Diese Präsentation wurde erfolgreich gemeldet.
Wir verwenden Ihre LinkedIn Profilangaben und Informationen zu Ihren Aktivitäten, um Anzeigen zu personalisieren und Ihnen relevantere Inhalte anzuzeigen. Sie können Ihre Anzeigeneinstellungen jederzeit ändern.
February, 2018
1 | POLICY BRIEF www.pwyp-indonesia.org
HTTPS://PWYP-INDONESIA.ORG
PositionPaper
Executive Summary
Oil and ...
2 | POLICY BRIEF www.pwyp-indonesia.org
Regarding the problem of the so-called “oil and gas mafia (Mafia Migas)”,
Corrupti...
3 | POLICY BRIEF www.pwyp-indonesia.org
The draft revision of
the Oil and Gas Law
focused on some key
issues that urge to ...
4 | POLICY BRIEF www.pwyp-indonesia.org
Oil and gas planning should be arranged
based on main considerations:
a.	Inventory...
5 | POLICY BRIEF www.pwyp-indonesia.org
2. Oil and Gas Management Institution Models
In the section of oil and gas busines...
6 | POLICY BRIEF www.pwyp-indonesia.org
BUMN for Upstream Oil and Gas Management
Supervisory Body
MK Decision Number 36/PU...
7 | POLICY BRIEF www.pwyp-indonesia.org
2.3. Revenue and Taxation
State revenue and taxation mechanism from oil and gas se...
8 | POLICY BRIEF www.pwyp-indonesia.org
Implementation of transparency is key to increasing accountability of cost recover...
9 | POLICY BRIEF www.pwyp-indonesia.org
Another protection related to oil and gas business activities is land procurement ...
10 | POLICY BRIEF www.pwyp-indonesia.org
Optimizing Participating Interest
The usual problems of participating interest ar...
11 | POLICY BRIEF www.pwyp-indonesia.org
References
Mahkamah Konstitusi: Putusan MK No. 002/PUU-I/2003, Putusan MK No. 20/...
PWYP Indonesia is coalition of civil societies for transparency and accountability of
extractive resources governance in I...
Nächste SlideShare
Wird geladen in …5
×

Main Ideas of PWYP Indonesia Coalition Proposal on the Revision Oil and Gas Law Number 22 Year 2001

86 Aufrufe

Veröffentlicht am

Oil and Gas Law Number 22 Year 2001 had been fie times asked to be judicial reviewed on Constitutional Court. Currently, Oil and Gas Law being in the revision process and had been registered in National Legislation Program of House of Representatives (Prolegnas) since 2010. However, till 2018 or after nine years, the revision has not done yet, in fact it was not even discussed between Government and Parliament. Until this Position Paper is written, the draft of revision is being discussed in Legislation Body “Badan Legislatif (BALEG)”, for further to ask agreement on the plenary session of the house to be draft of Oil and Gas Bill from Parliament.

Civil society coalition of Publish What You Pay Indonesia (PWYP Indonesia) have formulated a draft of Oil and Gas Bill with its main ideas consist of Oil and Gas Planning and Reserving Aspects for Energy Security; Institutional Model of Oil and Gas Management, Endowments Funds, Environmental Impact Management and Safety Works; and also Transparency, Accountability and Public Participation aspects on the Oil and Gas Planning and Management.

  • Als Erste(r) kommentieren

  • Gehören Sie zu den Ersten, denen das gefällt!

Main Ideas of PWYP Indonesia Coalition Proposal on the Revision Oil and Gas Law Number 22 Year 2001

  1. 1. February, 2018 1 | POLICY BRIEF www.pwyp-indonesia.org HTTPS://PWYP-INDONESIA.ORG PositionPaper Executive Summary Oil and Gas Law Number 22 Year 2001 had been five times asked to be judi- cial reviewed on Constitutional Court. Currently, Oil and Gas Law being in the revision process and had been registered in National Legislation Program of House of Representatives (Prolegnas) since 2010. However, till 2018 or after nine years, the revision has not done yet, in fact it was not even discussed be- tween Government and Parliament. Until this Position Paper is written, the draft of revision is being discussed in Legislation Body “Badan Legislatif (BALEG)”, for further to ask agreement on the plenary session of the house to be draft of Oil and Gas Bill from Parliament. Civil society coalition of Publish What You Pay Indonesia (PWYP Indonesia) have formulated a draft of Oil and Gas Bill with its main ideas consist of Oil and Gas Planning and Reserving Aspects for Energy Security; Institutional Model of Oil and Gas Management, Endowments Funds, Environmental Impact Man- agement and Safety Works; and also Transparency, Accountability and Public Participation aspects on the Oil and Gas Planning and Management. Introduction Since it was enacted in 2001, Oil and Gas Law had been five times asked to be judicial reviewed on Constitutional Court with decisions: Constitutional Court Decision No. 002/PUU-I/2003, Constitutional Court Decision No. 20/PUU- V/2007, Constitutional Court Decision No. 36/PUU-X/2012, Constitutional Court Decision No. 65/PUU-X/2012, and Constitutional Court Decision No. 4/PUU-XIII/2015. Currently, Oil and Gas Law being in the revision process. But, after nine years, the revision has not done yet, in fact it was not even dis- cussed between Government and Parliament. PWYP Indonesia views that revision of Oil and Gas Law urges to be completed. There are some serious problems threatening national energy security, espe- cially in the oil and gas sectors, such as: declining reserve and production, impending energy crisis, rent seeking, uncertain institutional ever changing, environmental problems, interest and aspiration challenges from local regions, importance of endowments funds allocation, importance of transparency and accountability, and public participation in the planning and management oil and gas, both in upstream and downstream sectors. Main Ideas of PWYP Indonesia Coalition Proposal on the Revision Oil and Gas Law Number 22 Year 2001 Outline • Executive Summary • Introduction • Main Ideas of PWYP Indonesia Coalition Proposal on the Oil and Gas Bill People Initiatives Version Revision of Oil and Gas Law urges to be completed, due to some serious prob- lems which threaten- ing national energy security, declining re- serve and production, impending energy crisis, rent seeking, uncertain institutional ever changing, en- voironmental prob- lems, and .importance of transparency, accountability, and public participation in the oil and gas gover- nance. “
  2. 2. 2 | POLICY BRIEF www.pwyp-indonesia.org Regarding the problem of the so-called “oil and gas mafia (Mafia Migas)”, Corruption Eradication Commission (KPK) has found the potentials loss of state revenues around US$336,1 million (IDR4,4 trillion) due to unpaid obligatory payments by Oil and Gas Companies “Kontrak Kerja Sama (KKS) Migas” which their Work Areas “Wilayah Kerja (WK)” already terminated (ESDM Ministry press release, October 2016). Furthermore, KPK also has found that from 319 WK, there are KKS Migas on 143 WK fully paid their financial obligations. Whereas there are KKS Migas 141 WK did not per- form Environmental Based Assessment (EBA) obligations (Katadata, 2016). In the mid-stream sector, purchasing and selling of crude oil are suspected for its rent seeking practices by Mafia Migas, it is indicated by KPK’s find- ings in a bribe case on a crude oil and condensate selling from government entitlement. In the downstream sector, there are indicated any closed and inefficient crude oil procurement according to the findings of Oil and Gas Governance Reform Team (TRTKM). Oil and Gas Law is suspected causing failure to make oil and gas national industries as a buffer of energy security and driving national development. There are evidenced by, first, mismanagement of oil and gas marked no man- agement and utilization roadmap; the existing of ‘Oil and Gas Mafia’; and inefficient of cost recovery. Second, Oil and Gas Law has created a par- tial and merely revenue–oriented national energy policy, not for maintaining national energy security. At the end, Indonesia got a paradox of plenty, a condition where countries with rich resources, especially natural unrenew- able resources like oil and gas tend to have unhealthy growth, even much more worse than countries with no much resources. It can be indicated by the poverty and inequality happened in countries with abundant natural re- sources. It is a concerned condition for a country like Indonesia which in current facing impedance of energy crisis while its oil and gas reserve are declining and high dependency from oil imports. Facing a national energy security crisis, it is urgent to finalize the revision of Oil and Gas Law that bringing the spirit of harmony between regulation and policy in oil and gas sectors with another sector, like environment, forestry, farming, industry, agrarian, maritime, spatial, etc. Furthermore, it is need in- tegrated and comprehensive institutional restructuring in order to answer challenges of the national oil and gas management needs towards national energy security.
  3. 3. 3 | POLICY BRIEF www.pwyp-indonesia.org The draft revision of the Oil and Gas Law focused on some key issues that urge to put into the revision of Oil and Gas Law, which are: (1) oil and gas planning and man- agement for national energy security; (2) oil and gas institu- tionalization models; (3) environmental protection, health and safety work; (4) oil and gas endowments; (5) the role of Local Government; and (6) information disclo- sure, accountability and public participa- tion. “ Main Ideas of PWYP Indonesia Coalition Proposal on the Oil and Gas Bill People Initiatives Version Since 2010, PWYP Indonesia kept oversee the Revision of Oil and Gas Law, and in 2014 has initiated formulating draft of Oil and Gas Bill People Initiatives Version as an intellectual contribution for improving oil and gas management in Indonesia. Generally, those draft focused on some key issues that urge to put into the revision of Oil and Gas Law, which are: (1) oil and gas planning and management for national energy security; (2) oil and gas institutionalization models; (3) environmental protection, health and safety work; (4) oil and gas endowments; (5) the role of Local Government; and (6) information disclosure, accountability and public participation. 1. Oil and Gas Management Planning for National Energy Security PWYP Indonesia views that the planning has strategic and important roles in theil and gas management of Indonesia, the reasons are: first, it is important to approach an integrate and comprehensively from upstream till downstream sectors. Second, to synchronize all of the policies, particularly regarding re- serving and maintaining national energy needs as an energy security strategy. Third, harmonize oil and gas utilization and management with the policies in energy sector, economy development, social and ecological justice, spatial, lands, and sustainable development aspect. Fourthly, to change the mindset that oil and gas not only commodities for state revenue sources. Oil and gas must be treated as development assets that give assurance for economy ben- efit and prosperity for the people. The emphasize on planning aspect to the draft Oil and Gas Law Bill is an initia- tive to correct the merely exploration and exploitation nuances in current Law. Oil and gas management should use comprehensive approach from upstream to downstream, through strong institutionalization and role division, get along with development plan’s objectives, and holistic law enforcement. Therefore, in the implementation level, government should arrange and determine planning instruments first, before use oil and gas to build national energy security.
  4. 4. 4 | POLICY BRIEF www.pwyp-indonesia.org Oil and gas planning should be arranged based on main considerations: a. Inventory result data of potentials and reserves oil and gas. The inventory should consider material balance between exploration activities with its rates, and also its reserve replacement ratio. b. National Energy Policy (KEN) and National Energy General Plan (RUEN) as regulated in regulation provisions. c. Strategic Environment Review (KLHS), Environment Protection and Management Plan (RPPLH), and strategic mitigation and climate change adaptation. d. National Development Plan, both middle term and long term, in order to harmonize them with another development strategy. e. Spatial and Land Use Plan (RTRW), including land and forest use, and another area. f. Population distribution, geographical condition and local wisdoms, and social and basic human rights protection. g. Distributive, sustainable, and social justice- oriented economy development strategy. The planning should at least consist of: a. Inventory and material balance of potentials, reserves and utilization of natural oil for maintaining a balance and sustainable national development needs. b. Fulfillment national energy needs as a part of national energy security strategy that is distributed evenly, affordable, sustainable, and can anticipate the energy crisis, including transitional strategy from fossil energy sources to renewable energy sources. c. Protecting and preserving environments affected by oil and gas business activities, and climate change mitigation and adaptation. d. Indicators of oil and gas management performances in the energy policy strategy and national development policy that can be measured, monitored, and evaluated periodically. e. Oil and gas management in spatial plan, the utilization of forests and lands. f. Oil and gas management in the context of fulfilment citizen needs, geographical conditions, social justice, and human rights protection. g. The implementation of economy development that evenly distributed, integrated form upstream to downstream, sustainable, and social justice. DMO and Domestic Energy Fulfillment One of important aspects of oil and gas management planning is energy independence achievement which is related with Domestic Market Obligation (DBO). Constituional Court (MK) Decision Num- ber 002/PUU-I/2003 annulled Article 22, paragraph 1 of Law Number 22/2001. MK believes that the phrase “at most” in this article means there is only upper limit (highest percentage benchmark) without minimum limit, this is potentially used by business actors to submit DMO of its part with the lowest percentage. This is contradicting with the principle of Article 33 of the 1945 Constitution. The MK’s decision states that the article of DMO in Oil and Gas Law does not have permanent legal force. Thus, the DMO arrangement should be put in the context of planning and priorities for the ful- fillment of domestic needs. Where, the amount of DMO is regulated by the Government with the consideration of the parliament which is aligned with development planning. It is intended that the Government has no restriction in regulating the DMO provisions, as the manifestation of control and regulation functions as mandated in Article 33 of the 1945 Constitution. In addition, it is important to mandate DMO obligation to meet the national energy and industry needs, so that the national oil and gas production is not merely export oriented.
  5. 5. 5 | POLICY BRIEF www.pwyp-indonesia.org 2. Oil and Gas Management Institution Models In the section of oil and gas business activities management, PWYP Indonesia Coalition emphasize on model and mechanism aspects of oil and gas contracts implementation, and on institutional aspect in upstream and downstream sectors, and on taxation and revenue aspect, also on cost recovery. 2.1. Model and Mechanism of Oil and Gas Contracts Implementation PWYP Indonesia Coalition views that the Cooperation Contract model, both Production Sharing Contract (PSC) or Technical Assistant Contract (TAC), generally still relevance to be applied. However, it may be possible for variations, for example gross split form (excluding cost recovery scheme), or fiscal term or taxation provisions that encourage investments. The schemes that can be used are: In the tender offer process of new Work Areas or extension process, it need a standardized mechanism with clear, transparent, and accountable criteria and due diligence review process. It can eliminate dis- cretion spaces for negotiators that vulnerable to corrupted motives. In the extension of oil and gas block, the first bidding rights are prioritized for state-owned enterprises (right of first refusal), and it is necessary to set transitional mechanisms favorable to all parties in order not to cause a crisis of production and performance of oil and gas management. 2.2. institutional Forms of Oil and Gas in Upstream and Downstream Sectors Basically, mining property right owned by the state, whose management rights are the responsibility of the government (economic right). The government then established institutions in the oil and gas sectors which are mandated to running functions of utilizing, arranging, organizing, managing, and supervising oil and gas sectors. The institution is Special Enterprise (BUK) in the form of State Owned Enterprise (BUMN) to run the five function. The BUK will be monitored by a supervisory agency involving independent ele- ments. Based on Decision of MK Number 36/PUU-X/2012, the State undertakes overall oil and gas manage- ment. This means, the State owned oil and gas resources as national treasures. The state ownership then held out by Government, including: the organization of regulatory and management functions by the Min- ister of EMR, and the implementation of the management and supervision functions of the BUMN. Furthermore, organizing function according to MK Decision then translated as; Regulation Function, par- ticularly arranging regulations and provisions and also issuing permits for mining concessions. Manage- ment Function held out by BUMN as mining concession mandatary; and Supervision Function can be ap- plied for oil and gas upstream and downstream, held out by BUMN for Upstream Oil and Gas Management Body or Supervisory Body.
  6. 6. 6 | POLICY BRIEF www.pwyp-indonesia.org BUMN for Upstream Oil and Gas Management Supervisory Body MK Decision Number 36/PUU-X/2012 in its con- siderations states that supervision become one of the meaning of “state ownings” according to Arti- cle 33 UUD 1945. Beside issuing policy, managing, regulating, and organizing for its citizen prosper- ity. The changes of institutional structures do not immediately guarantee the effective performance. Another countries’ experience had showed that it need mechanisms to ensure accountability for pub- lic or among government institutions, and to mini- mize risks of corrupt practices and conflict of in- terests. Thus, supervising is one of main agendas that must be administer in the revision of Oil and Gas Law. In term of oversight, PWYP Indonesia Coalition urge the Government, particularly the President, to appoint Supervisory Body outside of BUMN as a kind of reform to create checks and balances, and to improve good governance through monitor- ing with integrity and independency. The main role of this Supervisory Body is monitoring oil and gas upstream and downstream activities hold by BUMN for Upstream Oil and Gas Management and other enterprises involved in national oil and gas man- agement. This Monitoring Body will have at least 5 people represent elements of government, civil so- ciety, academician, and business. PWYP Indonesia Coalition views that in the imple- mentation oil and gas management, both in up- stream and downstream sectors, it must be hold out integrally in a strong institutional form running by BUMN for Upstream Oil and Gas Management. It has principal mandate to ensure national energy need for oil and gas, for consumption or for sup- porting national economic activities. It has also tasks to find oil and gas strategic reserves, from domestic or foreign sources, for national energy security. In carrying out these, BUMN for Upstream Oil and Gas Management has authorities to explore and exploit Work Area intensively, and also to pro- duce oil and gas optimally by using good mining practices and to manage transparent and account- able operations. In the upstream sector, Government delegates Min- ing Concession to BUMN for Upstream Oil and Gas Management for holding out management function of oil and gas sector. When BUMN for Upstream Oil and Gas Management cannot manage by it- self, then it can collaborate with another enterprise through Cooperation Contract mechanism. In downstream sector, BUMN for Upstream Oil and Gas Management running strategic function in ful- filling national energy needs and national oil and gas utilization, ensuring the availability of supply and distribution, building infrastructures, and sta- bilizing the prices. In those contexts, BUMN for Upstream Oil and Gas Management can do them by itself or can be undertaken by the third parties. Third parties undertake should be carried out ac- cording the permits by Government (Cq. Related ministries). In other word, BUMN for Upstream Oil and Gas Management act as an aggregator, and giving recommendations to Government for permits issuing. Regarding recently BUMN Holding as a Govern- ment policy, it is possible that BUMN Holding can run partly or wholly concept of BUMN for Upstream Oil and Gas Management. However, PWYP Indo- nesia Coalition emphasize, especially in the aspect of institution, the necessity to build coordina- tion between ministries handling energy and min- eral resources with related ministries coordinat- ing BUMNs, and the necessity of better oversight from House of Representatives. One most impor- tant thing is that BUMN Holding (also will play the role as BUMN for Upstream Oil and Gas Manage- ment in this concept) must be managed efficiently, transparently, accountably, so it can compete at the global level.
  7. 7. 7 | POLICY BRIEF www.pwyp-indonesia.org 2.3. Revenue and Taxation State revenue and taxation mechanism from oil and gas sectors should be urged to overcome problems of energy distribution and access, fulfilling industry and development needs, and to improve public wealth through economic multiflier effect. The mechanism must be urged becoming more transparent, account- able and fair, by considering the utilization of that state revenue for public wealth. It needs certainty regu- lation for that taxation/revenue state, profit sharing and utilization and allocation of effective, targeted, anticipatory income to abuse, sustainability, and fulfill the principle of inter-generation benefits. In ad- dition, the utilization of state revenue should not make regions with rich natural resources in the trap of dutch desease that causing chronic dependency in oil and gas sector. Therefore, PWYP Indonesia Coalition encourages the strengthening of transparency revenue initiative through Extractive Industries Transparency Initiative (EITI) mechanism. EITI is a mechanism of state revenue reports (tax and non-tax) paid by extractive companies and received by government. Indonesia is a mem- ber of EITI since 2010 with mechanisms are regulated by Presidential Decree No. 26/2010 on Transpar- ency of State Revenue and Region Income Gained from Extractive Industries. Through EITI, it is expected that there is checks and balances between government, business entities, and the public, particularly re- garding lifting information, commodity trading, state revenue, and oil and gas profit sharing. Through EITI, it is expected that the problem of asymmetry information that can cause public mistrust can be minimized. 2.4. Cost Recovery Transparency With the new upstream oil and gas institutional model (according to the proposed PWYP Coalition of Indonesia), for Cooperation Contract still using cost recovery scheme, the monitoring will have held out by BUMN for Upstream Oil and Gas Management. Therefore, it is important to ensure the transparency in the cost recovery implementation. The closure of determining and detailing cost recovery and without standardized price can give opportunities to collusion and corruption practices as confirmed in the BPK reports. In 2013, BPK had found cost recovery deviation of USD 221,5 millions or IDR 2,25 trillion during 2010-2012[1] Investigation Reports of BPK to the cost recovery during 2010-2016, had found a shortfall in state revenue caused by the correction of cost recovery that failed being paid by KKKS. Total amount the finding during 2010–2016 reached IDR 17,64 trillion and USD 66,47 million (Totally IDR 18,24 trillion, with assumption USD 1 USD = IDR 9000). For that aberration and dispute, the public having difficulties to verify and monitor them because there were no cost recovery data that can be accessed by the public.1 1 Ananda Rizky, Dkk; PWYP Indonesia (2017).
  8. 8. 8 | POLICY BRIEF www.pwyp-indonesia.org Implementation of transparency is key to increasing accountability of cost recovery calculations paid to PSC contractors and preventing potential loss of state revenues due to potential mark-up and dispute of cost recovery calculation. Beside that, on which operational cost can be recovered, the Revision of Oil and Gas Law must regulate that the cost of environment management is excluded from cost recovery. Thus, oil and gas companies are encouraged to really manage the environment better. If there were pollution/damages of environment, the companies will have held responsible for that problems they caused and the recovery costs will be put upon them as polluter pays principle regulated by Law Number 32/2009 on Environment Protection and Preservation (UU PPLH) and another international legal instrument. 3. Protection of Environmental Impacts and Working Safety of Oil and Gas Sector Oil and Gas Law does not regulate many aspects of environmental protection in oil and gas activities. Whereas, those activities are the ones that have effects to its environments. Beside the effects caused by land clearing and risk of air, land and water pollutions, those activities also discharge greenhouse gas emission that worsen climate change. The Oil and Gas Law regulates environmental aspects in unity with aspects of occupational health and safety (K3) protection, as formulated in Article 40 paragraph (2): Business Entities or Permanent Establishments ensure the safety and health of the work and environmental management and comply with the provisions of the laws and regulations applicable in the business of Oil and Gas. While the regulation on K3 is intended to provide protection for human resources working in the oil and gas industry. Protection of K3 is carried out in accordance with existing standards and qualities, good engineering practices, and with the provisions of the prevailing laws and regulations. Therefore, the revi- sion of the Oil and Gas Law should regulate the aspect of environmental protection comprehensively and separate from the provisions of K3. The regulation of environmental aspects includes the obligations of BUMN and Business Entities to en- sure the protection and management of the environment and the obligation for certain businesses to have environmental insurance. Environmental protection and management includes prevention, mitigation and recovery activities for pollution and / or environmental damage caused by oil and gas activities. The regulation on environmental insurance is undertaken as an effort to strengthen the concept of strict liability in environmental cases as stipulated in the PPLH Law. With the regulation of financial / insurance guarantee, the company is not allowed to drill if it does not have insurance / financial guarantee with mini- mum coverage as specified in the laws and regulations.
  9. 9. 9 | POLICY BRIEF www.pwyp-indonesia.org Another protection related to oil and gas business activities is land procurement for oil and gas business interests. Article 10 (e) Law No. 2/2012 on Land Procurement for Development in Public Interest states that oil and gas activities fall into the category of development activities for the public interest. Therefore, land procurement must be subject to Law No. 2/2012. However, land procurement for oil and gas activi- ties must also considering the existence and land ownership and indigenous forest by indigenous people as strengthened by Constitutional Court Decision. Abandoned Site Restoration (ASR), which is a closure, reclamation and post-mining activity in the oil and gas sector, needs to be allocated for funding by KKKS under the supervision of SOE Managers and the Government (Cq Ministry of related affairs). This requirement must be regulated firmly through special clauses in the revision, to ensure rights accomplishment to environmental protection and management. 4. Endowment Funds What Developed countries experiences had showed that saving non-renewable natural resources fund can produce long term benefits than spend them for short term spending. This can extend the financial benefits of oil and gas extraction beyond the operation of the oil and gas fields, thus creating intergenera- tional justice. For example, in Norway in 2015, state revenues from endowment funds were bigger than the revenues from its oil and gas selling. Even in 2016, its petroleum funds assets had reached US$ 1.002 bil- lion (around IDR 10.000 trillions). Endowments of this oil and gas can also be used as development capital when oil and gas reserves have been exploited. In the momentum of Oil and Gas Law Revision, PWYP Indonesia Coalition propose two schemes of oil and gas endowment: (1) petroleum funds addressed for developing exploration to search the new reserves, infrastructures, and renewable energy sources; and (2) Sovereign Wealth Funds (SWF) in subnational level addressed for making a kind of intergenerational justice, and stabilizing regional economies. The alloca- tion of petroleum funds can be derived from government entitlement like from previous upstream business activities fee, and sovereign wealth funds can be derived from oil and gas DBH or the dividend of partici- pating interest in downstream business activities. 5. The Role of Sub National Since Reformation Era, decentralization policies implemented among others aim to provide greater au- thority to local governments to design their own regional development priorities and use natural resources to build the region. Although the management of oil and gas sector is still highly centralized, in the con- text of decentralization of local government take a greater role to manage the revenues from oil and gas through the mechanism of the Sharing Fund (DBH) of oil and gas that is transferred to the local treasury of the Central Government. The percentage of DBH for APBD of oil and gas producing regions increased significantly and had a great influence on the fiscal capacity of the regions. Thus, their APBD had have quite great risks to commodity price volatility in world markets, then the continuity of those regional development plans really influenced by a relatively unstable world markets circumstances. In that context, there must be mechanisms in those regions to minimize the effects of price volatility of commodities in world markets to regionals’ develop- ment plans and fiscal capacities through Sovereign Wealth Funds (SWF) as mentioned above.
  10. 10. 10 | POLICY BRIEF www.pwyp-indonesia.org Optimizing Participating Interest The usual problems of participating interest are that the regions cannot afford participating interest rights fully, unless they are hand in hand with private parties as investors. This caused the aims of participating interest, which is involving and giving benefits to regional governments, regional companies and local citizens, were not achieved due to cooperation scheme that more advantageous to third parties. This Oil and Gas Bills proposed the amount of participating interest scheme is 10% maximum where sub national have flexibility to take part accord with their capabilities. The Coalition encourages BUMDs to cooperate with Government financing institutions such as Government Investment Centers, State-Owned Enterprises such as PERTAMINA and others, or issue bonds to raise funds from the public. In addition, BUMDs that can take participating interest is a BUMD whose capital ownership is 100% controlled by Lo- cal Government, or can be with golden share scheme. 6. Information Disclosure, Accountability and Participation In this era, information disclosure, accountability and have become the demands of citizens, and are an important element in the administration of the state and good governance. Therefore, the revision of the Oil and Gas Law should encourage the strengthening of information disclosure, accountability and public participation in the management of oil and gas sector. It is also in line with the Government's participation in promoting global governance openness, for example through EITI and Open Government Partnership (OGP) standards. In the implementation of oil and gas sector activities, information disclosure on pro-active, periodic, or necessarily in line with the implementation of Law Number 14 of 2008 on Public Information Disclosure (UU KIP). The KIP Law requires the establishment of an Information and Documentation Management Of- ficer (PPID) in every public body, in order to fulfill the public's right to information. Information disclosure, accountability and participation are encouraged along the chain of oil and gas industry processes, up- stream and downstream sectors. In the upstream sector, transparency, accountability and participation are encouraged during the bidding process of the working area (oil and gas block contracts), exploration and exploitation processes, produc- tion and sales of oil and gas, state revenue payment, profit sharing, and allocation of oil and gas revenues. In downstream sector, they are encouraged happening while in the process of transportation, shipping and distributing oil and gas production, supplying crude oil for fuel oil, and in calculating and allocating oil and gas subsidies with its finance and distribution. The revision of the Oil and Gas Law should emphasize the importance of accessing public information to the documents and processes of the Cooperation Contracts, with respect to the interests of the parties, through the exclusion of information as regulated in Article 17 of the KIP Law. In the process of bidding and issuing contracts, they are encouraged to be fairer and more transparent, when in every processes the government is expected to argue publicly their basis of decision making. It is also helping parliaments, and also the public, to monitor the bidding and implementation processes of a oil and gas cooperation contract.
  11. 11. 11 | POLICY BRIEF www.pwyp-indonesia.org References Mahkamah Konstitusi: Putusan MK No. 002/PUU-I/2003, Putusan MK No. 20/PUU-V/2007, Putusan MK No. 36/PUU-X/2012, Putusan MK No. 65/PUU-X/2012, dan Putusan MK No. 4/PUU-XIII/2015 Martha Thertina, Ninis Chairunnisa dan EFRI R. BPK Temukan Cost Recovery Ilegal. http://www.tempo. co/read/news/2013/08/18/063505202/BPK-Temukan-Cost-Recovery-Ilegal-Rp-225-Triliun, diakses pada 17 Februari 2015. Natural Resource Fund Governance: The essentials. NRGI & Columbia Center on Sustainable Investment. New York: 2014. Hal. 12. Publish What You Pay Indonesia: Draft Usulan RUU Migas Versi Masyarakat Sipil. Jakarta: 2015. Publish What You Pay Indonesia: Lifting, Cost Recovery, and Performance of Oil and Gas Non-Tax Rev- enue. Jakarta : 2017 Editorial Team Maryati Abdullah, Dessy Eko Prayitno, Ahmad Hanafi, Desiana Samosir, Aryanto Nugroho, Meliana Lum- bantoruan, Asri Nuraeni Design & Layout Abdun Syakuur
  12. 12. PWYP Indonesia is coalition of civil societies for transparency and accountability of extractive resources governance in Indonesia. PWYP Indonesia was established in 2007, legalised under Indonesia’s law in 2012 as Yayasan Transparansi Sumberdaya Ekstraktif, and affiliates to the network of PWYP global campaign. PWYP Indonesia works in transparency and accountability along the chain of extractive resource, from development phase of contract and mining operation (publish what you pay), to the spending phase of revenue for sustainable development and social walfare (publish what you earn and how you spent). Website: pwyp-indonesia.org Email: sekretariat@pwyp-indonesia.org Facebook: Publish What You Pay Indonesia Twitter: @PWYP_INDONESIA

×