Regulation: The development of domestic small-scale oil refineries
Tuesday, August 16 2016 - 01:49 AM WIB
REGULATION OF THE MINISTER OF ENERGY AND MINERAL RESOURCES OF THE REPUBLIC OF INDONESIA
NUMBER 22 YEAR 2016
REGARDING
THE DEVELOPMENT OF DOMESTIC SMALL-SCALE OIL REFINERIES
BY GRACE OF GOD THE ALMIGHTY
THE MINISTER OF ENERGY AND MINERAL RESOURCES OF THE REPUBLIC OF INDONESIA,
Considering:
a. that in the framework of realizing energy security, assuring fuel oil supply, efficiency in upstream and downstream oil and natural gas business activities, reducing dependence on the import of fuel oil as well as driving up national and regional economy, it is necessary to utilize optimally crude oil and/or condensate resulting from domestic production through the development of domestic small-scale oil refineries;
b. that having regards to letter a, it is necessary to stipulate a regulation of the Minister of Energy and Mineral Resources regarding the Development of Domestic Small-scale Oil Refineries;
In view of:
1. Law Number 22 Year 2001 regarding Oil and Natural Gas (Statute Book of the Republic of Indonesia Year 2001 Number 136, Supplement to Statute Book of the Republic of Indonesia Number 4152);
2. Government Regulation Number 35 Year 2004 regarding Upstream Oil and Natural Gas Business Activities (Statute Book of the Republic of Indonesia Year 2004 Number 123, Supplement to Statute Book of the Republic of Indonesia Number 4435) as already amended several times and the latest by Government Regulation Number 55 Year 2009 regarding the Second Amendment to Government Regulation Number 35 Year 2004 concerning Upstream Oil and Natural Gas Business Activities (Statute Book of the Republic of Indonesia Year 2009 Number 128, Supplement to Statute Book of the Republic of Indonesia Number 5047);
3. Government Regulation Number 36 Year 2004 regarding Downstream Oil and Natural Gas Business Activities (Statute Book of the Republic of Indonesia Year 2004 Number 124, Supplement to Statute Book of the Republic of Indonesia Number 4436) as already amended by Government Regulation Number 30 Year 2009 regarding the Amendment to Government Regulation Number 36 Year 2004 concerning Downstream Oil and Natural Gas Business Activities (Statute Book of the Republic of Indonesia Year 2009 Number 59, Supplement to Statute Book of the Republic of Indonesia Number 4996);
4. Government Regulation Number 79 Year 2010 regarding Recoverable Operational Cost and Income Tax Treatment in the Field of Upstream Oil and Natural Gas Business Activities (Statute Book of the Republic of Indonesia Year 2010 Number 139, Supplement to Statute Book of the Republic of Indonesia Number 5173);
5. Presidential Regulation Number 68 Year 2015 regarding the Ministry of Energy and Mineral Resources (Statute Book of the Republic of Indonesia Year 2015 Number 132);
6. Presidential Regulation Number 146 Year 2015 regarding the Realization of Oil Refinery Development and Expansion in the Country (Statute Book of the Republic of Indonesia Year 2015 Number 417);
7. Regulation of the Minister of Energy and Mineral Resources Number 0007 Year 2005 regarding Requirements and Guidance for the Implementation of Business License in Downstream Oil and Natural Gas Business Activities;
8. Regulation of the Minister of Energy and Mineral Resources Number 23 Year 2012 regarding Procedures for Methodology and Formula of Indonesia Crude Oil Price (State Gazette of the Republic of Indonesia Year 2012 Number 892);
9. Regulation of the Minister of Energy and Mineral Resources Number 13 Year 2016 regarding Organization and Working Mechanism of the Ministry of Energy and Mineral Resources (State Gazette of the Republic of Indonesia Year 2016 Number 782);
To stipulate:
THE REGULATION OF THE MINISTER OF ENERGY AND MINERAL RESOURCES REGARDING THE DEVELOPMENT OF DOMESTIC SMALL-SCALE OIL REFINERIES
GENERAL
Article 1
Referred to in this regulation as:
1. Domestic Small-scale Oil Refinery hereinafter called Small-scale Oil Refinery shall be oil and/or condensate refinery along with supporting facilities in the country with the maximum capacity 20,000 (twenty thousand) BOPD (Barrel Oil Per Day).
2. Oil shall be a result of natural process in the form of hydrocarbon, which in pressure condition and atmosphere temperature is in the form of liquid or solid phase, including asphalt, candle, mineral or ozokerit, and bitumen obtained from the mining process but excluding coal or other solid hydrocarbon sediments obtained from activities not related to oil and natural gas business activities.
3. Condensate shall be liquid resulting from the condensation of natural gas phase at atmosphere pressure and temperature in the form of pentane fraction above (>C5+).
4. Fuel Oil shall be fuel oil resulting from and/or processed from oil and/or condensate.
5. Processing Business License shall be a license granted to business entity to undertake the processing of oil and/or natural gas in order to produce fuel oil as the main product.
6. Cluster shall be an area containing oil source from one working area or several adjacent working area in the framework of fulfilling supply to small-scale oil refinery.
7. Marginal Oil Field hereinafter called Marginal Oil Field shall be an oil field, which on the basis of the effective term and conditions of Production Sharing Contract has not been economical to develop in a working area with the status already producing.
8. Contractor shall be a business entity or permanent establishment stipulated to undertake exploration and exploitation in a working area on the basis of production sharing contract with the Special Working Unit Executing Upstream Oil and Natural Gas Business Activities.
9. Business Entity shall be a company in the form of legal entity, which undertakes business line permanently, continually and is established by the legislation in force as well as works and is domiciled in the territory of the Unitary State of the Republic of Indonesia.
10. Minister shall be the minister in charge of oil and natural gas affairs.
11. Director Generals shall be the Director General assigned to formulate as well as implement technical policy and standardization in the oil and natural gas sector.
12. Special Working Unit Executing Upstream Oil and Natural Gas Business Activities hereinafter called SKK Migas shall be a working unit executing the management of upstream business activities on the basis of production sharing contract under the fostering, coordination and supervision of the Minister.
The development of small-scale oil refineries shall be intended to:
a. realize energy security;
b. create efficiency in upstream and downstream oil and natural gas business activities and increase oil and/or condensate production especially from marginal oil fields;
c. increase the national fuel oil production and reduce the dependence on the import of fuel oil;
d. fulfill the fuel oil need around the location of small-scale oil refinery development; and
e. drive up national and/or regional economy.
DEVELOPMENT OF SMALL-SCALE OIL REFINERIES
Part One
General
Article 3
(1) Small-scale oil refineries may be built inside or outside cluster.
(2) The cluster as referred to in paragraph (1) shall be stipulated by the Director General by observing recommendation of the Head of SKK Migas.
(3) The recommendation of the Head of SKK Migas as referred to in paragraph (2) shall contain at least profile of production and potential of oil availability reserves as raw material.
The development of small-scale oil refineries shall be executed on the basis of processing business license in accordance with the provision of legislation.
The development of small-scale oil refineries shall be obliged to:
a. adopt technology matching the environmental management and protection provision in accordance with the provision of legislation;
b. prioritize to the utilization of domestic products in accordance with the provision of legislation; and
c. prioritize to the utilization of local human resources in accordance with qualification and competence.
In the framework of enhancing the economic feasibility, the development of small-scale oil refineries may be realized by:
a. granting fiscal or non-fiscal incentive facilities in accordance with the provision of legislation; and/or
b. integrating petrochemical production.
Development of Small-scale Oil Refineries Inside Cluster
Paragraph 1
Development Scheme
Article 7
(1) The development of small-scale oil refineries inside cluster may be executed by:
a. the government; or
b. business entities.
(2) The development of small-scale oil refineries inside cluster by the government as referred to in paragraph (1) letter a may be done on the basis of the assignment through:
a. government financing; or
b. corporate financing.
(3) The development of small-scale oil refineries inside the cluster by the business entities as referred to in paragraph (1) letter b shall be done through the selection of business entities.
Development of Small-scale Oil Refineries Inside Cluster by the Government
Article 8
(1) The development of small-scale oil refineries inside the cluster by the government shall be done by granting the assignment to PT Pertamina (Persero).
(2) The assignment to PT Pertamina (Persero) as referred to in paragraph (1) shall be done in accordance with the provision of legislation.
Development of Small-scale Oil Refineries Inside Cluster by Business Entity
Article 9
The development of small-scale oil refineries inside cluster by business entities shall be done through the selection of business entities by the Director General.
(1) In order to select the business entities as referred to in Article 9, the Director General shall establish a business entity selection team.
(2) The business entity selection team as referred to in paragraph (1) shall consist of representatives of among others:
a. the Directorate General of Oil and Natural Gas;
b. SKK Migas;
c. regulating body; and
d. Center for Oil and Natural Gas Technology Research and Development ?Lemigas?.
(3) The business entity selection team shall be assigned to:
a. formulate and prepare selection document containing at least:
1. profile of production and oil reserves potential;
2. crude assay;
3. formula of Indonesia Crude Oil Price;
b. execute selection;
c. evaluate and judge business entities;
d. submit and recommend business entities executing the development of small-scale oil refineries to the Director General; e. submit the recommendation about the formula of crude oil price for small-scale oil refineries to the Director General.
Further provision on procedures for the selection of business entities in the development of small-scale oil refineries inside cluster shall be stipulated by the Director General.
(1) Business entities interested in developing small-scale oil refineries inside cluster shall be obliged to submit interest bid to the Minister through the Director General by enclosing the administrative and technical requirements in accordance with the provision of legislation.
(2) Business entities already having processing business license shall be obliged to submit processing business license as the administrative requirement as referred to in paragraph (1).
(1) The Director General on behalf of the Minister shall stipulate business entities executing the development of small-scale oil refineries inside cluster on the basis of recommendation of the business entity selection team.
(2) In the case of only one business entity submitting interest bid, the business entity selection team shall recommend the business entity to the Director General to be stipulated as business entity executing the development of small-scale oil refinery inside cluster as long as the business entity meets the evaluation.
(3) The stipulation as referred to in paragraph (1) and paragraph (2) shall become the basis for the granting of tentative processing business license in accordance with the provision of legislation or the approval of the adjustment to processing business license.
In the case of no business entity being interested in developing small-scale oil refinery inside cluster or no business entity matching the evaluation and judgment in the selection process on the basis of result of the evaluation and judgment by the business entity selection team, the Minister may assign PT Pertamina (Persero) to build small-scale oil refinery inside cluster.
Development of Small-scale Oil Refinery Outside Cluster
Article 15
The development of small-scale oil refineries outside cluster by business entities shall be done on the basis of the management of downstream oil and natural gas business activities in accordance with the provision of legislation.
SUPPLY OF RAW MATERIAL AND THE PRICE OF OIL FOR SMALL-SCALE OIL REFINERY
Part One
Supply of Raw Material
Article 16
(1) Supply of raw material to small-scale oil refinery shall come from:
a. oil and/condensate constituting a right of the government and/or contractor; and/or
b. in specified condition, from the payment of income tax in kind in accordance with the provision of legislation.
(2) In the case of the development of small-scale oil refineries being executed inside cluster, supply of raw material in the form of oil and/or condensate as referred to in paragraph (1) shall come from fields inside the cluster, including marginal oil field.
In order to assure the operational sustainability of small-scale oil refineries, supply of raw material in the form of oil and/or condensate may come from the import.
The Price of Oil for Small-scale Oil Refinery
Article 18
(2) The formula of oil and/or condensate price as referred to in paragraph (1) shall be stipulated by considering specification of oil and/or condensate, efficiency of upstream and/or downstream business activities and/or scale of economy of refinery at the point of delivery.
The minister may stipulate a different price formula for a kind of oil and/or condensate at different point of delivery.
THE PURCHASE OF PRODUCTION OF SMALL-SCALE OIL REFINERY
Article 20
In the case of small-scale oil refinery being developed by business entity other than PT Pertamina (Persero), PT Pertamina (Persero) may act as buyer of fuel oil and/or other product.
(1) Business entities developing small-scale oil refinery may be assigned to distribute specified fuel oil around the small-scale oil refinery.
(2) The assignment of business entity to provide and distribute specified kind of fuel oil shall be done in accordance with the provision of legislation.
THE FULFILLMENT OF DOMESTIC NEED
Article 22
(1) The whole production of small-scale oil refineries shall be prioritized to the fulfillment of domestic fuel oil need.
(2) In the case of the domestic need being already fulfilled, no buyer and/or no domestic transaction agreement, the production of small-scale oil refinery may be sold to other countries in accordance with the provision of legislation.
FOSTERING AND SUPERVISION
Article 23
The Director General shall foster and supervise the development, expansion and operation of small-scale oil refineries in accordance with the provision of legislation.
Business entities developing small-scale oil refineries shall be obliged to submit report periodically to the Director General every 3 (three) months or at anytime if required.
TRANSITIONAL PROVISION
Article 25
With the enforcement of this regulation:
1. Tentative Processing Business License coming into the criteria of small-scale oil refineries already issued before the enforcement of this regulation shall be declared to remain valid until expiring.
2. Tentative Processing Business License coming into the criteria of small-scale oil refineries already issued before the enforcement of this regulation and located inside a specified cluster, shall be declared to remain valid for the cluster until the validity period thereof expires and abide by this regulation.
3. Processing Business License coming into the criteria of small-scale oil refineries already issued before the enforcement of this regulation shall be declared to remain valid until expiring and shall abide by this regulation.
CONCLUSION
Article 26
The ministerial regulation shall come into force as from the date of promulgation.
For public cognizance, the regulation shall be promulgated by placing it in State Gazette of the Republic of Indonesia.
Stipulated in Jakarta
On July 25, 2016
THE MINISTER OF ENERGY AND MINERAL RESOURCES OF THE REPUBLIC OF INDONESIA
sgd.
SUDIRMAN SAID
Promulgated in Jakarta
On August 4, 2016
THE DIRECTOR GENERAL OF LEGISLATION OF THE MINISTRY OF LAW AND HUMAN RIGHTS OF THE REPUBLIC OF INDONESIA
sgd.
WIDODO EKATJAHJANA
STATE GAZETTE OF THE REPUBLIC OF INDONESIA YEAR 2016 NUMBER 1130
The copy complies with the original text
THE MINISTRY OF ENERGY AND MINERAL RESOURCES
The Head of Legal Affairs Bureau
Hufron Asrofi