Oil and gas contractors must give 10% stake to local companies

The government will make it obligatory for oil and gas contractors to divest a 10 percent stake to companies owned by regional administration under a “participating interest” scheme, the Bisnis Indonesia newspaper reported in its Tuesday edition.

This requirement is incorporated in the government’s new draft regulation on the oil and gas upstream sector.

The Bisnis claimed it received a copy of the draft government regulation.

Article 33 of the draft regulation says: “Since the approval of the plan to develop a field (oil and gas field) for the first time in an area, the contractor must offer 10 percent stake under participating interest to the company owned by regional government.”

The company, which is eligible to buy the 10 percent stake, must be established and owned by the local administration, where the oil and gas field is located. And the offer to this company is valid for 60 days.

If this company fails to acquire the 10 percent stake, the contractor has the right to offer it to other entities including state-owned companies, cooperatives or small and medium scale companies, whose entire ownership is in the hands of Indonesian citizens.

In case these national companies fail to respond the contractor’s offer within 60 days, the offer will become null and void. (*)