Gov’t to Get Rp11.3 trillion in Non-Tax Revenues from Pertamina

The Indonesian Government will receive Rp11.3 trillion in non-tax state revenue (PNBP) from state-owned oil and gas company Pertamina based on the signature bonus proposed to operate the Rokan Block – the largest oil and gas block in Indonesia – located in Riau province.

Special Staff of Energy and Mineral Resources Minister Hadi M. Djuraid said that Pertamina has been appointed as the operator of the block due to its more favorable proposal with the proposed signature bonus reaching US$784 million, certain work commitment amounting to US$500 million (Rp7.2 trillion), and the 8 percent discretion.

“The signature bonus means funds that the contractor must pay to the Government before the contract is signed. This aims to show seriousness and readiness of the contractor,” Hadi said, adding that Rp11.3 trillion that the Government will receive is considered the biggest amount of PNBP in one transaction so far.

Regarding potential revenue from various forms for 20 years, Hadi said that it is expected to reach around US$57 billion, excluding significant multiplier effects for regional and national economies following the hand over of the block.

The Rokan Block has many strategic values, contributing 26 percent of total national oil and gas production. The 6,220-kilometer block has 96 fields, three of which, namely Duri, Minas, and Bekasap, can potentially produce much more oil than the rest of the fields combined. Since the operation from 1971 until 31 December 2017, the block has produced approximately 11.5 billion barrels of oil.

Nevertheless, Hadi dismissed the allegation that political considerations and public pressure were involved in the decision to hand over the management of the block to Pertamina from Chevron. “The parameter set is based on economical and business factors in a framework of national interests.  It isn’t based on political and public pressure. We chose proposal with the most values and benefits for the country,” he said.

Hadi further said that before the decision was made, Chevron as the existing contractor and Pertamina were given the first opportunity to submit a proposal regarding the management of Rokan Block after it contract expires in 2021. According to him, if both proposals had not been considered feasible, the Government would conduct an open auction.

The assessment was done by 22 WK (working area) teams formed by Minister of Energy and Mineral Resources Ignasius Jonan to evaluate every oil and gas blocks whose contracts have expired, including Rokan Block. The deadline of the proposal submission was on Tuesday 31 July 2018 and the proposals themselves were evaluated by 22 WK Team, stipulated by Minister of Energy and Mineral Resources and announced in the evening on the same day.

According to Hadi, following the takeover, there are challenges, including maintaining production of the block so it can continue contributing 26 percent to the total national oil and gas production, or even contribute more. “We believe Pertamina is up to the challenges,” Hadi added.

Hadi further said that by operating the Rokan Block, Pertamina’s contribution to the national oil and gas production would increase by 60 percent. “Pertamina’s contribution this year only reaches 36 percent and next year it is expected to reach 39 percent. By 2021, Pertamina deserves on par with world top oil companies,” Hadi concluded. (ES) (RAS/EP/Naster)