New regulation on participating interest triggers pros and cons
Monday, December 5 2016 - 01:56 AM WIB
The paper said that the minister briefed oil and gas contractors operating in the country about the new regulation on participating interest during a weekend gathering in Bali as 25 oil and gas blocks are required to offer 10 percent participating interest (PI) to regional governments next year. The new regulation is applied for both new production sharing contracts and contracts which are extended.
Important points of the new Ministerial Regulation No 37/2016 include contractors are required to offer 10 percent PI to a company owned by regional government/s. Contractors are also required to provide loans free of interest to the regional governments to finance the purchase of the PI, which would later be repaid through the local government?s share of the block?s output. The regional government-owned company is not allowed to sell the PI to other companies.
The paper quoted Syamsu Alam, Upstream Director at state-owned oil and gas firm PT Pertamina as saying that the company will implement the new regulation. The company is seeking for an extension of its contract over the ONWJ block in West Java Province, and will be ready to provide the 10 percent PI to the West Java provincial administration.
But the Indonesian Petroleum Association (IPA) has a different opinion. The paper said that IPA wants to maintain the previous business to business approach in relation to the transfer of the 10 percent PI to the regional government.
Andang Bachtiar, Secretary General of the Association of Oil and Gas Producing Regions, welcomes the new government policy, which he describes as exceeding expectation particularly with regards to the interest-free loans, but warned of contractors? compliance. (*)