Oil, gas bill will slash govt revenue: Pertamina

Oil, gas bill will slash govt revenue: Pertamina

JAKARTA (JP): State oil and gas company Pertamina warned on
Thursday that the government-proposed oil and gas bill currently
being debated by the House of Representatives, if passed, would
potentially reduce the government's revenue from the oil and gas
sector.

Pertamina president Martiono Hadianto also expressed concerns
over what he saw as a lack of the bill's commitment to support
national oil and gas companies amid domination by foreign
contractors.

"The bill's objective of securing the government's revenue and
develop national oil and gas companies will be hardly
attainable," he said in a statement.

Martiono noted that the fact that the bill gives freedom to
oil and gas contractors to choose types of cooperation contracts
other than the currently applied production sharing contract
(PSC) system would be a "setback" to the country's oil and gas
sector.

He said the PSC system was introduced by Pertamina, and is
currently being imitated by dozens of developing countries to
obtain maximum benefits from their oil and gas resources.

Pertamina's founding fathers, he said, took pains to make the
PSC acceptable to multinational oil and gas companies, which
basically prefer the royalty system to the PSC.

Although the bill does not specify the cooperation contracts
that foreign contractors can choose, Martiono believed the
contract of work (COW) system currently applied in the country's
mining sector would be one of the alternatives.

Under the COW system, Martiono said, mining contractors pay
taxes and royalties only to the government, both of which are
lower than the profit share received by the government from oil
and gas contractors under the PSC system.

Under the PSC system, Pertamina holds the management of the
oil and gas contractors to control the expenditures, while under
the COW system, the contractors manage their spending themselves.

Minister of Mines and Energy Kuntoro Mangkusubroto said on
Thursday that for the moment, the government had no intention of
changing the PSC system but might allow oil and gas contractors
to choose other types of contracts in the future.

"The cooperation contract is a generic term. It can be PSC,
COW or some other," he said on the sidelines of a hearing with
the House task force on the bill.

Martiono noted that the bill would mostly be beneficial to
foreign oil and gas companies. As such, it did not support the
constitutional doctrine that "the natural resources should be
utilized for the maximum benefit of the people."

He also said the bill was in conflict with the national
constitution, which says that the country's natural resources are
controlled by the state not the government, arguing that the
state is different from the government.

The bill aims at turning Pertamina into a limited liability
company and lifting the decade-long monopoly held by the company
on the country's oil and gas downstream sector.

Under the bill, the government will also take over the
company's right to award contracts and regulate and manage
foreign oil and gas contractors.

Martiono was pessimistic that the government would be able to
manage and regulate oil and gas contractors.

"The bureaucratic pace of work is less suitable to business,"
he said.

Martiono said Pertamina could accept the bill's objective of
revoking its monopoly on the downstream sector but he said it
should be done gradually.

He said Pertamina was ready to meet the government's request
to focus on its core business of exploration and production.

But the government should give it enough freedom to do so,
Martiono said, noting that the government had thus far taken over
most of the company revenue and provided it with a limited budget
for exploration and production.

Meanwhile, the House task force on the bill has agreed with
Kuntoro on the schedule and rules of the deliberations on the
bill.

Kuntoro said he was optimistic that the bill could be passed
into law before the general election in June. (jsk)