Vietmindo’s BCC bad energy

Licenced in 1991 with 30-year life-span, Vietmindo is a business cooperation contract (BCC) between Vinacomin’s Vietnamese party Uong Bi Coal Company and Indonesia’s P.T. Vietmindo Energitama Company.

The company’s legal capital is $27 million offset by the foreign partner, while the Vietnamese party’s contribution is in the form of anthracite coal reserves, exploration and mining and some relevant investments.

Vietmindo’s mining activities started in 1997 with extraction output of 38,600 tonnes in this first year. In 2009, pursuant to the Mineral Law the Vietnamese party got a new licence to allow Vietmindo to extract 500,000 tonnes of commercial coal, equivalent to 650,000 tonnes of raw coal per year maximally in a duration of 12.5 years until 2021 when the BCC expires with a total mining volume of 6.25 million tonnes.
Uong Bi Coal Company would benefit from 10 per cent annual commercial coal volume produced by Vietmindo.

However, the company’s mining output often exceeds regulated volume. For instance, its raw coal extraction output came to 857,300 tonnes and 1,212,000 tonnes in 2010 and 2011 respectively, resulted in respective commercial coal output of 742,000 tonnes and 863,000 tonnes, far exceeding permissible level.

Besides, Vietmindo often hired sub contractors without getting approval from Uong Bi Coal Company which was against contract terms.  

In addition, Vietmindo often fails to submit production plans to Uong Bi Coal in a timely manner, causing difficulties to the Vietnamese party in governance and environmental protection activities.

The company twice incurred penalties as its operations hurt the environment, with fines of VND5 million ($240) in 2006, soaring to around VND230 million ($10,900) in 2010.

The company was also blamed for wasting natural resources with coal loss amounting to 10 per cent of extraction volumes against regulated 5 per cent and lower commercial coal/raw coal recovery rate of 70 per cent against regulated 80 per cent.

After Vinacomin rendered a full report about Vietmindo to the prime minister  in late May, the ministries of Industry and Trade, Finance, Natural Resources and Environment pledged to assess the BCC’s implementation.

The relevant bodies said Vietmindo must not extract exceeding regulated capacity as repeated excessive mining capacity occurrences could create bad precedents which will hurt Vietnam’s national energy security policy.

Vietmindo’s excessive export volume in 2010 and 2011 of 524,396 tonnes would be gradually deducted from its exploitation output in 2012 and ensuing years or incurs fines as per Vietnam’s current laws regulating mining activities.