Gov’t Seeks Higher Revenue through Energy Contracts

Minister of Energy and Mineral Resources (ESDM) Bahlil Lahadalia delivers a statement in Washington, D.C., United States, Friday (02/20). (Photo by: BPMI of Presidential Secretariat)

In an effort to expand partnerships with several international companies operating in Indonesia while increasing state ownership and revenue, the Government has reaffirmed its commitment to strengthening national energy security and sovereignty through strategic measures.

According to Minister of Energy and Mineral Resources (ESDM) Bahlil Lahadalia, one such measure is increasing Indonesia’s shareholding in PT Freeport Indonesia from the current 51 percent to 63 percent by 2041.

“We are extending the contract to allow for early exploration by adding a 12 percent stake for the state. This 12 percent divestment will be granted at no cost, particularly for the state’s acquisition of the additional shares,” the Minister said in a statement in Washington, DC., United States, Friday (02/20).

In addition to increasing ownership, the Minister emphasized that the extension scheme must also generate higher state revenues than those in the previous period, including through optimized royalties, taxes, and contributions to the Papuan regional government as the producing region.

“The scheme will boost job creation and ensure the continuity of state revenue, including royalties from non-tax state revenue, as well as regional income,” he said.

Furthermore, Bahlil underscored that following the signing of the memorandum of understanding (MoU), the Government will proceed with technical discussions regarding Freeport’s fulfillment of administrative requirements.

Under the future exploration expansion plan, he added, funding obligations will be shared proportionally based on ownership.

“With the extension through 2041, state revenues are expected to be substantially higher than at present, including from royalties and other taxes, particularly on gold. This is to prevent any misunderstanding among the public,” Bahlil stated.

The Minister highlighted that over the past two years, the Government, MIND ID, and Freeport-McMoRan have engaged in intensive communication and negotiations to ensure the continuity of mining operations in Papua, especially as Freeport’s peak production is projected for 2035.

“We know that Freeport’s current annual production capacity, even prior to the disaster, reaches 3.2 million tons of concentrate ore rather than copper, yielding approximately 900,000 tons of copper and around 50 to 60 tons of gold,” he explained.

In the oil and gas sector, the Government is also continuing discussions with ExxonMobil regarding a possible extension of operations through 2055. The scheme includes a planned additional investment of around USD 10 billion to sustain and increase production (lifting), which currently ranges from about 170,000 to 185,000 barrels per day.

The Government emphasized that all negotiations, both in mining and in oil and gas, will be carried out in line with Article 33 of the 1945 Constitution, which mandates that natural resources be managed for the greatest benefit of the people.

“Of course, in negotiations we will prioritize the interests of the state, because Article 33 of the 1945 Constitution, as directed by the President, requires that the national interest come first,” the Minister remarked. (BPMI of Presidential Secretariat) (RIF/AW)