Mining sector promises more investment in 1999

JAKARTA (JP): Foreign investment in the mining sector should continue flowing in 1999 despite the prevailing uncertainties on both the economic and political fronts, Minister of Mines and Energy Kuntoro Mangkusubroto said on Monday.

Speaking at a year-end press conference, Kuntoro revealed that the government had received 16 applications for coal mining and 13 applications for mining other minerals for the eighth generation of the mineral contracts of work (COWs), bringing the total to 29.

"This is not too bad for a situation like this. This indicates that investing in our mining sector remains attractive," Kuntoro said, adding that the government was currently drafting the eighth generation mineral COWs.

He gave no details about the applicants.

The government must hold discussions with the House of Representatives before awarding mining contracts.

This year the government received and approved 72 applications for seventh generation mineral COWs, compared to 50 applications in 1997 and 239 applications in 1996.

Of the 72 approved applications, 38 companies had signed the contracts, 10 withdrew their applications, 17 lost their principal licenses and seven more were still considering signing the contracts.

The government awarded 65 sixth generation COWs in 1997, seven fifth generation COWs between 1991 and 1994, and 95 fourth generation COWs between 1985 and 1990.

Director General of Mining Rozik Boedioro Soetjipto said that even if the government immediately awarded eighth generation COWs to the applicants, they would not bring a significant amount of investment to the industry in 1999 because the companies would only do general surveys during the first year.

Contracts require mining companies to carry out their activities in stages, beginning with a general survey (one year), then exploration (three years), a feasibility study (one year), construction (three years) and production (30 years).

Rozik said that significant investments were expected to come from holders of fourth, fifth and sixth generation COWs.

Some holders of seventh generation COWs had just started their field activities.

Kuntoro also revealed that Indonesia remained the top investment destination in Southeast Asia for mineral exploration activities.

A study by the Metals Economics Group showed that in 1998 Indonesia absorbed US$136 million, or 75 percent of all funds for mineral exploration activities in the region.

"Although 1998 was a bleak year for all of us, the investment activities in the mining sector were heartening. And for 1999, we expect investment in the mining sector will not disappoint," Kuntoro said.

Rozik projected that total investment in mining for 1998 would reach $2 billion.

"For next year, it will be hard to achieve that level. But I am confident that significant investments in the mining sector will remain," he said.

He said new investments in 1999 would be affected by the government's policy consistency and its commitment to honor the existing contracts.

In the oil and gas sector, Minister Kuntoro said it would be a difficult year for Indonesia following the drastic fall of oil prices in the world market.

Kuntoro predicted that crude oil prices would remain low in 1999, ranging from $10 to $12 per barrel.

"Unless something takes place early next year, prices will be range-bound between $10 and $12 a barrel," Kuntoro said.

In 1998, the government signed 22 new oil contracts, of which 15 were production sharing contracts, four were joint operating bodies and three were technical assistant contracts.

This year, Indonesia also witnessed the inauguration of the country's longest gas pipeline, from South Sumatra to Central Sumatra.

The 536-kilometer pipeline transmits natural gas from the Gulf Indonesia Resources' gas fields in Gersik, Musi Banyuasin, South Sumatra, to the oil fields of PT Caltex Pacific Indonesia in Duri, Riau, where the gas is used to replace crude oil to pump crude oil wells.

Kuntoro said the government plans to build another 328- kilometer pipeline from Duri to Batam island and then to Singapore.

The minister also said that the government was currently working on some technical issues pertaining to the contracts for a 640-kilometer subsea gas pipeline from the western part of the Natuna Islands to Singapore.

"We hope we can settle all the problems by mid-January," Kuntoro said.

Discussing electricity, Kuntoro said the government would maintain the current electricity rates for consumers, except for upper-class households, until the end of March.

"I can guarantee that the electricity tariffs will remain the same until March. After that, we do not know yet. It will depend very much on the nature of the 1999/2000 budget," he said. (rid)