T

he government looks set to continue the process of renewing mineral and coal contracts of work, which is still in progress. However, the focus will be on the terms of extension of the business licenses.

Energy and Mineral Resources Minister Sudirman Said underlined that business players needed certainty and consistency in order to carry out their affairs.

'€œTherefore, whatever the decision, as long as there is certainty and consistency, business players will comply,'€ the minister said.

Sudirman emphasized that the government would prepare policies that helped companies avoid encountering problems.

'€œThat will be our stance concerning contracts with big companies such as Freeport [PT Freeport Indonesia], Vale [PT Vale Indonesia] and Adaro [PT Adaro Indonesia]. In every renegotiation, each party wants more benefits,'€ Sudirman said.

The minister made the statement in response to questions as to whether the current government would review recent agreements over contract of work renegotiations with a number of companies.

The public also wants to know whether President Joko '€œJokowi'€ Widodo'€™s administration will decide on the continuity of operations after companies'€™ contracts of work expire.

Under the 2009 Mining Law, the government is required to renegotiate a number of contracts of work for mineral and coal mining activities, locally known as KK for minerals and PKP2B for coal.

The renegotiations, through which the government must adjust several points in the contracts of work to conform to the new law, should have been completed a year after the law passed. However, the complexity of the issue has prolonged the process.

A number of memorandums of understanding (MoU) were signed between companies and the government during the final days of president Susilo Bambang Yudhoyono. The MoUs stressed the principal agreements of the companies and the government for the adjustment of their contracts of work until their expiry.

The MoUs must be followed up into a contract of work amendment, which is legally binding.

Coordinating Maritime Minister Indroyono Soesilo, who coordinates a number of ministries including the Energy and Mineral Resources Ministry, said earlier that a review was possible for the signed MoUs, as they were not legally binding.

Of 107 mineral and coal mining contracts of work, only one has been amended, which belongs to nickel miner PT Vale Indonesia.

The Energy and Mineral Resources Ministry'€™s director general for mineral and coal, R. Sukhyar, said his office expected to conclude the amendment of a contract of work with copper giant PT Freeport Indonesia this month.

'€œAs for Freeport Indonesia, we have to complete the amendment this year. The sooner the better, because it will also perform divestment, which according to the new regulation should begin next year,'€ Sukhyar said.

Under the MoU, Freeport Indonesia will divest up to 30 percent of its shares to Indonesian shareholders. Freeport Indonesia, which has been operating in the country since 1967, is currently 90.64 percent-owned by US giant Freeport McMoRan and 9.36 percent by the government.
It has to conclude the 30 percent divestment within five years.

Apart from divestment, a strategic issue in Freeport Indonesia'€™s contract of work is its operation continuity after 2021, when its contract will expire and be replaced with a mining license if the government grants an extension to the company.

Thus, any proposal will likely be tabled in 2019, when the country will also see a transition to a new government.