Oil, gas processing regions demand revenue cut

Fitri Wulandari, The Jakarta Post, Jakarta

Non-oil and gas producing regions whose territories house oil and gas processing facilities are demanding a portion of the central government's revenue from the sector.

The chairman of the Communications Forum for Oil and Gas Processing Regions (FKKDM), Andi Sofyan Hasdam, said on Tuesday that the revenue was needed for such things as meeting the cost of guarding the vital facilities and as compensation for their environmental impacts.

Oil and gas refineries and liquefied natural gas (LNG) plant could pose environmental hazards for their surrounding environments and residents living in the vicinity of the facilities, said Sofyan, who is also the mayor of Bontang in East Kalimantan, which plays host to an LNG plant.

He added that since the vital installations were prone to terrorist attacks and other security threats, the local governments had to pay out money on their security.

He pointed out as an example that the Bontang administration paid between 5 percent and 10 percent of its budget on ensuring security for oil and gas facilities.

"When other regions can sleep easily at night, we have to be always on alert for leaks or blasts," he told reporters on the sidelines of a seminar.

Sofyan hoped the demand would be accommodated by the government, which is currently in the process of amending the local autonomy law and the fiscal balance law.

Based on these laws, only oil and gas producing regions get a portion of the central government's revenue from the oil and gas sector. The government obtains 85 percent of the revenue from oil projects, and 70 percent from gas projects.

From these figures, the producing regions get 15 percent from oil and 30 percent from natural gas.

Now, the members of the FKKDM, which consists of 10 regencies and municipalities whose regions host oil and gas processing facilities, want part of that revenue.

Aside from Bontang, the regions include Lhokseumawe in Aceh province, Palembang and Prabumulih in South Sumatra, Dumai in Riau, Langkat in North Sumatra, Cilacap in Central Java, Indramayu in West Java and Sorong in Papua province.

The demand, if accommodated, would lessen the revenue accruing to the state budget, which has sunk heavily into the red as a result of covering the huge cost of the late 1990s economic and financial crisis.

Indonesia has eight oil refineries with a combined capacity of 992,745 barrels per day. The largest oil refineries are in Cilacap (348,000 barrels per day), Balikpapan (240,920 barrels per day) and Balongan (125,000 barrels per day).

As regards natural gas, there are currently two LNG plants, namely the Arun plant in Lhokseumawe and Bontang plant in East Kalimantan, which have a combined capacity of 31.6 million tons per year.

Oil and gas facilities are either owned by the state oil firm, Pertamina, or are jointly operated by Pertamina and other investors.