Press Release
Jakarta – Monday (9/8), PT Pertamina (Persero), through its subsidiary PT Pertamina Hulu Rokan (PHR), officially became the operator of the Rokan Working Area (WK), replacing the previous operator of the Chevron Pacific Indonesia (CPI). It also marks the history where after Caltex and then CPI managed the Rokan Block for 80 years, since it was first discovered in 1941, and operated in 1951, the operator one of the largest Blocks in Indonesia was handed over to State-owned enterprises (Pertamina)
As known, the government has decided PT. PHR as the operator of the Rokan Block after August 8, 2021, with a Participating Interest (PI) of 100% (including a 10% PI that will be offered to Regional Owned Enterprises/BUMD) through the Decree of the Minister of Energy and Mineral Resources No. 1923 K/10/MEM/2018 dated August 6, 2018. The Rokan Block’s Cooperation Contract (KKS) has been signed between PT. PHR with SKK Migas on May 9, 2019, using the Gross Split Contract Scheme and effective from August 9, 2021, with a contract period of 20 years.
Rokan Block is one of the strategic work areas that has been produced 11.69 billion barrels of oil (from 1951 to 2021), with average production from 2021 to July 2021 of 160.5 thousand barrels of oil per day crude oil or approx. 24% of national production and 41 MMSCFD for natural gas.
“In the context of extractive industry, the strategic value of the Rokan Block is equivalent to the Mining Area managed by PT. Freeport Indonesia,” said Aryanto Nugroho, Coordinator of Publish What You Pay (PWYP) Indonesia.
However, Aryanto warns there is still much homework, both from the Central and Local Government, PT. PHR (and Pertamina) and CPI. Do not let this nation be carried out momentary euphoria and lulled by the ceremony over the transition of operation Rokan Block and forget the basic things that must be done immediately.
Aryanto revealed that Pertamina’s biggest challenge is maintaining or even increasing oil and gas production in the Rokan Block. With a production target of at least 200 thousand barrels of oil per day, Pertamina has to find appropriate technology, adequate human resources (HR), or cooperate with experienced partners. It includes financing solutions for the Rokan Block operation, considering the Rokan block’s age, which is more than 90 years old, requiring unconventional technology, which will require a significant investment.
“Of course, we have to maintain optimism and hope that Pertamina’s experience in increasing production in the ONWJ Block could be repeated,” Aryanto explained.
Transparency and Accountability
Aryanto Nugroho, also one of the civil society representatives on the EITI Indonesia multi-stakeholder groups (MSG), reminded that Pertamina has to continue implementing the principles of transparency and accountability. Amid the slanted issue of “SOEs as Dairy Cows,” this could be momentum for Pertamina to become a pioneer as a truly transparent and accountable State-Owned Enterprises by opening the entire Rokan Block operation process to the public.
Transparency and accountability could be started by disclosing the Cooperation Contract documents, including when working with Third Parties; carry out financial obligations such as signature bonuses, taxes, and other state revenues; also social and environmental obligations.
Transparency in terms of cooperation with third parties should be a significant concern. It’s because this is where the space for rent-seeking and oligarchs comes in. Both transparency in terms of cooperation in the procurement of goods and services also transparency in the selection of partners who have capabilities in the upstream oil and gas sector following business practices (business to business).
“Moreover, Indonesia as the implementing country for the global Extractive Industries Transparency Initiative (EITI) since 2010, requires oil and gas and mining companies, including PT. Pertamina (Persero), to make all of its payment obligations transparent to the public.” Aryanto said
Aryanto added that in 2017, Indonesia was appointed as the first country who publish commodity trading report1, including the disclosure of data on volume and sales of oil and gas government entitlement managed by PT. Pertamina.
“Our notes regarding the EITI commodity trading transparency process, PT. Pertamina (Persero) has to improve more aspects related to its transparency and accountability.” Aryanto said.
Responsibilities of CPI?
Muhammad Herwan, Deputy Secretary-General of the Riau Community Leaders Communication Forum (FKMPR), said another crucial thing is ensuring CPI completes its obligations, such as financial obligations to the state also social and environmental obligations. It includes the return of essential technical data.
“We urge the Government to disclose the document of Indonesia’s contract with CPI so that it is clear what obligations must be complied with and whether these obligations have been carried out,” explained Erwan.
It includes the Rokan Block transition process and results handled by the Rokan Block Transition Team consisting of SKK Migas, PHR, and CPI. The government must be honest and open to the public about success and not being achieved. It is starting with how CPI has to maintain production, data and technology migration, electricity supply, and employment.
The findings of the Corruption Eradication Commission (KPK) in 2016 stated that there was a potential state loss of around US$ 336.1 million or equivalent to Rp. 4.4 trillion, due to the non-fulfillment of financial obligations by oil and gas contractors to work areas that had been terminated; 141 Working Areas do not carry out Environmental Based Assessment (EBA) obligations; and survey data that were not submitted to the government because the contractors had fled.
“This should not happen in the context of the Transition of Block Rokan Operation,” said Herwan
“Also the issue of Oil Contaminated Land (TTM) in the Rokan Block area, which has drawn protests and even lawsuits from the public, it must be the responsibility of CPI,” added Herwan.
Local Region Participation in the Operation of Rokan Block
The Executive Director of the Riau Democratic Action and Empowerment Institute (LPAD), Ikhsan Fitra, explained that the Regulation of the Minister of Energy and Mineral Resources Number 37 of 2016 concerning Provisions for Offering a Participating Interest of 10 percent in Oil and Gas Working Areas, provides opportunities for the local region, both province, and district, to participate and get the maximum benefit in the operation of Rokan Block through 10% Participating Interest (PI) rights.
The question is, which BUMD will be appointed to manage the 10% PI? Does the local government only “enjoy” the dividends from this 10% PI right? Or is there an effort to join operate the Rokan Block with the experience of several Riau-owned Oil and Gas BUMDs? How is the PI divided between the Provincial and District Governments? How is the governance of Riau Oil and Gas BUMD? How to ensure the capacity, experience, and integrity of BUMD Migas Riau starting from the top-middle-low management level?
“We urge transparency on preparing, developing, and discussing PI rights in the Rokan Block. Open the widest public involvement, including the community around the mine. Do not let the management of PI rights in the Rokan Block only become the target of new rent seeker.” said Ikhsan Fitra
Its have also be ensured how Riau gets other benefits from the existence of Rokan Block, both in terms of added economic value, local content, employment, CSR, also social and environmental responsibility. The community has to get the benefits, not only limited to Charity Programs or just “Lips Service”.
Ikhsan Fitra added that Riau should at least learn 2 (two) things in natural resource governance. First, in a journal entitled Natural Resource Curse Phenomenon in Regional Development in Indonesia published by the Indonesian Journal of Economics and Development in July 20212, it was stated that Riau Province is one of the provinces in Indonesia indicated to the Natural Resources Curse phenomenon. Riau is a significant producer of oil and gas and other natural resources, but its sustainable regional development index is lower than regions that are not dependent on the natural resources sector. Second, Riau has had a bad experience with corruption in the Natural Resources sector.
“Do not let the operation of Rokan Block add to the long list of Riau officials arrested by the KPK.” clear Ikhsan Fitra.
Riko Kurniawan, the Director of WALHI Riau, warns that in exploiting natural resources on Rokan block for almost a century, there has to be a significant correction to ensure environmental restoration and recognition of indigenous community rights in the concession are returned and recognized.
The transition operation of Rokan Block should not be interpreted as merely a transfer of operators. Further than that, the government also has to show political will in governing oil and gas to restore and recognize the rights of indigenous peoples and ensure environmental restoration for the safety people of Riau in the future.
“Again, the paradigm of oil and gas governance in Indonesia, and Riau in particular, in the context of protecting the environment, including the protection and recognition of forest areas and the existence of indigenous peoples, still have to be placed as the main signs in the governance of the Rokan Block. Not only just exploitation and state revenue!” concluded Riko Kurniawan.
Contact Person:
Aryanto Nugroho – aryanto@pwypindonesia.org
Muhammad Herwan – mherwan78@gmail.com
Ikhsan Fitra – satuperubahan@gmail.com
Riko Kurniawan – rikokurniawan@gmail.com
Publish What You Pay (PWYP) Indonesia is a civil society coalition for transparency and accountability in the governance of extractive oil and gas resources, mining, and natural resources. Consisting of 29 civil society organizations, spread across various natural resource-rich areas in Indonesia
Anggota koalisi PWYP Indonesia dari Riau
- Forum Komunikasi Pemuka Masyarakat Riau (FKPMR)
- Lembaga Pemberdayaan dan Aksi Demokrasi (LPAD) Riau
- Wahana Lingkungan Hidup (WALHI) Riau
- Forum Indonesia untuk Transparansi Anggaran (FITRA) Riau
- The Indonesian Commodity Trading Transparency Report can be accessed at: https://eiti.esdm.go.id/laporan-commodity-trading-eiti-indonesia/
- Rahma, H., Fauzi, A., Juanda, B., & Widjojanto, B. (2021). Fenomena Natural Resource Curse dalam Pembangunan Wilayah di Indonesia. Jurnal Ekonomi Dan Pembangunan Indonesia, 21(2), 148-163.
The journal can be accessed via the following link:
https://jepi.fe.ui.ac.id/index.php/JEPI/article/view/1358/361