107 firms get the nod for 3rd generation coal deals

JAKARTA (JP): The government confirmed yesterday that 107 companies would be awarded third generation production sharing contract licenses for coal mining projects this year.

The Ministry of Mines and Energy's director for coal, Sudjoko Tirtosoekotjo, said 92 were domestic companies.

"The government has approved in principle the 107 coal mining contracts. Another 15 foreign investment proposals, however, have not been approved," he said, as quoted by Antara.

Sudjoko said the 15 foreign firms would have to get recommendations from the House of Representatives before they could be awarded coal mining contracts.

The mines to be operated under the third generation contracts are mostly in East and South Kalimantan and South Sumatra. A few are in West Kalimantan and West Sumatra.

Sudjoko said that unlike the second generation contract, the third generation contract stipulates that the 13.5-percent share of the mine's production which goes to the government should be in the form of money -- to go directly to the state treasury -- instead of in coal.

The third generation contract allowed the government's share of coal production to be less than 13.5 percent if the mine produced low-quality coal, he said.

"But this incentive will be given only after a thorough study, so it is not misused by investors," Sudjoko said.

He said that based on the number of contracts to be awarded this year, it was obvious that investor interest in coal mining was better than in previous years.

"Only 18 investors operated under the second generation contract ... This shows investors' strong confidence in coal mining," he said.

He acknowledged that investors might be attracted to the coal mining industry because its exploration projects had a high rate of success -- usually more than 50 percent.

Indonesia's coal production in the last six years increased from 10 million tons in 1990 to 51 million tons last year.

Indonesia is the world's second largest coal producer after Australia.

Most of Indonesia's coal production is exported and only 11 million tons each year are used domestically. About 70 percent goes to coal-fired power plants.

In the last six years, coal exports increased from five million tons in 1990 to 36 million tons last year.

Indonesia contributes up to 20 percent to Asia's coal trade. (pwn)