Jakarta, Petrominer – Publish What You Pay (PWYP) Indonesia appreciates the issuance of the Minister of Energy and Mineral Resources Regulation (Permen ESDM) No.37 / 2016 concerning Provisions on the 10% Participating Interest Offer in Oil and Gas Working Areas. This regulation is considered to try to reduce the rent seeking gap in the management of regional share participation in the upstream oil and gas industry.

“The scheme in this Permen is in line with the proposed PWYP Indonesia coalition as stipulated in the Revision of Law Number 22 Year 2001 concerning Oil and Gas, which prioritizes direct ownership of shares by the regions,” said PWYP Indonesia researcher Rizky Ananda, Sunday (1/29).

So far, the problem that often occurs is that the regional government does not have the capital to take the entire portion of PI shares (10%) allocated to the regions. As a result, the ration was managed by a third party with a scheme that was sometimes burdensome or disadvantaged the region.

“Therefore, it is important for regions to be given flexibility in taking part of PIs in accordance with their financial capabilities,” he explained.

This rule also allows the contractor to bear financing first, to be calculated later in the distribution of dividends later. “At least the substance of the ESDM Regulation 37/2016 can reduce the rent-seeking gap which is actually detrimental to the region,” said Rizky.

Meanwhile, PWYP Indonesia’s National Coordinator, Maryati Abdullah, reminded that PI is the right of the region to participate as well as to play an active role in the management of oil and gas for the welfare of the people in the producing regions. PI should not be interpreted as the distribution of shares to regions without conditions, without obligation and is only oriented to profit sharing.

“Managing PIs means that the region must pay capital participation obligations with a maximum amount of 10%; bound by the points of the cooperation contract that are also willing to bear the risk if it loses,” explained Maryati.

The purpose of providing PIs through BUMD is so that regions can truly participate in the management of upstream oil and gas, including to encourage transparency and accountability in governance, technology transfer, as well as direct supervision of the performance of the oil and gas industry in the regions – from the planning stage to the evaluation. Of course, to do this requires a capacity of HR and management of BUMD which is really strong in understanding business processes in the upstream oil and gas sector.

Considering the end of the oil and gas blocks that are getting closer, Maryati asked how far the oil and gas producing regions have prepared BUMDs that will manage PIs? Have the institutions, human resources, regional regulations, transparency and accountability mechanism, oversight been prepared?

“The Central Government together with local governments must really strengthen coordination so that the management of this PI runs according to its track,” he explained.

There are at least 10 oil and gas working areas that will expire until 2018, where the Government has appointed Pertamina to manage them, namely the Offshore Northwest Java (ONWJ) block, Mahakam block (Total E&P Indonesia), Attaka block (Inpex Corporation), South East Sumatra block (South East Sumatra block) CNOOC), East Kalimantan block (Chevron Indonesia Company), Middle block (Total E&P Indonesia), North Sumatra Offshore block (Pertamina), Tuban block, Ogan Komering block and Sanga-Sanga Block. (Aldi)

Source: here.

In Media, Media Coverage|PWYP Indonesia|January 30th, 2017