New law reassures jittery oil contractors

New law reassures jittery oil contractors

JAKARTA (JP): State oil and gas company Pertamina said on
Wednesday that the intergovernmental fiscal balance law, which
will give a larger share of oil and gas receipts to provinces,
will make oil and gas mining contractors in the provinces feel
better protected and secure amid any political turmoil.

Head of Pertamina's Foreign Contractors Management Body
(BPPKA) Gatot K. Wiroyudo said some provinces seemed to lack a
sense of kinship with oil and gas contractors in their areas due
to the total control of all oil and gas revenue by the central
government.

The fiscal balance law is expected to create a sense of
kinship among local people toward oil and gas operations in their
areas, he said.

"If local people have a sense of kinship toward the oil and
gas operations in their areas, it would be reasonable to assume
that the operations will become more protected," Gatot said.

Gatot said Pertamina and its oil and gas contractors had thus
far no plan to cut their community development programs despite
the upcoming rise in provincial administrations' shares from the
government's oil and gas revenues.

Pertamina and its contractors spend about US$10 million
annually for community development programs.

Several oil and gas-rich provinces, including Riau and Aceh,
have been demanding a significant share of oil and gas earnings
which have until now been transferred wholly to the central
government.

Riau students vandalized last week some facilities of oil
company PT Caltex Pacific Indonesia near the capital of Pekanbaru
to pressure the government into fulfilling their demand for a 10
percent share in oil earnings from the province.

Revenue

The fiscal balance law, which was approved by the House of
Representatives last week, stipulates that the central government
must give 15 percent of its net oil revenue and 30 percent of its
net gas receipts to the provinces which produces the commodity.

However, Gatot said his office had not yet known the details
about the amount of oil and gas revenues to be received by the
provinces.

" We have still to study the stipulations of fiscal balance
bill and their technical details which will be elaborated in
government regulations," he added.

Gatot said under production sharing contracts (PSCs), the
government takes 85 percent of contractors' before-tax oil
earning and 65 percent of their gross gas earnings.

The government's 85 percent oil share includes taxes paid by
contractors to the government, which amount to 19.09 percent of a
contractor's revenue.

The government's net take thus amount to only 65.91 percent of
a contractor's net earnings.

With regards to gas, the government takes 44.55 percent of a
contractor's gas earnings, not including gas taxes amounting to
20.45 percent of a contractor's incomes.

Gatot also noted that the current law gives Pertamina the
right to supervise oil and gas contractors to ensure that
operational costs are kept at minimum. Pertamina is also assigned
to sell the government's share of contractors' oil output, but
buyers transfer payments directly to the central bank.

"Thus, it's wrong to reckon that Pertamina also manages the
government's oil and gas money and has a chance to embezzle
money," Gatot said.

Riau students and several analysts have voiced suspicion that
Pertamina embezzled the government's oil revenue from Caltex
following the publication of different statements related to the
government receipts from Caltex.

Caltex claimed it had delivered Rp 17 trillion in oil revenue
and taxes to the government in fiscal 1998/1999, but Minister of
Finance Bambang Subianto said the government received only Rp 6
trillion from the company. (jsk)