Encouraging interest in mineral and coal exploration, the Ministry of Energy and Mineral Resources discusses right to match incentives

Encouraging interest in mineral and coal exploration, the Ministry of Energy and Mineral Resources discusses right to match incentives
The Ministry of Energy and Mineral Resources (ESDM) prepares a strategy to encourage investment activities for exploration in the mineral and coal sub-sector (minerba). The plan is that the Ministry of Energy and Mineral Resources will provide “right to match“incentives for those who carry out the assignment of exploration activities in the sub-sector.

The Director of Mineral and Coal Program Development at the Ministry of Energy and Mineral Resources, Sunindyo Suryo, said that his party is currently preparing a Draft Government Regulation (RPP) that regulates provisions regarding the provision ofright to matchincentives.”This year’s RPP is expected to be published, it has been processed since Law 3/2020 (Minerba Law) was issued,” said Sunindyo to Kontan.co.id, Friday (9/7).

The RPP regarding exploration assignments andthe accompanying rightto match incentives, continued Sunindyo, is a follow-up to Article 17B of Law No. 3 of 2020 concerning Amendments to Law No.4 of 2009 concerning Mineral and Coal Mining.

As is known, Law No. 3 of 2020 changes several articles in Law No.4 of 2009 as well as inserting an additional article on the rules of the Act.Article 17B itself is an additional article that is inserted.Previously, this article did not exist.

Paragraph (1) Article 17B of Law Number 3 of 2020 states, the minister can assign assignments to state research institutions, state-owned enterprises, regionally-owned enterprises, or private companies to conduct investigations and research in the context of preparing Metal Mineral and Mining Business Permit Areas (WIUP). Coal Mining Permit Areas.

SOEs, regionally-owned enterprises, or private companies that get the assignment will later get the right to match the bids in the auction of the explored area or commonly known as theright to match.This provision is regulated in Paragraph (3) of Law Number 3 of 2020.

As a comparison, the provisions regarding the assignment to conduct investigations and research in the context of preparing metallic Mineral WIUP and Coal WIUP have actually also been regulated in Article 87 of Law no.4 of 2009. However, the assignment targets in these provisions are only aimed at state and/or regional research institutions.In addition, Law no.4 of 2009 also does not mention the right to match bids akaright to match.

Sunindyo explained that this assignment scheme can also be carried out based on requests from companies that wantright to matchincentives.

In the event that the assigned area is designated as metallic Mineral WIUP and Coal WIUP, the company that has carried out regional exploration assignments and participated in the auction of the area can use itsright to matchto match the bid from the highest bidder and win the auction.

This is based on the consideration that companies that have carried out regional exploration assignments have more experience in the area and have incurred exploration costs.

“If the assignment recipient considers the value (the auction value of the highest bidder) too high and states not to use theright to match, then the winner is the party who is not the recipient of the assignment (the highest bidder),” explained Sunindyo.

Chairman of the Association of Indonesian Mining Experts (Perhapi), Rizal Kasli said, Perhapi supports the discourse of providingrights to matchincentivesto companies conducting mineral and coal exploration.Perhapi himself, said Rizal, had given input to the Ministry of Energy and Mineral Resources to implement the incentive mechanism to encourage companies’ interest in conducting exploration activities in the mineral and coal sub-sector.

According to Rizal, Indonesia has stagnated in the field of mineral resource exploration in the last decade.According to him, this is reflected, for example, in theexpenditure ofexplorationexpenditurein Indonesia, which is only around US$ 100-200 million a year or equivalent to 1%-2% of the world’s total exploration budget based on 2016 S&P Global data and the Ministry of Energy and Mineral Resources.

“We hope that (exploration investment) will increase (with theright to match),” Rizal said to Kontan.co.id (7/7).

Even so, Rizal considered that the government still had other ‘homework’ to encourage companies to carry out exploration activities in the mineral and coal sub-sector.According to him, the government still needs to solve other problems, such as the speed and effectiveness of licensing services and land issues.

There are so many licenses spread across various ministries/agencies and they are still taking a long time.Land overlapping and long processes in land acquisition,” said Rizal.

Source:https://industri.kontan.co.id/news/dorong-minat-eksplorasi-minerba-kementerian-esdm-godok-insentif-right-to-match?page=2