Govt to give percentage of oil, gas yield to provinces
Govt to give percentage of oil, gas yield to provinces
JAKARTA (JP): Minister of Mines and Energy Kuntoro
Mangkusubroto said on Friday the ministry would draft a formula
to distribute a percentage of the government's oil and gas
revenue to provinces in the form of oil and gas royalties.
Kuntoro said the new royalty ruling was important to fulfill
the demand by some provinces for shares in the government's oil
and gas revenue, because the existing production sharing
contracts (PSC) system did not provide a clear formula regarding
the provincial share.
Under the PSC system, the government receives 85 percent of
the oil and gas contractors's revenue from oil operations and 70
percent from gas operations. The system does not specify
royalties to be dispensed to local administration.
"We shall issue a ruling on oil and gas royalties to support
the oil and gas bill currently being debated by the House of
Representatives," Kuntoro said.
He said in other mining sectors the government experienced no
distribution difficulties because the amount of government
royalties paid to local administrations was stipulated in the
contract of works.
Mining royalties paid by mining contractors to the government
range between 1.5 percent and 7 percent of sales for copper,
between 1 percent and 3 percent of sales for gold and silver and
3.5 percent of sales for coal.
The central government receives 20 percent of the royalties,
with the remaining 80 percent going to local administrations.
"The royalty-sharing mechanism in the mining sector will also
be applied in the oil and gas sector," Kuntoro said.
Several oil and gas producing provinces, including Aceh and
Riau, have demanded shares in the government's oil and gas
revenue, threatening succession from Indonesia unless the central
government meets their demands.
People from Riau have demanded a 10 percent share in the
province's oil output while Acehnese have demanded 80 percent of
the province's gas output.
Riau produces about 60 percent of the country's oil output of
approximately 1.2 million barrels per day, while Aceh is home to
giant liquefied natural gas producer PT Arun NGL Co.
Currently, the central government pools all oil and gas
revenue in the state budget, distributing the revenue to
provinces in the form of development funds, regardless of the
contribution of each province.
Several legislators and analysts have questioned the
government's commitment to distributing its oil and gas revenue,
given the fact that the government-proposed bill on financial
balance between the central and local administrations does not
provide a clear-cut revenue-sharing formula for all kinds of
natural resources.
The oil and gas bill also does not specify any clear-cut
formula for the sharing of revenue from oil and gas between the
central government and local administrations.
Minister of Finance Bambang Soebianto has thus far refused the
House's request to include the revenue-sharing formula in the
fiscal balance bill, saying the government would set the formula
in separate regulations.
Kuntoro said he did not include a clear-cut revenue-sharing
formula for oil and gas in the oil and gas bill because he
expected such a formula to be specified in the financial balance
bill.
"The revenue-sharing formula should be included in the
financial balance bill, not in the oil and gas bill. The oil and
gas bill is expected to only contain technical things regarding
oil and gas.
"But, don't interpret this as a proposal that the revenue-
sharing formula be included in the financial balance bill. The
making of the financial balance bill is the minister of finance's
right, not mine." (jsk)