One-day Conference on DMO

CHALLENGING THE DMO POLICY NOW AND GOING FORWARD

Background

Minister of Energy and Mineral Resources Ignasius Jonan had on May 6 issued Ministerial Decree No 78 K/30/MEM/2019 on the minimum allocation of the country's 2019 coal production for domestic market, also known as domestic market obligation (DMO).

According to the decree, all coal producing miners, including those holding the coal contract of work in production operation phase, coal production operation IUP mining business license, and coal production operation special IUP mining business license, must allocate at least 25 percent of their respective 2019 coal production plans approved by the minister or governors for the domestic market.

The decree says that coal miners are obliged to meet the minimum DMO volume requirement. Miners, which could not meet the DMO quota, can purchase the required coal from other miners via the quota transfer mechanism in accordance with the existing regulations.

Coal miners, which fail to meet the DMO quota, will be given sanction in the form of reduction in their 2020 production plan.

The minister shall appoint companies to fulfill domestic market in case domestic coal consumers face difficulties in getting coal supply. This ministerial decree is effective retroactively from 1 January 2019.

There have been many question on how to determine fair price for coal DMO quota transfer since each miners has different cost structures in its operation which is influenced among others by coal quality, stripping ratio, infrastructure and also the difference of financial obligations between the PKP2B and IUP holders.

The conference would invite speakers from the government, PLN, coal mining companies and experts to discuss the best way to implement the DMO quota transfer and how to determine fair pricing for coal sold under the DMO mechanism.