Locals may get oil firms' stock

JAKARTA (JP): Minister of Mines and Energy Kuntoro Mangksubroto has asked state oil and gas company Pertamina to tender shares to be divested by its foreign oil and gas contractors to national companies.

Kuntoro said on Friday the tender would provide equal opportunities for all national companies to participate in the development of the country's oil and gas reserves in joint ventures with foreign contractors.

He noted, however, that if no national companies had enough funds to acquire the shares, foreign contractors could keep them.

"If no company is able to buy the shares, just keep on working. Why should foreign contractors be concerned about that?" Kuntoro asked.

Oil and gas production sharing contracts (PSC) initially allowed foreign contractors to wholly own their contract areas throughout their operation.

But, in the late 1970s, Pertamina on behalf of the government introduced an "Indonesian Participation" clause in PSCs obliging foreign contractors to divest 10 percent stakes to national companies at the beginning of production.

The contracts provide Pertamina with the right to appoint the national companies that buy the shares.

However, during the 32-year rule of former President Soeharto, the divestment of the foreign contractors' ownership mostly went to Soeharto's family and cronies.

The most recent divestment of shares involved the Bimantara Group, controlled by Soeharto's son Bambang Trihatmodjo, in the Kangean onshore and offshore block in East Java.

The contractors of the block are Atlantic Richfield Bali North Inc., a subsidiary of the giant United States energy company Atlantic Richfield Company (ARCO) and British Petroleum and Production.

President and resident manager of Atlantic Richfield Indonesia Company (ARII) Leon Codron said recently that Bimantara had no more shares in the block.

He argued that Bimantara had been given an option to purchase a 10 percent interest in the block, but it failed to exercise it within the period stated in the contract.

Codron said that it was Pertamina which appointed Bimantara to take the option.

Pertamina officials told The Jakarta Post that the company was often helpless to resist interference from the government and contractors in selecting companies to buy the divested shares. (jsk)