Coal mining has evolved on ‘greenfield’ sites and under the control of what used to be the Ministry of Mining and Energy or its Directorate General for Mining. By 1999, state-owned coal reserves had been offered in three tranches for inter-national development under a bidding procedure, the first tranche in 1981 with 11 ‘Coal Contracts of Work’ (CCOWs), the second in 1993 with 17, and the third in 1997 with 114. A fourth wave of contracts came after 1999 from the by-now autonomous provinces.
The ‘contractors’ undertake to prospect for and explore the coal deposits located in their concession area, possibly to engage in mining development and, in return, are granted exclusive rights for a term of 30 years subject to a royalty (free mine) of 13.5% of proceeds. The contractors are also obligated to offer Indonesian investors at least 51% of the mining stock after a ten year operating period. In 2001, this provision affected two foreign investors, Rio Tinto/BP and BHP Billiton.
While one of the deals went smoothly, the other was accompanied by conflicts as regards company value and the nomination of buyers. Besides foreign and local investors, the state-owned P.T. Tambang Batubara Bukit Asam has started production on Sumatra, mostly for domestic consumption. This company is to be privatised in a second attempt.
Most of the companies are based on generation-I CCOWs, representing over 80 Mt, generation-II CCOWs with about 40 Mt and generation-III CCOWs with a mere 10 M t.
Coal mining without official approval, too, has evolved in the meantime, with output at four Mt per annum. These are small local companies that operate with the tacit consent of officials.
Indonesia‘s coal policy, for the time being at least, prevents the international consolidation movement from spreading to Indonesia. To that extent, Indonesia‘s hard coal mining sector is an important element for healthy competition on the world market.