Minister to issue new regulation on local PI in oil, gas block

By Godang Sitompul

Minister of Energy and Mineral Resources Sudirman Said is set to issue next week a new regulation on the participating interest (PI) of local governments in oil and gas blocks including in those whose contracts are set to expire over the next few years.

Sudirman said Wednesday the new ruling will ensure the regional government's PI in oil and gas blocks to provide economic benefits to the local people.

The new ruling will be issued as the contract of 29 oil and gas block is set to expire through to 2022. This includes the gas-rich Mahakam Block where the East Kalimantan government will have a 10 percent PI after the contract of the existing operator expires in 2017.

Existing regulation issued in 2014 only regulates PI of local government in new oil and gas blocks.

According to the planned new regulation, regional governments will have 10 percent PI in oil and gad blocks located on shore.

For working areas located offshore (over 12 miles), the central government will determine the PI of local governments.

Local governments are not allowed to team up with private investors in acquiring the PI. Local government-owned firms can team up with state owned firms or investment company of the Finance Ministry. The local firms will not be allowed in putting the PI as collateral for loans.

The PI for local government can be realized after the operator complete the first plan of development, to be offered within 60 days.

Editing by Reiner Simanjuntak