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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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- Coalindo Energy - Indonesia
- Attock Cement Pakistan Limited
- Petrochimia International Co. Ltd.- Taiwan
- Australian Coal Association
- Parliament of New Zealand
- Jindal Steel & Power Ltd - India
- McConnell Dowell - Australia
- Indika Energy - Indonesia
- Meralco Power Generation, Philippines
- Siam City Cement - Thailand
- Independent Power Producers Association of India
- VISA Power Limited - India
- Aboitiz Power Corporation - Philippines
- Coal and Oil Company - UAE
- Tata Chemicals Ltd - India
- Thai Mozambique Logistica
- Metalloyd Limited - United Kingdom
- Gujarat Mineral Development Corp Ltd - India
- Interocean Group of Companies - India
- Sojitz Corporation - Japan
- Simpson Spence & Young - Indonesia
- The State Trading Corporation of India Ltd
- Ambuja Cements Ltd - India
- Parry Sugars Refinery, India
- Rashtriya Ispat Nigam Limited - India
- Sindya Power Generating Company Private Ltd
- Mercuria Energy - Indonesia
- Anglo American - United Kingdom
- Planning Commission, India
- Kideco Jaya Agung - Indonesia
- Chamber of Mines of South Africa
- Eastern Coal Council - USA
- Edison Trading Spa - Italy
- Uttam Galva Steels Limited - India
- Makarim & Taira - Indonesia
- Chettinad Cement Corporation Ltd - India
- Orica Mining Services - Indonesia
- Leighton Contractors Pty Ltd - Australia
- PNOC Exploration Corporation - Philippines
- Semirara Mining and Power Corporation, Philippines
- White Energy Company Limited
- Indo Tambangraya Megah - Indonesia
- Bukit Makmur.PT - Indonesia
- European Bulk Services B.V. - Netherlands
- GN Power Mariveles Coal Plant, Philippines
- Essar Steel Hazira Ltd - India
- Energy Link Ltd, New Zealand
- AsiaOL BioFuels Corp., Philippines
- Iligan Light & Power Inc, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Indian Oil Corporation Limited
- Ministry of Transport, Egypt
- Indonesian Coal Mining Association
- Mercator Lines Limited - India
- San Jose City I Power Corp, Philippines
- Banpu Public Company Limited - Thailand
- Aditya Birla Group - India
- Barasentosa Lestari - Indonesia
- Central Electricity Authority - India
- Latin American Coal - Colombia
- Economic Council, Georgia
- Cigading International Bulk Terminal - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Toyota Tsusho Corporation, Japan
- The University of Queensland
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Carbofer General Trading SA - India
- Commonwealth Bank - Australia
- Kartika Selabumi Mining - Indonesia
- Heidelberg Cement - Germany
- Borneo Indobara - Indonesia
- Medco Energi Mining Internasional
- Maheswari Brothers Coal Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Miang Besar Coal Terminal - Indonesia
- GVK Power & Infra Limited - India
- Madhucon Powers Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- Grasim Industreis Ltd - India
- Indogreen Group - Indonesia
- Wilmar Investment Holdings
- Meenaskhi Energy Private Limited - India
- Thiess Contractors Indonesia
- Bangladesh Power Developement Board
- Global Business Power Corporation, Philippines
- Xindia Steels Limited - India
- Gujarat Electricity Regulatory Commission - India
- Lanco Infratech Ltd - India
- Renaissance Capital - South Africa
- Offshore Bulk Terminal Pte Ltd, Singapore
- Mjunction Services Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Wood Mackenzie - Singapore
- Bayan Resources Tbk. - Indonesia
- New Zealand Coal & Carbon
- Minerals Council of Australia
- SMC Global Power, Philippines
- Rio Tinto Coal - Australia
- Pendopo Energi Batubara - Indonesia
- Jaiprakash Power Ventures ltd
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Georgia Ports Authority, United States
- Samtan Co., Ltd - South Korea
- Gujarat Sidhee Cement - India
- Timah Investasi Mineral - Indoneisa
- Sarangani Energy Corporation, Philippines
- Vedanta Resources Plc - India
- Semirara Mining Corp, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Manunggal Multi Energi - Indonesia
- Indian Energy Exchange, India
- Coastal Gujarat Power Limited - India
- Straits Asia Resources Limited - Singapore
- Therma Luzon, Inc, Philippines
- MS Steel International - UAE
- Bukit Baiduri Energy - Indonesia
- Goldman Sachs - Singapore
- Petron Corporation, Philippines
- South Luzon Thermal Energy Corporation
- Dalmia Cement Bharat India
- Global Coal Blending Company Limited - Australia
- Bulk Trading Sa - Switzerland
- Bhushan Steel Limited - India
- Kaltim Prima Coal - Indonesia
- Bhatia International Limited - India
- LBH Netherlands Bv - Netherlands
- Pipit Mutiara Jaya. PT, Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- IHS Mccloskey Coal Group - USA
- Binh Thuan Hamico - Vietnam
- Agrawal Coal Company - India
- International Coal Ventures Pvt Ltd - India
- Vizag Seaport Private Limited - India
- Orica Australia Pty. Ltd.
- Tamil Nadu electricity Board
- Ministry of Finance - Indonesia
- Africa Commodities Group - South Africa
- GAC Shipping (India) Pvt Ltd
- Directorate Of Revenue Intelligence - India
- Salva Resources Pvt Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Kohat Cement Company Ltd. - Pakistan
- Bhoruka Overseas - Indonesia
- Oldendorff Carriers - Singapore
- Krishnapatnam Port Company Ltd. - India
- Electricity Authority, New Zealand
- Sinarmas Energy and Mining - Indonesia
- Deloitte Consulting - India
- TeaM Sual Corporation - Philippines
- Kapuas Tunggal Persada - Indonesia
- Riau Bara Harum - Indonesia
- CIMB Investment Bank - Malaysia
- Cement Manufacturers Association - India
- Karaikal Port Pvt Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Sree Jayajothi Cements Limited - India
- ICICI Bank Limited - India
- PowerSource Philippines DevCo
- SN Aboitiz Power Inc, Philippines
- Trasteel International SA, Italy
- Energy Development Corp, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Sakthi Sugars Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Baramulti Group, Indonesia
- Bharathi Cement Corporation - India
- Kepco SPC Power Corporation, Philippines
- Posco Energy - South Korea
- Power Finance Corporation Ltd., India
- Kumho Petrochemical, South Korea
- Global Green Power PLC Corporation, Philippines
- Intertek Mineral Services - Indonesia
- Romanian Commodities Exchange
- Star Paper Mills Limited - India
- Ceylon Electricity Board - Sri Lanka
- Formosa Plastics Group - Taiwan
- PTC India Limited - India
- Malabar Cements Ltd - India
- Standard Chartered Bank - UAE
- Holcim Trading Pte Ltd - Singapore
- Neyveli Lignite Corporation Ltd, - India
- Marubeni Corporation - India
- Maharashtra Electricity Regulatory Commission - India
- Sical Logistics Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Directorate General of MIneral and Coal - Indonesia
- SMG Consultants - Indonesia
- Port Waratah Coal Services - Australia
- Price Waterhouse Coopers - Russia
- Videocon Industries ltd - India
- CNBM International Corporation - China
- Kobexindo Tractors - Indoneisa
- Globalindo Alam Lestari - Indonesia
- Eastern Energy - Thailand
- ASAPP Information Group - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Antam Resourcindo - Indonesia
- OPG Power Generation Pvt Ltd - India
- Altura Mining Limited, Indonesia
- Merrill Lynch Commodities Europe
- India Bulls Power Limited - India
- Australian Commodity Traders Exchange
- Larsen & Toubro Limited - India
- Electricity Generating Authority of Thailand
- Ind-Barath Power Infra Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- GMR Energy Limited - India
- Siam City Cement PLC, Thailand
- Mintek Dendrill Indonesia
- IEA Clean Coal Centre - UK
- Savvy Resources Ltd - HongKong
- London Commodity Brokers - England
- The Treasury - Australian Government
- Ministry of Mines - Canada
- Central Java Power - Indonesia
- Singapore Mercantile Exchange
- Bank of Tokyo Mitsubishi UFJ Ltd
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