2011 Domestic Market Obligation for Coal

Following the implementation of Article 7 (3) of Minister of Energy and Mineral Resources (“Minister”) Regulation No. 34 of 2009, the Minister has issued Minister of Energy and Mineral Resources Decision No. 2360 K/30/MEM/2010 of 2010 (“Decision”), which sets out the 2011 Domestic Market Obligation (“DMO”) for coal.

The Decision sets out:

At present, Indonesia’s domestic demand for coal in 2011 is estimated at 78.97 million tons, while coal production is estimated at 326.65 million tons. Accordingly, the Minister has decided that coal-mining firms must, at a minimum, fill 24.17% of the domestic demand.

For 2011, the coal-mining firms subject to the DMO consist of: 42 firms with Coal Mining Exploitation Working Arrangements (‘PKP2B’), 10 firms with Coal Mining Concessions (‘KP’) and/or Mining Business Licenses (‘IUP’), and 1 state-owned enterprise.

Price determination for coal sold in the Indonesian market is governed by the recently issued Minister of Energy and Mineral Resources Regulation No. 17 of 2010 on Procedures to Determine the Standard Sales Price (Harga Patokan) for Minerals and Coal has been in force since 23 September 2010. In brief, each month the Director General of Mineral, Coal and Geothermal (on behalf of the Minister of Energy and Mineral Resources) determines the standard sale price for coal. This standard price is then used as the price for IUP and Special Mining Business License (‘IUPK’) holders.

Minister of Energy and Mineral Resources Regulation No. 17 of 2010 will be elaborated on further in a future Indonesian Legal Brief.

The Decision has been in force since 31 August 2010.

For a brief overview of the previous regulation see ILB Number 1402 27/4/2010.