EXCLUSIVE: Govt to oblige oil and gas investors to offer 10 percent shares to regions

The government was preparing a presidential decree to oblige oil and gas investors to divest up to 10 percent of its shares to the regional administrations, a senior official at the ministry of energy and mineral resources said.

Director general of oil and gas Rachmat Sudibyo said last Thursday that the draft presidential decre had been completed by the ministry and was expected to be approved by Vice President Megawati Surkarnoputri by the end of this month.

Rachmat said the policy was basically not new, as the divestment obligation was already stipulated in the production sharing contracts awarded to investors.

The presidential decree would only explain how the divestment obligation should be executed amid the decentralization era, he said.

"Under the PSC, it is called participating interest. (Under the PSC) the participating interest for national entities is set at 10 percent. In this regional autonomy era, we give priorities for the regional administrations, through the region-owned companies, (to buy the shares)," Rachmat told Petromindo.Com.

Rachmat did not provide details about the divestment obligation in the PSC, but Petromindo's data reveal the divestment obligation was stipulated in the PSCs issued from the late 1970s.

Under the PSC, oil and gas investors had to offer national companies an option to buy 10 percent stake in their contract areas at the beginning of production.

Under the contracts, state oil and gas company Pertamina holds the right to appoint companies to buy the shares, but the option will be eliminated if the appointed companies fail to excercise the option within three months.

In the past, most of the shares were offered to former President Soeharto's familly members and cronies.

The government's plan to introduce a presidential decree on the divestment obligation came amid pressure by several regions for the central government to allow them to gain shares in the oil and gas companies operating in their areas.

Several provinces which have voiced interest in acquiring shares in the oil and gas operations in their respective regions are Aceh, Irian Jaya and Riau.

Riau is seeking to obtain 70 percent shares in the joint venture with Pertamina to develop the Coastal Plains Pekanbaru (CPP) block after the current contract on the block held by PT Caltex Pacific Indonesia (CPI) expires in August this year.

CPI is equally owned by American oil and gas firm Chevron and Texaco.

President Abdurrahman Wahid has stated that the government only allows Riau to have a 20 percent stake in the joint venture.

Rachmat said the government would issue a presidential decree on the share composition in the joint venture to develop the CPP block by the end of this month.

"We hope both presidential decrees (on investors' divestment obligation and CPP) will be issued by the end of this month," Rachmat said. (Godang/Epin)