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.
|
|
Tuesday, 22 November 11
ABM INVESTAMA SETS IPO AT RP 3,750
Insider Stories reported that, Integrated energy company PT ABM Investama Tbk has determined the IPO price at Rp3,750 (approximately US$ 0.415) per ...
Tuesday, 22 November 11
A SURPRISINGLY STRONG WEEK FOR THE CAPES - BRS
Positive gains for most of the segments this week, the exception being the Handysizes. Overall the BDI ended the week at 1,895 points (+3.3% week-on ...
Tuesday, 22 November 11
APPETITE FOR DRY BULK VESSELS SLOWS DOWN AT THE START OF THE WEEK - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The dry bulk market was down at the beginning of the week, as demand for Capesize vessels was particularly low. The industry’s benchmark, the ...
Monday, 21 November 11
CAPESIZES DRIVE MARKET LOWER, ANALYSTS DIVIDED ON DRY BULK OUTLOOK IN THE LONG RUN - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The dry bulk market ended the week on a sour note, with the industry’s benchmark heading downwards to 1,895 points, which represented a slight ...
Sunday, 20 November 11
THE FREIGHT MARKETS EXPECTED TO BE FIRM NEXT WEEK - VISTAAR
COALspot.com - The market continued to move up with all sectors gaining except for handy size.
The BDI was up by 3.26 pct and closed at 1895 poin ...
|
|
|
Showing 4966 to 4970 news of total 6871 |
|
 |
|
|
|
|
| |
|
 |
|
|
| |
|
- ASAPP Information Group - India
- Coalindo Energy - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Kalimantan Lumbung Energi - Indonesia
- IHS Mccloskey Coal Group - USA
- Essar Steel Hazira Ltd - India
- The University of Queensland
- Indian Energy Exchange, India
- Straits Asia Resources Limited - Singapore
- Iligan Light & Power Inc, Philippines
- Bukit Makmur.PT - Indonesia
- SN Aboitiz Power Inc, Philippines
- Samtan Co., Ltd - South Korea
- Gujarat Mineral Development Corp Ltd - India
- Xindia Steels Limited - India
- Ministry of Transport, Egypt
- GMR Energy Limited - India
- Maheswari Brothers Coal Limited - India
- VISA Power Limited - India
- Ind-Barath Power Infra Limited - India
- The State Trading Corporation of India Ltd
- GVK Power & Infra Limited - India
- Baramulti Group, Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Georgia Ports Authority, United States
- Sinarmas Energy and Mining - Indonesia
- Larsen & Toubro Limited - India
- Ambuja Cements Ltd - India
- AsiaOL BioFuels Corp., Philippines
- Goldman Sachs - Singapore
- Mintek Dendrill Indonesia
- Meenaskhi Energy Private Limited - India
- Binh Thuan Hamico - Vietnam
- Oldendorff Carriers - Singapore
- Directorate General of MIneral and Coal - Indonesia
- Medco Energi Mining Internasional
- Sree Jayajothi Cements Limited - India
- Wood Mackenzie - Singapore
- TNB Fuel Sdn Bhd - Malaysia
- Minerals Council of Australia
- Electricity Authority, New Zealand
- Petron Corporation, Philippines
- Cigading International Bulk Terminal - Indonesia
- Semirara Mining Corp, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Central Java Power - Indonesia
- Chettinad Cement Corporation Ltd - India
- Romanian Commodities Exchange
- Directorate Of Revenue Intelligence - India
- Indian Oil Corporation Limited
- Bukit Asam (Persero) Tbk - Indonesia
- Cement Manufacturers Association - India
- Australian Commodity Traders Exchange
- Karaikal Port Pvt Ltd - India
- Parliament of New Zealand
- Aboitiz Power Corporation - Philippines
- Manunggal Multi Energi - Indonesia
- San Jose City I Power Corp, Philippines
- Ministry of Mines - Canada
- Energy Link Ltd, New Zealand
- India Bulls Power Limited - India
- Standard Chartered Bank - UAE
- Agrawal Coal Company - India
- Kohat Cement Company Ltd. - Pakistan
- Lanco Infratech Ltd - India
- Edison Trading Spa - Italy
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Miang Besar Coal Terminal - Indonesia
- Electricity Generating Authority of Thailand
- CIMB Investment Bank - Malaysia
- Kaltim Prima Coal - Indonesia
- White Energy Company Limited
- Planning Commission, India
- Karbindo Abesyapradhi - Indoneisa
- Mercuria Energy - Indonesia
- MS Steel International - UAE
- Banpu Public Company Limited - Thailand
- Thiess Contractors Indonesia
- Australian Coal Association
- Intertek Mineral Services - Indonesia
- Barasentosa Lestari - Indonesia
- OPG Power Generation Pvt Ltd - India
- Siam City Cement PLC, Thailand
- Trasteel International SA, Italy
- Malabar Cements Ltd - India
- Globalindo Alam Lestari - Indonesia
- PowerSource Philippines DevCo
- Independent Power Producers Association of India
- Bukit Baiduri Energy - Indonesia
- Global Coal Blending Company Limited - Australia
- Bulk Trading Sa - Switzerland
- CNBM International Corporation - China
- Indogreen Group - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Altura Mining Limited, Indonesia
- Merrill Lynch Commodities Europe
- Kepco SPC Power Corporation, Philippines
- Singapore Mercantile Exchange
- Grasim Industreis Ltd - India
- Orica Australia Pty. Ltd.
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Jorong Barutama Greston.PT - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- European Bulk Services B.V. - Netherlands
- Offshore Bulk Terminal Pte Ltd, Singapore
- Makarim & Taira - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Indonesian Coal Mining Association
- Deloitte Consulting - India
- Kideco Jaya Agung - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- The Treasury - Australian Government
- Billiton Holdings Pty Ltd - Australia
- Jindal Steel & Power Ltd - India
- Energy Development Corp, Philippines
- Eastern Coal Council - USA
- Gujarat Electricity Regulatory Commission - India
- Power Finance Corporation Ltd., India
- Bharathi Cement Corporation - India
- Aditya Birla Group - India
- Savvy Resources Ltd - HongKong
- Alfred C Toepfer International GmbH - Germany
- Indika Energy - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Parry Sugars Refinery, India
- Salva Resources Pvt Ltd - India
- LBH Netherlands Bv - Netherlands
- Pendopo Energi Batubara - Indonesia
- Port Waratah Coal Services - Australia
- Wilmar Investment Holdings
- PTC India Limited - India
- Therma Luzon, Inc, Philippines
- Kapuas Tunggal Persada - Indonesia
- Sindya Power Generating Company Private Ltd
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Simpson Spence & Young - Indonesia
- Kumho Petrochemical, South Korea
- Renaissance Capital - South Africa
- Timah Investasi Mineral - Indoneisa
- Madhucon Powers Ltd - India
- TeaM Sual Corporation - Philippines
- Interocean Group of Companies - India
- Vedanta Resources Plc - India
- Bangladesh Power Developement Board
- Economic Council, Georgia
- Mjunction Services Limited - India
- Borneo Indobara - Indonesia
- Antam Resourcindo - Indonesia
- Posco Energy - South Korea
- GAC Shipping (India) Pvt Ltd
- Orica Mining Services - Indonesia
- Global Green Power PLC Corporation, Philippines
- GN Power Mariveles Coal Plant, Philippines
- SMC Global Power, Philippines
- Coastal Gujarat Power Limited - India
- Chamber of Mines of South Africa
- Metalloyd Limited - United Kingdom
- Bhoruka Overseas - Indonesia
- Tamil Nadu electricity Board
- Commonwealth Bank - Australia
- Dalmia Cement Bharat India
- Holcim Trading Pte Ltd - Singapore
- Central Electricity Authority - India
- PNOC Exploration Corporation - Philippines
- Riau Bara Harum - Indonesia
- Meralco Power Generation, Philippines
- Leighton Contractors Pty Ltd - Australia
- Mercator Lines Limited - India
- Indo Tambangraya Megah - Indonesia
- SMG Consultants - Indonesia
- South Luzon Thermal Energy Corporation
- Star Paper Mills Limited - India
- Jaiprakash Power Ventures ltd
- New Zealand Coal & Carbon
- Rio Tinto Coal - Australia
- Gujarat Sidhee Cement - India
- Neyveli Lignite Corporation Ltd, - India
- Eastern Energy - Thailand
- Videocon Industries ltd - India
- Africa Commodities Group - South Africa
- Attock Cement Pakistan Limited
- Bahari Cakrawala Sebuku - Indonesia
- Sical Logistics Limited - India
- Bayan Resources Tbk. - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Global Business Power Corporation, Philippines
- Siam City Cement - Thailand
- Thai Mozambique Logistica
- Kobexindo Tractors - Indoneisa
- Uttam Galva Steels Limited - India
- Vizag Seaport Private Limited - India
- Tata Chemicals Ltd - India
- Heidelberg Cement - Germany
- IEA Clean Coal Centre - UK
- Bhatia International Limited - India
- ICICI Bank Limited - India
- Carbofer General Trading SA - India
- Price Waterhouse Coopers - Russia
- Marubeni Corporation - India
- Sojitz Corporation - Japan
- Vijayanagar Sugar Pvt Ltd - India
- Coal and Oil Company - UAE
- Petrochimia International Co. Ltd.- Taiwan
- Anglo American - United Kingdom
- Asmin Koalindo Tuhup - Indonesia
- Formosa Plastics Group - Taiwan
- Sarangani Energy Corporation, Philippines
- Sakthi Sugars Limited - India
- Toyota Tsusho Corporation, Japan
- London Commodity Brokers - England
- Kartika Selabumi Mining - Indonesia
- Ministry of Finance - Indonesia
- Bhushan Steel Limited - India
- McConnell Dowell - Australia
- Latin American Coal - Colombia
- International Coal Ventures Pvt Ltd - India
|
| |
| |
|
