Wednesday, March 04, 2009


  • NEW ERA Indonesian Mining. LAW changes COW Era to become Permits /Licences to conduct the Mining Business Activities in Indonesia

  • It is really interested in studying such New Minerals and Coal Mining Law, since it appears there is a significant change in the arrangement whereby the Government is providing permits /licences to Mining Minerals and Coal activities which according to the writings / articles from the media/ news, it indicates that the concept of Contract Of Work ( "COW") which was made by the Government and the Mining Companies as the basis of the contractual relations and the Kuasa Pertambangan (KP) mechanism, which was practiced for the last 40 years was changed and replaced by this Permits /Licenses of Mining Minerals and Coals.
  • It is interesting to observe this new law, since as a Partner of the Law Firm of Suleiman Agung & Co, ( who operates for more than 10 1/2 Years since June 1998), I was formerly experiencing working as in-house Legal Counsel for 5 Years in PT Freeport Indonesia Company ( PT FI), a cooper USA mining company, who operates its mining operations in Indonesia, where COW was the main agreement between PT FI as the Mining Company and the Government.
  • The other interesting part is because, I was also experiencing working for 5 Years as in-house Legal Counsel in Huffco Indonesia (Virginia Company) a USA Oil and Gas Company who operates in Indonesia, and produces Gas/LNG at Bontang, where Production Sharing Contract (PSC) was being the basis of their presence in conducting the oil and gas operations in Indonesia.
  • all the oil /gas and the mining of minerals and coal are natural resources from Indonesia.
  • The Scheme mechanism treatment in mining such natural resources from Indonesia is really very interesting to be observed, among others from the history of such mining rulings, which were introduced / developed by the various governments/ authorized institution and the people who were represented by their Representatives in the peoples house of Representatives/Parliament.
  • For instance, relating to Oil and Gas, during the Dutch period, the concept which was introduced and recognized is sort of concession, where Private Companies may be granted a concession by the Authorized Institution.
  • When Indonesia stated its independence, based on Article 33(3) of the Indonesian Basic Constitution Law Year 1945 , the oil and gas is the wealth of the people, where, the people will grant Power or Mining Authority to the State to mine such oil and gas, through forming PT Pertamina ( as representing the government /people) during that time , where as the holder of such Mining Authority they can /allowed to enter into a cooperation with private companies.
  • Contract of Work ( COW) was being introduced as the basis of the relation or arrangement between the Government or PT Pertamina with such Oil/Gas Company.
  • In the progress Production Sharing Contract (PSC) was introduced where in the transition period the COW was replaced / amended to become PCS, examples of this, is experienced by PT Stanvac Indonesia.
  • In the COW concept, the Mining Contractor or the Oil/Gas Contrator shall perform the Mining activities, absorb all the expenses and costs and the risks, without any cost recovery mechanism by the Government.
  • Whereas under a PSC arrangement, the Oil/Gas Contractor shall take the risks, and pay all costs and expenses by itself, but shall be cost recovered by the Government or Pertamina/ now BP Migas, after commercial production is declared.
  • One of the most interesting part is that the rulings of oil and gas is differentiated from the rulings of minerals and coal.
  • Having briefly giving some illustration of this matter, while studying this New Minerals and Coal Mining Law, I shall try to forward some significant items, and hope can digest in understanding this new law and shall try to communicate it with the readers of this blog.
This New Minerals and Coal Mining Law No. 4 Year 2009, contains XXVI Chapters and 175 Articles
  • In the Recitals of this New Law its states that Minerals and Coal which is contained in the Indonesian Legal Mining Area of Indonesia is the natural wealth which cannot be renewable as gift from The One ALL Mighty God, has the important role to fulfill the life needs of many people, thus it has to be controlled /possessed by the State to give real value added for the national economy in the effort to reached the people's welfare and prosperous justifiably.
  • the mineral and coal mining is mining business outside the geothermal, oil and gas and land water which has the important role in providing real value added to the national economic growth and sustainable regional development.
  • it considers that the Law No 11 Year 1967 concerning the Regulation of the Basic Mining is no longer in accordance so that changes are required upon the rulings in the mineral and coal mining, which can manage and effort the potential mineral and coal in a manner which is independent, competent, transparent, competitive, efficient, environmental vision, to secure the sustainable national growth.
Based on the above considerations it is needed to form the Mineral and Coal Mining Law. The considerations also refers to Article 5 (1) , Article 20 and Article 33 (2) and (3) of the State Basic Constitution Law 1945.
  • There are several permits as shown in Chapter I Article 2 namely :
  • Izin Usaha Pertambangan/Mining Business Permit ( IUP) which is the permit to conduct mining business.
  • IUP Explorasi /Exploration Mining Business Permit which is a business permit provided to conduct stages of general survey, exploration and feasibility studies.
  • IUP Operasi Produksi (Production Operation Business Permit) which is business permit provided after the completion of the performance of IUP Explorasi to conduct stages of production operations activities.
  • IzinPertambanganRakyat (IPR) / Peoples Mining Permit which is permit to conduct mining business in the peoples mining territory with the area of limited territory and investment.
  • Izin Usaha Pertambangan Khusus, Special Mining Business Permit (IUPK), which is a permit to conduct mining business in the special mining business permit territory.
  • IUPK Explorasi (Exploration IUPK) which is the business permit provided to conduct general survey, exploration, and the feasibility studies in the special mining business territory
  • IUPK Operasi Produksi (Production Operation IUPK) which is the business permit provided after the completion of the performance of IUPK Explorasi to conduct the stages of production operation in the special mining business territory
Jakarta, March 4, 2009

Agung Supomo Suleiman

Senior Partner

Law Firm Suleiman Agung & CO


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