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Allotment of 10% BUMD shares in 26 Oil and Gas Blocks Processed

    The Special Task Force for Upstream Oil and Gas Business Activities (SKK Migas) noted that as of April 2021, 26 oil and gas blocks were still in the process of transferring 10% participating rights to Regional Owned Enterprises (BUMD).

Blogger Agus Purnomo in SKK Migas

    Head of the Program and Communication Division of SKK Migas Susana Kurniasih revealed, in general, the process of transferring 10% participating shares to BUMDs does take time.

"Usually the governor has not determined which BUMD will represent or the Contractor of the Same Affected Contract (KKKS) has not offered PI to the regional government," he explained.

    In addition, the other process, namely BUMDs still has to complete data according to the provisions in the applicable regulations, namely the Minister of Energy and Mineral Resources Regulation Number 37 of 2016. The Indonesian Petroleum Engineering Expert Association (IATMI) considers that there needs to be a change in the 10% Participating Interest share allocation scheme for BUMDs.

    Hadi Ismoyo, Secretary-General of IATMI who is also the President Director of PT Petrogas Jatim Utama Cendana, said that the 10% PI governance for BUMDs contained in Government Regulation Number 37 of 2016 still faces many challenges, one of which is the reduced internal rate of return (IRR) of contractors oil and gas.

    Hadi said that previously BUMDs were allowed to cooperate with partners, but this time it is not allowed. He hopes that there is a middle ground that can be taken.

"It is a legal construction as it is now, but the articles that might become a negative list for investors are corrected," he said.

    In addition, under the current regulations, the contractor must first pay for the financing.

"From the perspective of BUMD, of course, it is very profitable, but in my opinion, it is not fair. Second, sometimes because everything is borne by the contractor first, it seems that our voice is lost," said Hadi.

    From an economic point of view, this has an impact on the reduction of the contractor's IRR, especially when the bailout funds are charged without interest. Referring to the Regulation of the Minister of Energy and Mineral Resources Number 37 of 2016 concerning Provisions for Offering 10% PI in Oil and Gas Working Areas Article 12 Paragraph 5 it is stated that the return on financing as referred to in paragraph (3) is taken from the share of BUMD or regional companies from oil production and or natural gas according to the cooperation contract without interest.

    Hadi also considered that a number of payment obligations should still be carried out by BUMD as part of investment and train BUMD to be professional in running a business. Hadi also confirmed that there needs to be a re-discussion regarding the current provisions.

“It takes professionals in the oil and gas sector to implement 10% PI governance. BUMD managers must be slim and agile and fast in making and processing strategic decisions," added Hadi.

    For the East Java Region, there are still five oil and gas blocks that are currently in the process of transferring the 10% PI to BUMD. The five oil and gas blocks are the Kangean Block, the Ketapang Block, the West Madura Offshore (WMO) Block, the Tuban Block, and the Brantas Block.

    There are a number of oil and gas blocks whose contracts have expired in 2020 and have officially changed their management. Thus, the transfer of 10% participation rights to BUMD will also be carried out in the oil and gas block.

    The blocks include Block B South Jambi. Then the Salawati Block where Petrogas Ltd through its subsidiary Petrogas (Island) Ltd officially manages the Bird's Head Salawati Block in Sorong Regency, West Papua as of April 23, 2020. On the other hand, there are three oil and gas blocks whose contracts expire this year, namely the Bentu Segat Block, Rokan Block, and Long Strait Block.

 Kontan, Page-12, Wednesday, July 28, 2021

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