Freeport told to double royalty for expansion go-ahead
JAKARTA (JP): Permission for PT Freeport Indonesia to double daily ore production at its Irian Jaya copper and gold mining operation hinges on it agreeing to the doubling of its royalty payments, Minister of Mines and Energy Kuntoro Mangkusubroto said on Friday.
Kuntoro said the subsidiary of New Orleans-based Freeport- McMoran Copper and Gold paid the government royalties ranging from 1 percent to 3 percent, depending on the copper price.
Freeport has applied to increase production to 300,000 metric tons.
"Discussions are in progress to at least double the royalties that Freeport Indonesia must pay to the government for daily production above 200,000 tons," he said.
Freeport will also have to prove its ability to contain the environmental and social impact of the operational expansion.
According to Kuntoro, the ministry granted Freeport a permit in principle to raise output in 1997.
It also received the environmental impact analysis permit for the planned expansion from the State Ministry of Environment in December 1997, he said.
The Directorate General of Mining allowed Freeport to increase its ore output to 240,000 tons per day for the period July 1998 to mid-March 1999 in a trial operation to ascertain the company's capabilities.
"Currently, we are evaluating the results of the trial operation, including those related to mineral conservation and protection against physical and social impact (of the expansion)," Kuntoro said.
President B.J Habibie has instructed several ministers, including Kuntoro, to assist Freeport in realizing its plan.
Habibie gave the instruction in response to a request from Freeport McMoRan CEO James "Jim-bob" Moffett, despite Kuntoro's demand for further assessment of the plan.
Habibie's decision drew flak from environmentalists, Irianese leaders and legislators. They doubted Freeport's ability to protect the environment and expressed disappointment at what they considered the firm's lack of commitment to community development.
They urged Kuntoro to hold off on allowing Freeport to increase production until it agreed to higher royalties, improved environmental management and stepped-up community welfare programs.
Caltex
Kuntoro also announced the recommendation from House Commission V, whose jurisdiction includes mines and energy, that state oil and gas company Pertamina be allowed to develop the Coastal Plain Pekanbaru (CPP) block in Riau in a joint venture with PT Caltex Pacific Indonesia.
Caltex holds the production sharing contract on the block until 2001. If realized, the joint venture would commence in that year.
The block produces 77,800 barrels per day of crude oil.
In 1997, then president Soeharto decided to allow Pertamina to take over development of the block after Caltex' contract expired. Last year, Caltex asked for a review of the decision following the strongman's resignation.
An inter-ministerial team recommended that the government allow both Pertamina and Caltex to jointly develop the block.
According to Kuntoro, House Commission V has called on the government to allow Pertamina to have a majority stake in the joint venture, as well as serve as the operator of the block.
The commission, according to Kuntoro, argued that Pertamina needed a joint venture with Caltex to enable the state company to benefit from Caltex's ability, technology, infrastructure and experience to maintain security of production at the block. (jsk)