Finance Ministry defends ruling on oil production split

The Ministry of Finance has defended its ruling on the share of provinces or regencies from the production of oil and gas from their areas, saying that the decision was issued in accordance with the existing oil and gas law Neraca reported on Wednesday.

Speaking to reporters in Jakarta on Tuesday, the Director General for Financial Institutions at the Ministry of Finance Darmin Nasution said that the Finance Minister?s decision on the oil and gas production split was also based on the recommendation from Minister of Energy and Mineral Resources.

"The decree was issued after Minister of Energy and Mineral Resources determined the volume of the oil production split for each region after consultation with Pertamina," he was quoted as saying.

At least 48 members of the Consultation Forum of Oil and Gas Producing Regencies threatened on Monday to block oil and gas production activities if the government refused to withdrew Finance Minister?s Decree No: 214/KMK.026/2002 on oil and gas production shares for 2002, which they said violated the oil and gas law.

According to the decree signed by Minister of Finance Boediono on May 26, the portion of oil and gas production that goes to producing areas is between two and three percent, while according to the new oil and gas law, the share of producing areas is 15 percent for oil and 30 percent for gas.

Managing director of FKDPM, Drajat Hadiwijoyo said in his office on Monday that the forum gave the government until June 1 this year to revoke the finance minister?s decree, if not all members of the consultation forum would halt oil and gas production activities in their respective regencies.

According to the new oil and gas law, 15 percent of oil production and 30 percent of gas production go to producing province. Of the 15 percent, 6 percent for regency where oil production activities are located, other 6 percent are equally split among other regencies in the province, and the other 3 percent for the provincial administration.

For gas production, the regency where the gas production is located has the right gets 12 percent of the 30 percent share from gas production, the other 12 percent for non-producing regencies, and the remaining 6 percent for the provincial administration.

The 15 percent and 30 percent share are taken from the government?s share from total oil and gas production in each area. Most of the oil production activities in the country are carried out by private oil companies under a production-sharing contract. The government generally receives 85 percent from oil output, and 65 percent from gas production, while the remaining 15 percent from oil and 35 percent from gas go to contractors.

Darmin said that the oil production split as contained in the Finance Minister?s decree was based on the actual production reported by the Ministry of Energy and Mineral Resources. "The split is calculated in rupiah, and if there is a mistake, it will be corrected in the coming disbursement," he added. (*)