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)