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PLAN OF DEVELOPMENT:ASPECT ON THE GOVERNMENTAL POLICY
By:SARYONO HADIWIDJOYO
Head Sub Directorate Exploration & Exploitation DevelopmentDirectorate of Exploration & Exploitation
Directorate General of Oil and Gas
By:By:SARYONO HADIWIDJOYOSARYONO HADIWIDJOYO
Head Sub Directorate Head Sub Directorate Exploration & Exploitation DevelopmentExploration & Exploitation DevelopmentDirectorate of Exploration & Exploitation Directorate of Exploration & Exploitation
Directorate General of Oil and Gas Directorate General of Oil and Gas
Presented on 3rd Workshop on the Indonesian PPM Case Study Surabaya, 18 Juli 2005
Presented on 3Presented on 3rdrd Workshop on the Indonesian PPM Case Study Workshop on the Indonesian PPM Case Study Surabaya, 18 Surabaya, 18 JuliJuli 20052005
CONDITION OF OIL & GAS SECTORCONDITION OF OIL & GAS SECTOR
GLOBALIZATION :WTO, APEC,AFTA
DEVELOPING OFINDUSTRIES State revenues-Source of energytoward the domestic needs
- Form of effort- Investment- Trick of competition
INVESTIGATION TOWARD OIL AND GAS LAW- Strategic excavate object
controlled by the state affectthe livelihood of the people atlarge
- National endurance?- State Enterprise only and
integrated?- Independence, fund maintenance?
OIL
AND
GAS
LAW
-The modern ofoil and gas industries
- Transparent- Efficient- Optimum state
revenues- Aspirate toward
regional- Competition
INTERNAL CHANGE :- Regional autonomy- Law of Anti Monopoly- State Owned Companies
POLICY FRAMEWORK OIL AND GAS SECTORPolicy Constraint Strategy Objectives Policy Outcome Final Outcome
NationWelfare
Professional Competency
Building
OrganizationStructural
Reform
LegalReform
GoodGovernance
SoundEnvironment
Expanding Oil and Gas RevenueContribution In National Economy
- SustainableEconomicGrowth
- Fair And JustIncomeDistribution
Professional Competency Building-Training and Workshop-Code of Conduct-Career Development-Renumeration-Reward and PunishmentOrganizational Reform-Restructuring Program-Reorganization-Transformation-Separation Of Player And Regulator Role-Modernization-Public Participation-ResponsivenessLegal Reform-Legislation-Laws-Ministry Decrees-Business Ethics-State Policies
-Competition
-Level PlayingField
-Equal Opportunity
-Transparancy
-Accountability
-Free Trade/Investment
-Rule of Law
-Public Oriented EconomicPlatform Based On FairAnd Just Market Mechanism-Employing Science AndTechnology Progress ThatSuits Nation’s Character-Inseparable Parts OfNational SustainableDevelopment ProgramWhich Is Based On National Capabilities WhilstTaking Into AccountGlobalization Challenges-Reflects EnvironmentalProtection Policy-In Line With RegionalAutonomous Regulations
- Availability Of Oil And GasAs Energy And FeedstockResources
- Growth In PetroleumBusiness Activities
- Growth In Number Of PlayersIn Petroleum BusinessActivities
- Growth in PetroleumAcreage (New)
- Growth In InvestmentAnd OperationalExpenditures
- Expansion Of PetroleumReserves, Production AndUtilization
- Growth In Job Opportunity- Technology Transfer- Increase of Value Added- Increase Of GovernmentRevenues And Taxes
BusinessVenturesThrough :-BUMN-BUMD-Private> Local> International
-Koperasi
The 1945 Institution Art. 33
POLICY FRAMEWORK ON THE OIL AND GAS SECTORHR DEVELOPMENT AND MANAGEMENT SETTING UP THE
INSTITUTIONSETTING UP THE REGULATION
Principle (Art. 2)The implementation of Oil and Natural Gas business activities regulated hereunder shall be
based on the principles of people’s economy, integration, benefit, justice, balance, even distribution, people’s prosperity and welfare, security, safety and legal certainty as well as
environmental-oriented
Assure that the effective execution and control of the
business through the mechanism of business competition
Law 22/2001 : UPSTREAM OIL AND GAS BUSINESS ACTIVITIES
Create job opportunities, increase the just and even distribution of the people’s welfare and prosperity and
maintain the preservation of the living environment.
IMPLEMENTATION REGULATION (GOVERNMENT REGULATION)REGARDING UPSTREAM OIL AND GAS BUSINESS ACTIVITIES
Guarantee the efficiency and effectiveness of the avaibility of Oil and Natural Gas, either as energy resource or as a raw material for
domestic needs
Support and improve national capacity to be more competitive
at the national, regional, and international level.
Purpose (Art. 3)
Assure that the effective execution and control of
Exploration dan Exploitation business activities
Increase the state revenue
OIL AND GAS NEW POLICYOIL AND GAS NEW POLICY
NEWNEWPREVIOUSPREVIOUS
PLAYER
REGULATOR
SUPERVISOR
•REGULATOR• PLAYER
2001 - RECENT (LAW NO. 22/2001)1970 - 2001
BACKGROUND
• To promote national welfare
• Strategic resources play an importance role in the national economy
• An important role in giving an actual added value to increased and sustainable national economic growth
• The previous oil and gas law is no longer suitable for development oil and gas business activities
SECTOR REFORM
•Enactment of a new oil and gas law
•Ending Pertamina’s monopoly and the opening up of all aspects in the petroleum sector to create greater competition while preserving Pertamina as an important company.
•Greater pricing mechanism transparency
•Establishment of new institution for upstream and downstream petroleum regulation
•Introduction of efficiency improvements in hydrocarbon exploration and production
THE INTENTION OF THE IMPLEMENTATION
a. To assure that the effective management of Exploration and Exploitation business activities is useful, productive, highly competitive and sustainable with respect to the State’s Oil and Natural Gas which are strategic and non-renewable natural resources through open and transparent mechanism;
b. To assure that the effective management of the business of Processing, Transportation, Storage and Trading is accountable through the mechanism of appropriate, fair and transparent business competition;
c. To guarantee the efficiency and effectiveness of the availability of Oil and Natural Gas, either as energy resources or as raw material for domestic need.
d. To improve national capability towards competitive environment at the national, regional, and international levels;
e. To increase revenue thus giving maximum contribution to the national economy, and to develop and strengthen the position of Indonesian industry and trade;
f. To create job opportunities, increase the just and even distribution of the people’s welfare and prosperity and maintain the preservation of the natural environment.
THE PRINCIPLE OF OIL AND GAS LAW
1. Oil and natural gas within territory of Indonesia are a national asset, controlled by the Government.
2. Government as the mining right holder establish an Implementing Body which controls the operational management.
3. Upstream business activities shall be conducted through the cooperative contracts.
4. Downstream business activities shall be conducted through the mechanism of appropriate, fair, and transparent business competition.
CURRENT CONDITION(AFTER UU 22/2001)
PAST CONDITION(BEFORE UU 22/2001)
DIT. GEN. OIL & GAS
DIT. GEN. OIL AND GASFUNDAMENTAL
DUTIES & FUNCTIONAccording to
Pres. Decree No. 165 of 2000and others related
Regulation
LAW 22/2001 CONCERNING OIL & GAS
PERTAMINA
Imp. Body
PT. PERTAMINA(PERSERO
Reg. Body
UpstreamFunction
DownstreamFunction
PertaminaAccording to
LAW No.8 of 1971
Gov. Upstream Function
Gov. Do.streamFunction
DIT. GEN. OIL AND GASFUNDAMENTAL
DUTIES & FUNCTIONAccording to
Pres. Decree No. 165 of 2000and others related
Regulation
MANAGEMENT OF OIL AND GAS ACTIVITIES
DIT. GEN. OIL AND GASDIT. GEN. OIL AND GAS/IMPLEMENTING BODYDIT. GEN. OIL AND GASPOST CONTRACTCONTRACTPRE CONTRACT
IMPLEMENTATION REGULATION (GOVERNMENT REGULATION)REGARDING UPSTREAM OIL AND GAS BUSINESS ACTIVITIES
CONTROL AND BUSINESS (Art . 4)• The control by the state• The government as the holder of the mining authority• Business Implementing Body• Implementation of Upstream Activities
UPSTREAM BUSINESS ACTIVITIES (Art. 11-22)
• Terms & Conditions before Cooperation Contract
• Implementing contract
PUBLICT INTEREST PROTECTION (Art. 40-42)
• Maintenance of occupational health & safety and conservation of the living environment
• Development of local communities
OPTIMIZATION OF ADDED DOMESTIC VALUE (Art. 39-40)
• Utilization of domestic goods, services, technology, and engineering and design capabilities
• Used of local manpower
OPTIMIZATION OF STATE REVENUE(Art. 3, 31, 39-42)
• Technical Principle • Asset maintaince• Standardization• Term & Conditions
Higher Oil and Gas Revenue Contribution in the National Economy
• Sustainable National Economic Growth• Fair and Just Income Distribution
Nation Welfare
GOVERNMENT REGULATION ON LAW NO. 22/2001
1. GOVERNMENT REGULATION NO. 42 YEAR 2002 ON IMPLEMENTING BODY UPSTREAM OIL AND GAS BUSINESS ACTIVITIES
2. GOVERNMENT REGULATION NO. 62 YEAR 2002 ON REGULATING BODY DOWNSTREAM OIL AND GAS BUSINESS ACTIVITIES
3. GOVERNMENT REGULATION NO. 35 YEAR 2004 ON UPSTREAM OIL AND GAS BUSINESS ACTIVITIES
4. GOVERNMENT REGULATION NO. 36 YEAR 2004 ON DOWNSTREAM OIL AND GAS BUSINESS ACTIVITIES
5. GOVERNMENT REGULATION NO. 31 OF 2003 ON CHANGE OF STATUS OF THE STATE OIL AND GAS MINING COMPANY (PERTAMINA) INTO A LIMITED LIABILITY COMPANY (PERSERO)
6. DRAFT ON GOVERNMENT REGULATION ON HEALTH, SAFETY, AND ENVIRONMENT MANAGEMENT IN UPSTREAM OIL AND GAS BUSINESS ACTIVITIES
7. DRAFT ON GOVERNMENT REGULATION ON TARIFF OF STATE REVENUE NON TAX
DEVELOPMENT AND SUPERVISION OF UPSTREAM OIL AND GAS ACTIVITIES
DEVELOPMENT(DIT. GEN. OIL AND GAS)
UPSTREAM OIL & GAS ACTIVITIES
TASK AND FUNCTIONDIT. GEN. OIL AND GAS
GOV. REGULATION 42/2002
• GOVERNMENT AFFAIRS OF UPSTREAM OIL & GAS ACTIVITIES
• DETERMINATION OF POLICIES/ REGULATION ON UPSTREAM OIL & GAS ACTIVITIES
ARTICLE 39 (1)
OIL AND GAS STATE CONTROL
GOVERNMENTMANAGEMENT
BASED ON THE COOPERATIONCONTRACT
IMPLEMENTING BODY
SUPERVISION
COMPLIANCE WITH PREVAILINGLAW AND REGULATION
MINISTRY OF ENERGY & MINERALRESOURCES/DIT GEN OIL & GAS AND
OTHER RELATED MINISTRIES
ARTICLE 4 (1)
ARTICLE 4 (2)
TASK AND FUNCTIONIMPLEMENTING BODY
FOR MINISTRY OF ENERGY & MINERAL RESOURCES/ DIT. GEN. OIL & GAS
DEVELOPMENT AND SUPERVISION OF UPSTREAM OIL AND GAS ACTIVITIES
PRE CONTRACT POST CONTRACTCONTRACT
DIT. GEN. OIL AND GASDEVELOPMENT AND SUPERVISION
IMPLEMENTING BODYSUPERVISION
HIGHLIGHT OF UPSTREAM OIL AND GAS BUSINESS ACTIVITIES (LAW NO. 22/2001)
1. UPSTREAM BUSINESS ACTIVITIES (ART. 11 – 22)TERM & CONDITIONS BEFORE COOPERATION CONTRACT (KKS)TERM & CONDITIONS DURING EXECUTION KKS
2. OPTIMATION OF STATE REVENUE (ART. 3, 31, 39 – 42)ENGINEERING PRACTICESASSET MANAGEMENTSTANDARDIZATIONTERM & CONDITION
3. MASTERY AND UTILIZATION (ART. 4)OIL MASTERY BY GOVERNMENTGOVERNMENT AS THE HOLDER OF MINING RIGHTSIMPLEMENTATION OF MASTERYCONDUCT UPSTREAM BUSINESS ACTIVITIES
4. PUBLIC INTEREST PROTECTION (ART. 40 – 42)HEALTH, SAFETY, AND ENVIRONMENT MANAGEMENT
LOCAL COMMUNITY DEVELOPMENT
GUIDANCE OF UPSTREAM BUSINESS ACTIVITIES
• CONDUCT OF GOVERNMENT AFFAIRS IN THE UPSTREAM BUSINESS ACTIVITY SECTOR
• SETTING POLICY ON UPSTREAM BUSINESS ACTIVITIES
GOV. REG. ART. 86 (2)
THE CONDUCT OF GOVERNMENT AFFAIRS INCLUDE :
(GR 35 Art.87 (1))
A. PLANNING;B. LICENSING, APPROVALS, AND RECOMMENDATIONS;C. MANAGEMENT AND UTILIZATION OF OIL AND GAS DATA;D. EDUCATION AND TRAINING;E. TECHNOLOGICAL RESEARCH AND DEVELOPMENT;F. APPLICATION OF STANDARDIZATION;G. GRANTING OF ACCREDITATION;H. GRANTING OF CERTIFICATION;I. GUIDANCE OF SUPPORT INDUSTRIES/ BUSINESS ENTITIES;J. GUIDANCE OF SMALL/MEDIUM-SCALE ENTERPRISES;K. USE OF DOMESTICALLY PRODUCED GOODS AND SERVICES;L. MAINTENANCE OF OCCUPATIONAL HEALTH AND SAFETY;M. CONSERVATION OF THE NATURAL ENVIRONMENT;N. CREATION OF A CONDUCIVE INVESTMENT CLIMATE;O. MAINTENANCE OF SECURITY AND ORDER.
DETERMINATION OF POLICY REGARDING UPSTREAM BUSINESS SHALL INCLUDE REGULATION OF :
(GR 35 Art. 87 (2))
1. EXECUTION OF GENERAL SURVEYS;2. MANAGEMENT AND UTILIZATION OF OIL AND GAS DATA;3. PREPARATION, DETERMINATION, AND OFFERS AND RETURNS OF WORK AREAS;4. FORMS AND TERMS AND CONDITIONS OF COOPERATION CONTRACTS;5. EXTENSIONS OF COOPERATION CONTRACTS;
6. PLANS FOR FIRST-TIME DEVELOPMENTS OF FIELDS;
7. DEVELOPMENT OF FIELDS AND PRODUCTION OF OIL AND GAS RESERVES;8. UTILIZATION OF NATURAL GAS;9. APPLICATION OF GOOD ENGINEERING PRACTICES;10. OBLIGATION TO SURRENDER A PART OF THE CONTRACTOR’S SHARE OF OIL AND GAS TO
FULFILL DOMESTIC NEEDS (DOMESTIC MARKET OBLIGATION, DMO);11. MASTERY, DEVELOPMENT, AND APPLICATION OF OIL AND GAS TECHNOLOGY;12. OBLIGATION TO PAY STATE REVENUES;13. MANAGEMENT OF THE NATURAL ENVIRONMENT;14. OCCUPATIONAL HEALTH AND SAFETY;15. USE OF FOREIGN MANPOWER16. DEVELOPMENT OF INDONESIAN MANPOWER;17. DEVELOPMENT OF LOCAL COMMUNITIES;18. STANDARDIZATION;19. USE OF DOMESTIC GOODS, SERVICES, TECHNOLOGY, AND ENGINEERING AND DESIGN
CAPABILITIES;20. CONSERVATION OF OIL AND GAS RESOURCES AND RESERVES;21. ENTERPRISES FOR COALBED METHANE;22. OTHER ACTIVITIES IN OIL AND GAS BUSINESS ACTIVITY SECTOR, INSOFAR AS THEY
INVOLVE THE PUBLIC INTEREST.
DEFINITION
Plan of Development for one field or more integrated is intended to develop/produce HC reserves optimally by considering technical, economic and HSE aspect.
• Before implementing the law no. 22/2001,
POD Approval for the first time within an Operational Area by President Director of Pertamina
• After implementation of law no. 22 year 2001
The plan to develop the field which will be produced for the first time within an Operational Area must obtain an approval of the Minister based on the consideration from the Implementing Body (BPMIGAS) and after consultation with the Regional Government of the relevant Province (Art 21).
If it has obtained the approval for initial field development within any Operational Area does not conduct its activities in a period of a maximum of 5 (five) years after the expiration of the Exploration period, it shall be obligated to relinquish all of its Operational Area to the Minister (Art 17).
PODDevelopment purpose for one field or more integrated is intended to develop/produce HC reserve optimally by considering technical, economic and HSE aspect.
POD is proposed to BPMIGAS based on actual condition and approval by Head of BPMIGAS
POD Validity was 2 (two) years since it was
approved.
Scope of work changes or POD executing delay
without confirmation will be expired
Plan of Development (GR 35 Art.95-96)• 1st POD will be approved by the Minister after
consultation with Regional Government, while subsequent POD will only be approved by BPMIGAS.
• Failure to implement 1st POD within 5 years of its approval will result in obligation to relinquish such Working Area.
• This provision is not applicable for a gas field which at such time has not secure any sales arrangement. In such case the Minister may consider extension for such period.
STATE REVENUES
Contractors are required to pay State revenues in the form of taxes and of Non-Tax State Revenues ( GR 35 Art. 52).
Contractor may choose the provisions regarding tax payment obligations among the following options: to follow the provisions of the laws and regulations in the taxation sector that are in force at the time that the Cooperation Contract is signed; or to follow the provisions of the laws and regulations currently prevailing in the taxation sector (GR 35 Art. 53).
The division of the production of Oil and Gas from Production Sharing Contracts between the Government and the Contractor shall be done at the point of deliver (GR 35 Art. 54).
All production of Oil and Gas produced by a Contractor in a Service Contract shall be the property of the State and must be surrendered by the Contractor to the Government. (GR 35 Art. 57)
MANPOWER AFFAIRS
In meeting their manpower needs, Contractors are required to place priority on the use of Indonesian manpower, with due attention to the use of local manpower. (G.R. 35 Art. 82)
Contractors may use foreign manpower that cannot yet be fulfilled by Indonesian person .
To develop the capabilities of Indonesian workers to enable them to meet work competency standards and the qualifications of their positions, Contractors are required to carry out guidance and education and training programs for Indonesian workers. (G.R.35 Art. 83)
SAFETY, HEALTH, ENVIRONMENTAL & COMDEV
Contractors are required to ensure and abide by the provisions regarding occupational safety and health, management of the natural environment, and development of local communities (GR 35 Art 72).
In participating in the development of local communities, Contractors shall allocate funds in the formulation of each year’s annual work plan and budget. (GR 35 Art 74)
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