Riau demands larger share in government oil revenue

Riau demands larger share in government oil revenue

JAKARTA (JP): A delegation from Riau province demanded on
Friday a change to the oil and gas bill currently being debated
by the House of Representatives to allow the province to obtain a
larger share of the government's oil and gas revenue.

The delegation, comprising the province's top academics and
officials, demanded the bill stipulate the country's provinces
would receive royalties amounting to 5 percent of oil and gas
companies' sales on top of the revenue share stipulated in the
intergovernmental fiscal balance law.

Under the intergovernmental balance law, which will be
implemented in the next fiscal year, the central government will
give local administrations 15 percent of net oil revenue and 30
percent of net gas revenue derived from their respective areas.

"We accept the revenue sharing scheme stipulated in the
intergovernmental fiscal balance law as long as it is implemented
transparently.

"But, aside from that, we demand royalties amounting to 5
percent of the sales of the oil and gas companies operating in
our areas in compensation for the loss of our natural resources
and the environmental damage caused by the oil and gas
operations," Riau vice governor Rustam S. Agus, who led the
delegation, said at a meeting with legislators and Minister of
Mines and Energy Kuntoro Mangkusubroto at the House of
Representatives.

The minister was holding a discussion with legislators on the
oil and gas bill when the delegation made the visit.

Riau, home to the country's largest private oil company, PT
Caltex Pacific Indonesia, accounts for more than half of the
country's oil output of about 1.2 million barrels of oil per day
(bpd).

The natural gas-rich Natuna islands area is also part of the
province's administrative territory.

Despite abundant hydrocarbon resources, 35 percent of the
population remain in poverty as the central government controlled
all the province's oil and gas revenue, the vice governor said.

The province's students launched a series of demonstrations in
the wake of former president Soeharto's downfall last year to
pressure the government to fulfill the province's demand for oil
and gas revenue shares.

"Our natural resources have become a curse rather than a
saving grace to us," rector of the Riau Islamic University Tengku
Dahril, who was among the delegation, told the legislators.

"In the past, any news about oil and gas discoveries in our
province would cause fear rather than happiness for our people.
They know after that their land would be appropriated and they
would lose their main sources of livelihood because of it," he
added.

Economist from the Riau University, B Isyandi, said the
province demands that the new oil and gas law give the right to
local administrations to put a representative on the board of
commissioners of the oil and gas companies operating in their
respective areas.

The law should also empower the local administration to take
part in regulating and managing the oil and gas companies,
Isyandi said.

Kuntoro said he appreciated the delegation's proposals,
promising to put them into discussion with the legislators.

"The proposals reflect the aspirations of people living in the
provinces," Kuntoro told reporters.

Kuntoro noted, however, that many of the proposals would be
better incorporated into governmental regulations, contracts or
ministerial decrees rather than law.

"Regarding having a representative on the board of
commissioners of the oil and gas companies, the demand may be
better incorporated in the contracts rather than in the law,"
Kuntoro said.

"As for royalties, the production sharing contract (PSC)
system applied to the country's oil and gas sector does not know
the royalty payment scheme. Royalty is included in the
government's 85 percent share in the revenue of oil companies."
(jsk)