Mining sector promises more investment in 1999

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)