Regencies warned against blocking oil, gas fields

Regencies warned against blocking oil, gas fields

Moch. N. Kurniawan, The Jakarta Post, Jakarta

Minister of Finance Boediono warned oil and gas producing regions
unsatisfied with the existing revenue split with the central
government against launching a blockade on oil and gas operations
in their areas as such a move could be disastrous for their
economies.

"The blockade move would only scare investors away. We must
realize that it's the people of the regions who will suffer
most," he told reporters Tuesday.

"This is not the time to make threats... If there's any
disagreement ... let's sit together to resolve the problem," he
added.

He said that he would meet with the protesting regions to
discuss the problem and try to prevent the blockade from
happening.

Boediono was responding to the threat made by the association
of oil and gas producing regencies (FKDPM) to blockade oil and
gas operations in their respective areas unless the government
revoked finance ministry decree No. 214/KMK.06/2002 on this
year's oil and gas revenue split between the central government
and regional administrations.

FKDPM senior official Dradjat Hadiwijoyo was quoted by the
Kompas daily as saying that the deadline for the government to
drop the decree was June 1, 2002.

The association said that oil and gas producing regions were
not satisfied with the revenue split formula set under the
finance ministry decree.

According to the Intergovernmental Fiscal Balance Law No.
25/1999, oil producing regions are entitled to 15 percent of
revenue from the commodity (the central government gets 85
percent), and 30 percent from gas (the central government gets 70
percent).

Of the 15 percent oil revenue split, the oil producing regency
administration will get 6 percent, while the remainder to be
distributed between the provincial administration and other
regencies in the province.

But FKDPM claimed that according to their calculations, based
on the finance ministry decree, the producing regions will only
get between 1 percent and 2 percent in oil revenue this year.

The oil and gas revenue split is part of the autonomy policy
launched by the government in 1999.

For eyebox

Point of dispute

Under the standard production sharing contracts, the
government takes 85 percent of contractors' oil output and 70
percent of their gas output, giving the remaining to contractors.
The government's 85 percent oil take includes 73.21 percent in
the government's oil share and 11.79 percent in corporate tax
payable by contractors, while the government's 70 percent gas
share includes 46.42 percent in the government's gas share and
23.58 percent in corporate tax payable by contractors.

Under the Intergovernmental Fiscal Balance Law No. 25/1999,
the central government delivers 15 percent of its oil share or
its after-tax oil earnings and 30 percent of its gas share or its
after tax gas earnings to the regional governments.

The 15 percent government oil share will then be distributed
to producing regencies (6 percent), non-producing regencies (6
percent) and the province (3 percent). The 30 percent government
gas share will be distributed to producing regencies (12
percent), non-producing regencies (12 percent) and the province
(6 percent).

Calculations by the association of oil and gas producing
regencies (FKDPM) made available to The Jakarta Post Tuesday
indicated that a producing regency got 6 percent of the
government's oil share or after-tax oil earnings. But, the
earning accounts for only 2.74 percent of the government's oil
take or before tax oil earnings. The association is demanding a
producing regency be given 6 percent of the government's oil take
on before-tax oil earnings.