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)