- Intertek Mineral Services - Indonesia
- Africa Commodities Group - South Africa
- Therma Luzon, Inc, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Vijayanagar Sugar Pvt Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Petrochimia International Co. Ltd.- Taiwan
- Sree Jayajothi Cements Limited - India
- Wood Mackenzie - Singapore
- Uttam Galva Steels Limited - India
- Malabar Cements Ltd - India
- Globalindo Alam Lestari - Indonesia
- Tamil Nadu electricity Board
- Australian Coal Association
- Bukit Makmur.PT - Indonesia
- Indian Oil Corporation Limited
- Metalloyd Limited - United Kingdom
- The University of Queensland
- Power Finance Corporation Ltd., India
- Salva Resources Pvt Ltd - India
- Altura Mining Limited, Indonesia
- Trasteel International SA, Italy
- PNOC Exploration Corporation - Philippines
- Jorong Barutama Greston.PT - Indonesia
- CIMB Investment Bank - Malaysia
- Romanian Commodities Exchange
- GN Power Mariveles Coal Plant, Philippines
- Economic Council, Georgia
- Coal and Oil Company - UAE
- PetroVietnam Power Coal Import and Supply Company
- Kohat Cement Company Ltd. - Pakistan
- Indo Tambangraya Megah - Indonesia
- Grasim Industreis Ltd - India
- Oldendorff Carriers - Singapore
- TeaM Sual Corporation - Philippines
- Bhushan Steel Limited - India
- Price Waterhouse Coopers - Russia
- Sindya Power Generating Company Private Ltd
- International Coal Ventures Pvt Ltd - India
- Heidelberg Cement - Germany
- Central Java Power - Indonesia
- Indian Energy Exchange, India
- Ceylon Electricity Board - Sri Lanka
- Bayan Resources Tbk. - Indonesia
- LBH Netherlands Bv - Netherlands
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Ind-Barath Power Infra Limited - India
- Eastern Energy - Thailand
- Toyota Tsusho Corporation, Japan
- Cement Manufacturers Association - India
- Binh Thuan Hamico - Vietnam
- Mintek Dendrill Indonesia
- Central Electricity Authority - India
- Krishnapatnam Port Company Ltd. - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Posco Energy - South Korea
- Formosa Plastics Group - Taiwan
- White Energy Company Limited
- Global Coal Blending Company Limited - Australia
- Videocon Industries ltd - India
- Deloitte Consulting - India
- Energy Development Corp, Philippines
- Siam City Cement PLC, Thailand
- Mercator Lines Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Renaissance Capital - South Africa
- The State Trading Corporation of India Ltd
- Attock Cement Pakistan Limited
- Bukit Baiduri Energy - Indonesia
- Samtan Co., Ltd - South Korea
- Orica Australia Pty. Ltd.
- Directorate Of Revenue Intelligence - India
- Barasentosa Lestari - Indonesia
- Bhoruka Overseas - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Borneo Indobara - Indonesia
- Anglo American - United Kingdom
- Tata Chemicals Ltd - India
- Commonwealth Bank - Australia
- GMR Energy Limited - India
- Directorate General of MIneral and Coal - Indonesia
- India Bulls Power Limited - India
- Kartika Selabumi Mining - Indonesia
- Bangladesh Power Developement Board
- Kapuas Tunggal Persada - Indonesia
- MS Steel International - UAE
- Orica Mining Services - Indonesia
- PowerSource Philippines DevCo
- IHS Mccloskey Coal Group - USA
- SMG Consultants - Indonesia
- Vedanta Resources Plc - India
- Meralco Power Generation, Philippines
- Thiess Contractors Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Wilmar Investment Holdings
- IEA Clean Coal Centre - UK
- New Zealand Coal & Carbon
- Kideco Jaya Agung - Indonesia
- Lanco Infratech Ltd - India
- Dalmia Cement Bharat India
- Minerals Council of Australia
- Kaltim Prima Coal - Indonesia
- Bulk Trading Sa - Switzerland
- Vizag Seaport Private Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Standard Chartered Bank - UAE
- Jaiprakash Power Ventures ltd
- ICICI Bank Limited - India
- GAC Shipping (India) Pvt Ltd
- Bukit Asam (Persero) Tbk - Indonesia
- CNBM International Corporation - China
- Indika Energy - Indonesia
- London Commodity Brokers - England
- SMC Global Power, Philippines
- Global Green Power PLC Corporation, Philippines
- Ministry of Finance - Indonesia
- Marubeni Corporation - India
- South Luzon Thermal Energy Corporation
- Leighton Contractors Pty Ltd - Australia
- Ministry of Transport, Egypt
- The Treasury - Australian Government
- Kepco SPC Power Corporation, Philippines
- Simpson Spence & Young - Indonesia
- Timah Investasi Mineral - Indoneisa
- Energy Link Ltd, New Zealand
- Billiton Holdings Pty Ltd - Australia
- Edison Trading Spa - Italy
- ASAPP Information Group - India
- Ambuja Cements Ltd - India
- VISA Power Limited - India
- Sakthi Sugars Limited - India
- Miang Besar Coal Terminal - Indonesia
- Georgia Ports Authority, United States
- Chettinad Cement Corporation Ltd - India
|
| |
| |
|
