JAKARTA. Ministry of Energy and Mineral Resources (ESDM) finally issued the Ministerial Regulation No. 37/2016 on Special Provisions of Participating Interest (PI) at the level of 10% in the Working Area of Oil and Gas. This policy will be a reference for the transfer of regional participation in oil and gas blocks.

The presence of the regulation, which was signed by the Minister of Energy and Mineral Ignasius Jonan on 25 November is important. Because, more than 15 oil and gas blocks have the obligations to submit the regional PIs starting from the next year. This rule applies to new and renewal contracts.

Not surprisingly, in the last weekend, Minister of Energy and Mineral Resources Ignasius Jonan and the Vice Minister Arcandra Tahar began to socialize the rule in Bali to some stakeholders, such as the contractors (KKKS) and the Association of Oil and Gas Producers Regions. "The meeting aimed to brief the Indonesian Petroleum Association (IPA) about the regulation,” Arcandra told KONTAN, Sunday (4/12).

Considerably, this is the first comprehensive regulation on PI. The policy breaks down the Government Regulation No 35/2004, which was subsequently revised to be the Government Regulation No 55/2009 on the Upstream Oil and Gas Activities. The article 34 of this Government Regulation only mentions that the 10% PI will be given to regional owned enterprises (BUMD).

Meanwhile, the new Government Regulation has more detail rules. For an example, any BUMD that owns the PI is prohibited to conduct other business activities beyond the management of PI, while the PI cannot be traded.

If a BUMD has already owned one PI, the following rights can then be offered to the new BUMD or regional companies under one condition: 99% of the local company’s shares are held by the BUMD, while another 1% is owned by the affiliates.

In terms of funding, oil and gas contractors have to fund the BUMD’s obligations in advance. In this case, the BUMD will settle the funding with installments of oil and gas production and do not bear interest.

Director of Usptream at PT Pertamina (state owned oil and gas company) Syamsu Alam said that Pertamina will immediately extend the contract of oil and gas block of Offshore North West Java (ONWJ) and is ready to provide 10% PI 10% to West Java province’s regional enterprise. "The Minister mandated that the 10% PI should not to be discussed, but implemented," Syamsu told KONTAN.

However, the IPA has different opinion. IPA wants the contractors (KKKS) to discuss the PI in a business-to-business manner as before.

The Secretary General of the Association of Oil and Gas Producer Regions Andang Bachtiar appreciates the policy. According to him, the regulation has exceeded the expectations, as the loan is returned without interest. “"But keep in mind the contractor’s compliance," said Andang.

President Director of East Kalimantan BUMD Wahyu Setiaji reminds that the rights of the PI owners should not be reduced. “The PI aims to enhance the locals’ involvements,” he said.

(Muhammad Farid/Translator)

Editor: Adi Wikanto