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