COORDINATING MINISTRY FOR ECONOMIC

AFFAIRS OF THE REPUBLIC OF INDONEISA

2 CONTEXTUAL
REPORT

EITI INDONESIA REPORT

2016
Back Cover
COORDINATING MINISTRY FOR ECONOMIC AFFAIRS
OF
THE REPUBLIC OF INDONESIA

EITI INDONESIA REPORT 2016

CONTEXTUAL REPORT

VOLUME TWO
 EITI
INDONESIA
REPORT 2016
 Contextual Report 2016 1

TABLE OF CONTENTS
LIST OF TABLES 3

LIST OF CHARTS 4

LIST OF FIGURES 5

LIST OF ABBREVIATIONS 6

EXECUTIVE SUMMARY 9

1 INTRODUCTION 13

2 THE GOVERNANCE OF EXTRACTIVE 14

INDUSTRY
2.1 The Overview of Upstream and Downstream 14
Activities
2.1.1 Oil and Gas Sector 14
2.1.2 Mining Sector 15
2.2 The Mandate of the 1945 Constitution of the 15
Republic of Indonesia
2.3 Legal Hierarchy of Extractive Industry 15
2.3.1 Legal Framework of Oil and Gas 15
(Migas) Mining
2.3.2 Legal Framework of Mineral and 19
Coal (Minerba) Mining
2.3.3 Other Laws and Regulations 23
Related to Extractive Industry
2.4 Fiscal Policy on Oil & Gas and Mineral & 28
Coal
2.4.1 Fiscal Policy on Oil and Gas Sector 28
2.4.2 Fiscal Policy on Mineral and Coal 32
Sector
2.5 Duties and Functions of Relevant 34
Government Agencies in the Extractive
Industry
2.6 Improving Governance Related to Extractive 35
Industry
2.6.1 Delegation of Indonesia’s 35
Integrated One Stop Service (PTSP)
2.6.2 Re-Organizing IUP through Clean 36
and Clear Certificate
2.6.3 Transparency of Beneficial 37
Ownership – Implementation of
Presidential Regulation No.13/2018
2.6.4 Regulation regarding Gross Split 38
Scheme
2.6.5 Current Status of the Revision of Oil 39
and Gas Law and Mining and Coal
Law
2.6.6 The Debate and Progress of 40
Regulation on Increasing Mineral
Value Added
2.6.7 Implementation of Share 40
Divestment Regulations
2.6.8 Contract Shifting to IUP 41
2.6.9 Draft of 6 Amandement of PP No. 41
23/2010 and Draft of Government
Regulation concerning Coal
Taxation
2.6.10 Oil Fuel 42
2.6.11 Imposition of PPN on LNG Products 43
 2

3 LICENSE AND CONTRACT 44 5.4 PT Bukit Asam (Persero) Tbk 76

3.1 Oil and Gas Mining Sector 44 5.5 PT Timah (Persero) Tbk 77
3.1.1 Applicable Contract in Oil and Gas 44 5.6 PT Perusahaan Gas Negara (Persero) Tbk 78
Sector 5.7 Establishment of Holding Companies for Oil 79
3.1.2 Establishment of Working Area 45 and Gas and Mining Companies
(WK)
3.1.3 Tender Procedure of Working Area 46 6 ENVIRONMENT AND SOCIAL 80
3.1.4 WK Offering in 2016 47 RESPONSIBILITIES
3.1.5 The Rule of One Working Area for 48
6.1 Social and Environmental Responsibilities 81
One Company
Program of the Company
3.1.6 Transfer of Participating Interest (PI) 48
6.1.1 Amount of CSR Fund 81
3.1.7 WK with Expired Contract 49
6.2 Oil and Gas Mining: Abandonment and Site 82
3.2 Mineral and Coal Mining Sector 51 Restoration Fund (ASR Fund)
3.2.1 Applicable Licenses in Mineral and 51 6.3 Mineral and Coal Mining: Reclamation and 83
Coal Mining Sector Post-Mining Guarantees
3.2.2 Establishment of Mining Area 51 6.4 People’s Mining 84
3.2.3 The Establishment of Mining Area 52 6.4.1 Illegal Mining (PETI) 84
and IUP in 2016
3.2.4 The Establishment of Mining 52
7 MANAGEMENT OF STATE REVENUE 86
Business License Area (WIUP)
GENERATED FROM EXTRACTIVE
3.2.5 Tender Procedure of Mining 52
Business License Area
INDUSTY
3.2.6 WIUP Tender and the Issuance of 53 7.1 State Financial Planning, Budgeting and 87
IUP in 2016 Audit
3.2.7 The Rule of One IUP One Company 53 7.1.1 Budget Planning 87
7.1.2 National Budgeting Approach 87
7.1.3 Outlook of Extractive Industry 88
4 CONTRIBUTION OF EXTRACTIVE 54
7.1.4 Audit Process in the Extractive 89
INDUSTRY IN INDONESIA
Industry Sector
4.1 Distribution and Potency of Extractive 54 7.2 Transfer and Payment to Local Government 89
Industry in Indonesia 7.2.1 DBH Scheme for the Extractive 90
4.1.1 Oil and Gas Sector 54 Industry
4.1.2 Coal Mining Sector 55 7.2.2 DBH Realization in 2016 91
4.1.3 Mineral Mining Sector 55 7.3 Payment from Oil and Gas Company and 92
4.2 Contribution of Oil and Gas GDP and Mining 55 Mineral and Coal Company to Local
GDP in Indonesia Government
4.3 State Revenue form Oil and Gas Sector and 57 7.3.1 Based on Local Regulation (Perda) 92
Mineral and Coal Sector 7.3.2 Commitment between Company 93
4.3.1 Oil Sector 57 and Local Government (Pemda)
4.3.2 Gas Sector 59 7.4 Current Issue of Extractive Revenue 93
4.3.3 Coal Sector 60 Management
4.3.4 Main Minerals Production 60 7.4.1 Petroleum Fund 91
4.4 Contribution of Oil and Gas Export and 61
Mineral and Coal Export 8 RECOMMENDATION 95
4.4.1 Oil & Gas and Mineral & Coal 61
Sector LIST OF REFERENCES 97
4.4.2 Export of Oil Sector by Main 63 LIST OF TERMS 100
Provinces
4.4.3 Export of Gas Sector by Main 63 APPENDIX 102
Provinces
APPENDIX 1: Matrix of Contextual Report
4.4.4 Export of Coal Sector by Main 64 102
Provinces and 2016 EITI Standard
4.5 Significant Exploration Activities 64 APPENDIX 2: List of Smelters That Have
4.6 Contribution of Extractive Industry to 65
104
Been Built and Are Still in Progress
National Employment
4.7 Contribution of Extractive Industry in the 65 APPENDIX 3: List of Contracts (KK and
Region (Several Regional Examples) PKP2B) That Have Been Amended and 106
Shift to IUPK
5 STATE-OWNED ENTERPRISES 68 APPENDIX 4: Summary of Conventional
5.1 Relationship between BUMN and the 69 Oil and Gas Working Area Offering 108
Government Results in 2016
5.1.1 Authority 69
5.1.2 Financial 69
5.2 PT Pertamina (Persero) 72
5.3 PT Aneka Tambang (Persero) Tbk 75
 Contextual Report 2016 3

LIST OF TABLES
Table 1 Matrix of Discussion Topics and Related 16 Table 31 CSR realization of PT Pertamina (Persero) 74
Laws and Regulations in the Oil and Gas Table 32 The composition of shareholders of PT 75
Sector Aneka Tambang Tbk
Table 2 Matrix of Discussion Topics and Related 20 Table 33 Retained earnings and dividend payout by 75
Laws and Regulations in the Mineral and PT Aneka Tambang Tbk
Coal Sector
Table 34 The list of subsidiaries of PT Aneka 75
Table 3 List of laws related to extractive industry 23 Tambang engaged iin the extractive sector
Table 4 Matrix of cadaster information 26 Table 35 PKBL realization of PT Aneka Tambang Tbk 76
Table 5 ESDM One Map information related to 26 Table 36 The composition of shareholders of PT 76
extractive industry Aneka Tambang Tbk
Table 6 Provisions of Perpres No. 13/2018 27 Table 37 Retained earnings and dividend payout by 76
Table 7 Tax policy in oil and gas mining sector 29 PT Aneka Tambang Tbk
Table 8 Components of gross split contract 30 Table 38 The list of subsidiaries of PT Bukit Asam Tbk 77
Table 9 Tax policy on minerba mining sector 32 engaged in the extractive sector
Table 10 Type and rate of non-tax state revenue in 32 Table 39 CSR program realization of PT Bukit Asam 77
minerba sector Tbk
Table 11 Simplification of licensing in minerba sector 35 Table 40 The composition of shareholders of PT 77
Timah Tbk
Table 12 Simplification of licensing in migas sector 36
Table 41 Retained earnings and dividend payout by 77
Table 13 Details of non-CnC IUP by province 37 PT Timah Tbk
Table 14 List of Gross Split Contracts until August 38 Table 42 The list of subsidiaries of PT Timah Tbk 78
2018 engaged in the extractive sector
Table 15 Strategic issues in the renegotiation of 41 Table 43 PKBL realization of PT Timah Tbk 78
mineral and coal industry contracts
Table 44 The composition of shareholders of PT 78
Table 16 Assesment criteria for WK of oil and gas 47 Perusahaan Gas Negara Tbk
Table 17 List of PI Transfer I 2016 48 Table 45 Retained earnings and dividend payout by 78
Table 18 List of PSC contracts that will expire before 50 PT Perusahaan Gas Negara Tbk
2024 Table 46 PKBL realization of PT PGN Tbk 79
Table 19 Authority to grant IUP – exploration and 51 Table 47 Transfer of Government shares to PT Inalum 79
production based on laws No. 4/2009 and
No. 23/2014 Table 48 Type of CSR Programmes 81
Table 20 Total mineral reserves in Indonesia in 2016 56 Table 49 CSR fund spent by reporting companies of 82
oil and gas sector
Table 21 Volume of main minerals production in 61
2012-2016 Table 50 CSR fund spent by reporting companies of 82
mineral and coal sector
Table 22 Significant oil and gas development projects 65
Table 51 Summary of reclamation guarantee and 83
Table 23 The amount of state equity participation 70 post-mining fund from 2016 EITI reporting
Table 24 Pay out ratio and dividend received by the 71 companies
government Table 52 Regulations related to People’s Mining 84
Table 25 BUMN engaged in the extractive industry 72 Table 53 Scheme of DBH for special autonomy region 91
Table 26 Retained earnings and dividend payout by 72 Table 54 Scheme of DBH SDA of general mining 91
PT Pertamina (Persero)
Table 55 Ten (10) largest recipients of migas and 92
Table 27 BBM and 3-kg LPG subsidy realization 73 minerba DBH
Table 28 Loan that forwarded to PT Pertamina 73 Table 56 Rate of PDRD 92
(Persero)
Table 57 The amount of PDRD reported by reporting 93
Table 29 The list of subsidiaries and affiliates of PT 74 companies for the period of 2016
Pertamina (Persero) engaged in the
extractive sector
Table 30 Changes in ownership of working areas of 74
PT Pertamina (Persero)
4

LIST OF CHARTS
Chart 1 Contribution of mining GDP to total national 56
GDP (at current price)
Chart 2 State revenue from the extractive industry 57
Chart 3 Oil production in 2012-2016 57
Chart 4 Oil lifting in 2012-2016 57
Chart 5 Oil production and lifting of 15 main 58
working areas
Chart 6 Oil lifting value of 15 main working areas 58
Chart 7 Gas production in 2012-2016 59
Chart 8 Gas lifting in 2012-2016 59
Chart 9 Gas production and lifting of 15 main 59
working areas
Chart 10 Gas lifting value of 15 main working areas 60
Chart 11 Coal production in 2012-2016 60
Chart 12 Coal production by producing provinces in 60
2016
Chart 13 Export value of mining sector by main 61
commodities, in billion USD
Chart 14 Export volume of mining sector by main 62
commodities, in million toons
Chart 15 Contribution of Mining Sector to Total Value 62
of National Export
Chart 16 Oil export value by provinces in 2016 63
Chart 17 Oil export volume by provinces in 2016 63
Chart 18 Gas export value by provinces in 2016 64
Chart 19 Gas export volume by provinces in 2016 64
Chart 20 Coal export by provinces in 2016 64
Chart 21 Contribution of extractive industry to 65
national employment
Chart 22 Contribution of mining and quarrying sector 66
to provincial GRDP
Chart 23 Natural resources DBH in 2016 (in billion 66
IDR)
Chart 24 Contribution of mining and quarrying sector 66
to the employment
Chart 25 Contribution of oil and gas sector and 66
mineral and coal sector to export
Chart 26 Gini index in 2016 67
Chart 27 Poverty percentage in 2016 67
Chart 28 ASR Fund Statistic 83
Chart 29 Realization of migas and minerba DBH in 91
2014-2016 (in billion IDR)
 Contextual Report 2016 5

LIST OF FIGURES
Figures 1 Upstream and downstream activities in oil 14
and gas sector
Figures 2 Upstream and downstream activities in 15
mineral and coal sector
Figures 3 Legal hierarchy of extractive industry 16
Figures 4 Three main regulations of the Minister of 21
Energy and Mineral Resources regulating
minerba mining issued in 2018

Figures 5 Cash flow in production sharing contract 30

with cost recovery scheme
Figures 6 Cash flow in gross split scheme 30
Figures 7 Roles and responsibilities of government 34
agencies in oil and gas mining sector
Figures 8 Roles and responsibilities of government 34
agencies in mineral and coal mining sector
Figures 9 The latest development of the number of 37
CnC and non-CnC companies as of
October 1, 2018
Figures 10 Roadmap of BBM one price 43
Figures 11 Two types of oil and gas working area 45
offerings
Figures 12 Flow of oil and gas working area 46
establishment
Figures 13 Flow of the tender process for oil and gas 46
working area
Figures 14 The online oil and gas WK tender 47
procedure
Figures 15 Types of mining areas 52
Figures 16 Flow of mining business license area 52
establishment
Figures 17 Flow of the tender process for WIUP 53
Figures 18 Distribution of Indonesia’s oil and gas 55
reserves
Figures 19 Distribution of coal reserves in Indonesia 55
Figures 20 Relationship between state-owned 70
enterprises and government
Figures 21 Mechanism for dividend payout by BUMN 71
Figures 22 Cash flow of state-owned oil sales and 73
BBM subsidies
Figures 23 Character of illegal miners 85
Figures 24 State revenue from the extractive industry 86
reported in LKPP
Figures 25 APBN cycle 88
Figures 26 DBH calculation and determination cycle 89
Figures 27 Scheme od DBH-SDA of oil and gas 90
6

LIST OF ABBREVIATIONS
AMDAL Analisa Mengenai Dampak Lingkungan CSR Corporate Social Responsibility
Environmental Impact Assesment CV Commanditaire Vennootschap
Antam Aneka Tambang (a mining company) DBH Dana Bagi Hasil
APDB Anggaran Pendapatan dan Belanja Daerah Revenue Sharing Fund
Local Government Revenue and Expenditure DEN Dewan Energi Nasional
Budget National Energy Council
APBN Anggaran Pendapatan dan Belanja Negara 7 Dana Hasil Produksi Batubara
State Revenue and Expenditure Budget Coal Production Fund
APBN-P Anggaran Pendapatan dan Belanja Negara DG Directorate General
Perubahan DGSA Directorate General of State Assets
Revised State Revenue and Expenditure DGT Directorate General of Taxes
Budget
DIPA Daftar Isian Pelaksanaan Anggaran
ASM Artisanal and Small-Scale Mining Budget Execution Document
ASR Adandonment and Site Restoration DKI Daerah Khusus Ibukota
ASX Australian Securities Exchange Special Capital Territory
Baleg Badan Legislatif DMO Domestic Market Obligation
Legislative Body DPD Dewan Perwakilan Daerah
BAPPENAS Badan Perencanaan Pembangunan Nasional Regional Representative Council
National Development Planning Agency DPR Dewan Perwakilan Rakyat
BBM Bahan Bakar Minyak The House of Representative
Oil Fuel DPRD Dewan Perwakilan Rakyat Daerah
BBNKB Bea Balik Nama Kendaraan Bermotor The District House of Representative
Tax on Change of Motor Vehicle Ownership DR Dana Reboisasi
BBTUD Billion British Thermal Unit perDay Reforestation Fund
BEI Bursa Efek Indonesia EGM Extraordinary General Meeting
Indonesia Stock Exchange (IDX) EITI Extractive Industries Transparency Initiative
Badan Kebijakan Fiskal EODB Ease of Doing Business
BKF
Fiscal Policy Agency
EP Exploration and Production
BKPM Badan Koordinasi Penanaman Modal
ESDM, EMR Energi dan Sumber Daya Mineral
Capital Investment Coordinating Board
Energy and Mineral Resources
BLUD Badan Layanan Umum Daerah
ETBS Equity To Be Split
Regional Public Service Agency
FATF Financial Act Task Force
BMN Barang Milik Negara
State-Owned Property FMV Fair Market Value
BO Beneficial Ownership FTP First Trance Petroleum
BP Migas Badan Pelaksana Kegiatan Usaha Hulu GDP Gross Domestic Product
Minyak dan Gas Bumi GMS General Meeting of Shareholders
Implementing Agency for Upstream Oil and GNP-SDA Gerakan Nasional Penyelamatan Sumber
Gas Business Activities Daya Alam
BPH Migas Badan Pengatur Hilir Minyak dan Gas Bumi National Movement to Save Natural
Regulatory Agency for Downstream Oil and Resources
Gas Business Activities GPFG Government Pension Fund Global
BPK Badan Pemeriksa Keuangan GRDP Gross Regional Domestic Product
Supreme Audit Board G&A General and Administrative Expense
BPKP Badan Pengawasan Keuangan dan G-20 Group of Twenty
Pembangunan Ha Hectare
BPS Badan Pusat Statistik HBA Harga Batubara Acuan
National Statistics Agency Indonesia’s Benchmark Coal Price
BPT Branch Profit Tax HIP Harga Indeks Pasar
Badan Usaha Market Index Price
BU
Business Entity HO Hinder Ordonantie
BUMD Badan Usaha Milik Daerah H2S Hydrogen Sulfide
BUMN Badan Usaha Milik Negara IBRD International Bank for Reconstruction and
BUMN-K Badan Usaha Milik Negara-Khusus Development
BUT Bentuk Usaha Tetap ICP Indonesian Crude Price
CAD Canadian Dollar IMB Izin Mendirikan Bangunan
Catatan atas Laporan Keuangan Permit Building License
CALK
Notes to Financial Statements IMF International Monetary Fund
CBM Coal Bed Methane IMTA Izin Mempergunakan Tenaga Asing
CFO Chief Financial Officer Foreign Manpower Employment Permit
CGA Chemical Grade Alumina IPO Initial Public Offering
CnC Clean and Clear IPP Izin Pinjam Pakai
COO Chief Operating Officer Borrow-to-Use License
CO 2 Carbon Dioxide IPPKH Izin Pinjam Pakai Kawasan Hutan
CR Cost Recovery Borrow-to-Use Forestry Permit
CSPA Conditional Sales Purchase Agreement IPR Izin Pertambangan Rakyat
People’s Mining Business License
 Contextual Report 2016 7

IP/PPI Indonesia Participating/Pertamina LSPOP Lampiran Surat Pemberitahuan Objek Pajak

Participating Interest Attachment of Tax Object Notification
ISIC International Standard Industrial Classification Letter
IUJP Izin Usaha Jasa Pertambangan MA Mahkamah Agung
Mining Services Business License Supreme Court
IUP Izin Usaha Pertambangan MBOPD Thousand Barrels of Oil Per Day
Mining Business License MDM Migas Data Management
IUPK Izin Usaha Pertambangan Khusus Oil & Gas Data Management
Special Mining Business License Migas Minyak dan Gas Bumi
Jamali Jawa Madura Bali Oil and Gas
JBKP Jenis BBM Khusus Penugasan Minerba Mineral dan Batubara
Special Fuel Type for Assignment Mineral and Coal
JBT Jenis BBM Tertentu MMBTU Million British Thermal Units
Certain Type of Fuel MMSCFD Million Standard Cubic Feet Per Day
JICA Japan International Cooperation Agency MMSTB Million Stock Tank Barrels
JOB Joint Operation Body MNK Migas Non-Konvensional
Kab. Kabupaten Non-Conventional Oil and Gas
Regency MoEMR The Ministry of Energy and Mineral
KAP Kantor Akuntan Publik Resources
Public Accounting Firm MoF The Ministry of Forestry
KB Kurang Bayar MoHA The Ministry of Home Affairs
Underpay MSCF Thousand Standard Cubic Feet
Kemenkumh Kementerian Hukum dan Hak Asasi Manusia MTEF Medium-term Expenditure Framework
am Ministry of Law and Human Rights M&P Maurel & Prom (an oil and gas company)
Kepmen Keputusan Menteri NPI Nickel Pig Iron, a low grade ferronickel
The Decision of the Minister
NPWP Nomor Pokok Wajib Pajak
Kg Kilogram Taxpayer Identification Number
KI Kredit Investasi OP Operasi Produksi
Investment Credit Production Operation
KIP Komite Informasi Pusat OSS Online Single Submission
Central Information Commission
PBB Pajak Bumi dan Bangunan
KK Kontrak Karya Land and Building Tax
Contract of Work
PBB Performance Based Budgeting
KKKS, K3S Kontraktor Kontrak Kerja Sama
PBBKB Pajak Bahan Bakar Kendaraan Bermotor
Cooperation Contract Contractor
Motor Vehicle Fuel Tax
KKS Kontrak Kerja Sama
PDRD Pajak Daerah dan Retribusi Daerah
Cooperation Contract
Local Tax and Retribution
Korsup Koordinasi dan Supervisi
Pemda Pemerintah Daerah
Coordination and Supervision
Local Government
KP Kuasa Pertambangan
Pemkab Pemerintah Kabupaten
Mining Authorization
Regency Government
KPJM Kerangka Pengeluaran Jangka Menengah
Pemkot Pemerintah Kota
Medium Term Expenditure Framework
Municipality Government
KPK Komisi Pemberantasan Korupsi
Pemprov Pemerintah Provinsi
Corruption Eradication Commission
Province Government
KSO Kerja Sama Operasi Perda Peraturan Daerah
Operation Cooperation Local (government) Regulation
KSO Kerja Sama Operasi Permen Peraturan Menteri
KSP Kerja Sama Pemanfaatan The Regulation of the Minister
Utilization Cooperation Permendagri Peraturan Menteri Dalam Negeri
K/L Kementerian/Lembaga The Regulation of the Minister of Home
Ministry/Institution Affairs
LAK Laporan Arus Kas Permenhut Peraturan Menteri Kehutanan
Cash Flow Report The Regulation of the Minister of Forestry
LAKIP Laporan Akuntabilitas Kinerja Instansi Perpres Peraturan Presiden
Pemerintah Presidential Regulation
Performance Accountability Report of Pertagas PT Pertamina Gas (a gas company)
Government Institution
PETI Pertambangan Tanpa Izin
LB Lebih Bayar Illegal Mining
Overpay
PGN Perusahaan Gas Negara
LKPP Laporan Keuangan Pemerintah Pusat
Central Government Financial Statements PHT Penjualan Hasil Tambang
LNG Sales Revenue Share
Liquefied Natural Gas
PI Participating Interest
LPG Liquefied Petroleum Gas
PKB Pajak Kendaraan Bermotor
LRA Laporan Realisasi Anggaran Motor Vehicle Tax
Budget Realization Report
8

PKBL Program Kemitraan dan Bina Lingkungan RUU Rancangan Undang-Undang

Partnership and Community Development Bill Draft
Program SAP Standar Akuntansi Pemerintahan
PKP2B Perjanjian Karya Pengusahaan Pertambangan Government Accounting Standards
Batubara SBI Sertifikat Bank Indonesia
Coal Mining Business Working Agreement Bank Indonesia Certificates
PLN Perusahaan Listrik Negara (an Indonesian electric SDA Sumber Daya Alam
company) Natural Resources
PLTU Pembangkit Listrik Tenaga Uap SE Surat Edaran
Steam Power Plant Circular Letter
PMA Penanaman Modal Asing SGA Smelter Grade Alumina
Foreign Investment SIMPONI Sistem Informasi Penerimaan Negara Bukan Pajak
PMDN Penanaman Modal Dalam Negeri Online
Domestic Investment Online Non-Tax State Revenue Information System
PMK Peraturan Menteri Keuangan SKK Satuan Kerja Khusus Pelaksana Kegiatan Usaha Hulu
The Regulation of the Minister of Finance Migas Minyak dan Gas Bumi
PMN Penyertaan Modal Negara Special Unit for Upstream Oil and Gas Business
State Equity Participation Activities
PNBP Penerimaan Negara Bukan Pajak SKUP Surat Kemampuan Usaha Penunjang
Non-Tax State Revenue Supporting Business Ability Certificate
POD Plan of Development SPOP Surat Pemberitahuan Objek Pajak
POR Pay Out Ratio Tax Object Notification Letter
PP Peraturan Pemerintah SPBG Stasiun Pengisian Bahan Bakar Gas
Government Regulation Gas Refueling Station
PPh Pajak Penghasilan SPT Surat Pemberitahuan Tahunan
Income Tax Annual Tax Return
PPID Pejabat Pengelola Informasi dan Dokumentasi TAC Technical Assistance Contract
Information and Documentation Management TPY Tons per Year
Officer TSCF Triliun Standard Cubic Feet
PP INSW Pengelola Portal Indonesia National Single UNDP United Nations Development Programme
Window USD, US$ United States Dollar
Administrator of Indonesia National Single WIUP Wilayah Izin Usaha Pertambangan
Window Portal Mining Business License Area
PPN Pajak Pertambahan Nilai WIUPK Wilayah Izin Usaha Pertambangan Khusus
Value Added Tax Special Mining Business License Area
PPN Perencanaan Pembangunan Nasional WK Wilayah Kerja
National Development Planning Working Area
PPnBM Pajak Penjualan atas Barang Mewah WP Wilayah Pertambangan
Sales Tax for Luxury Goods Mining Area
Prov. Province WPN Wilayah Pencadangan Negara
PSC Production Sharing Contract State Reserve Area
PSDH Provisi Sumber Daya Hutan WPR Wilayah Pertambangan Rakyat
Forest Resource Rent Provision People’s Mining Area
PSO Public Service Obligation WUP Wilayah Usaha Pertambangan
PTFI PT Freeport Indonesia (a mining company) Mining Business Area
PTK Pedoman Tata Kerja WUPK Wilayah Usaha Pertambangan Khusus
Work Procedure Guidelines Special Mining Business Area
PTSP Pelayanan Terpadu Satu Pintu 3T Terdepan,Terluar dan Tertinggal
Indonesia’s Integrated One Stop Service Frontier, Outermost and Least Developed (Region)
Raperda Rancangan Peraturan Daerah
Local Regulation Draft
Renstra Rencana Strategis
Strategic Plan
RKAB Rencana Kerja dan Anggaran Belanja
Work and Budget Plan
RKBI Rencana Kebutuhan Barang Impor
Needs Plan for Imported Goods
Rp, IDR Rupiah, Indonesian Rupiah
Ruang Pelayanan Informasi Investasi Terpadu
RPIIT
Integrated Investment Information Service Room
Rencana Pembangunan Jangka Menengah
RPJMN Nasional
National Medium-Term Development Plan
Rencana Pembangunan Jangka Panjang Nasional
RPJPN
National Long-Term Development Plan
Rencana Penggunaan Tenaga Kerja Asing
RPTKA
Foreign Manpower Utilization Plan
 Contextual Report 2016 9

EXECUTIVE SUMMARY
The contextual annual report is prepared with the aim that the 1. Introduction of EITI;
wider community can better understand the extractive 2. Governance of the Extractive Industry;
industry sector in Indonesia as well as current issues related to 3. License and Contract;
extractive industry. The Contextual Report provides additional 4. Contribution of the Extractive Industry;
information in accordance with the 2016 EITI Standard on how 5. Role of BUMN;
the extractive sector is regulated, including the explanation of 6. Environmental and Social Responsibilities;
the contract regime and licensing procedure, production data 7. Management of Revenue from Extractive Industry; and
and revenue allocation. 8. Recommendation

In 2016, the government made a breakthrough to increase The first chapter provides a background on EITI, namely a
transparency in the management of the extractive industry global initiative aimed at encouraging transparency of income
sector. The first is the tender system for oil and gas working and extractive industry management information. As a country
areas and the submission of business licenses in the mining rich in natural resources, Indonesia seeks to manage extractive
sector with an online system. This online system is expected industry properly, one of which is by implementing the EITI
to accelerate and simplify business licensing. Second, the International standard based on the Presidential Regulation
issuance of Presidential Regulation No. 13/2018 which Number 26 of 2010 concerning Transparency of
requires each corporation to provide detailed information on National/Local Extractive Industry Revenues.
the beneficial owner and appoint officials or employees to
implement the principle of recognizing beneficial owners. Second chapter The governance of extractive industry in
Indonesia is guided by the Article 33 of 1945 Constitution
Based on the 2016 EITI standard and input from the which is then implemented through the statutory provisions of
Implementation Team, the Contextual Report covers several the extractive industry, namely Law No. 22/2001 concerning
discussion topics which are divided into 8 chapters, namely: Oil and Gas and Law No. 4/2009 concerning Mineral and Coal
Mining.
 10

In the oil and gas sector, there is a new mechanism for 2. Cadastre Information
production sharing contract between the government and The Ministry of Energy and Mineral Resources has
contractor, since the issuance of the Regulation of the Minister published a web-based information system (ESDM One
of Energy and Mineral Resources No. 8/2017 which is then Map: http://geoportal.esdm.go.id) that is able to display
amended by the Regulation of the Minister of Energy and various information on thematic maps of the ESDM sector
Mineral Resources No. 52/2017 concerning Gross Split online. However, this application does not yet contain
Production Sharing Contract. In order to provide law certainty information on the date of application, date of license /
in tax aspect, the government issued Government Regulation contract (date of award) and duration of license / contract
No. 53/2017 concerning Tax Treatment for the Gross Split as required by the EITI standard. To meet the EITI
Contract. In this government regulation, the government standard, information on the validity date and expiration
provides tax provisions for gross split production sharing of PSC and IUP contracts, is accommodated in the
contract, including the arrangement for production cost such reporting form submitted by the reporting company which
as depreciation as a tax deduction component and a number can be accessed at http://portal-
of tax incentives such as the exemption of import duty, PPN ekstraktif.ekon.go.id/license.
and PPnBM for the acquisition and utilization of oil and gas
operating services at the exploration and exploitation stage 3. Disclosure of Beneficial Ownership (BO)
until the start of production. In March 2018, the government issued Presidential
Regulation No.13 / 2018 concerning the Principles of
In the mineral and coal mining sector, the Government Recognizing Benefit Owners of Corporations in the
through the Ministry of Energy and Mineral Resources Context of Prevention and Eradication of Money
simplified all Ministerial Regulations into only three Laundering and Terrorism Crimes. To implement
regulations. The three main regulations of the Minerba sector Presidential Regulation No. 13/2018, Ministry of Energy
are designed to cover the three main substances related to and Mineral Resources issued the Decision of the Minister
Minerba mining, namely: of Energy and Mineral Resources No. 1796 K / 30 / MEM /
2018 which stipulates that as a requirement for issuing
1. Regulation of the Minister of Energy and Mineral licenses, business entities must provide information on the
Resources No.11 / 2018 and No. 22 / 2017 related to register of shareholders up to the individual of final
substances of area, licensing, and reporting on minerba beneficial owner.
mining business activities.
2. Regulation of the Minister of Energy and Mineral This chapter also discusses the government's efforts to
Resources No. 25/2018 related to the substance of improve the governance of extractive industry including by
business implementation in minerba mining business establishing an Indonesia’s Integrated One Stop Service
activities, including the Coal DMO policy. (PTSP) and applying online licensing.
3. Regulation of the Minister of Energy and Mineral
Resources No. 26/2018 related to the substance of Current challenges and issues related to extractive industry
supervision on minerba mining business activities. governance are also discussed in this chapter, including: i)
Transparency of beneficial ownership as an implementation of
In addition to the above ministerial regulations, in 2018 the Presidential Regulation No. 13/2018; ii) Problem related to
government issued the Regulation of the Minister of Energy regulation regarding gross split scheme; iii) Current status of
and Mineral Resources No. 43/2018 concerning Amendment the revision of Migas and Minerba Laws; iv) Implementation of
to the Regulation of the Minister of Energy and Mineral share divestment regulation, especially in minerba sector; and
Resources No. 09/2017 regarding Procedure for Divesting v) Supply and distribution of BBM as well as the
Shares and Divestment Share Pricing Mechanism. In this implementation of BBM one price.
Permen, the price of the divestment share is calculated based
on fair market value by calculating the amount of reserves that Third chapter There is no change in provisions in oil and
can be mined during the IUP of the production operation gas working area tender procedure since the publication of
period. the 2015 EITI Report. The most recent thing reported is that
the oil and gas WK tender procedure currently carried out
This chapter also discusses several regulations and the online. The online tender was done as an effort to facilitate
implementation of disclosure of some information which, investors in participating in the tender process. However, in
according to the provisions of the 2016 EITI Standard, is 2016, none of the companies won the oil and gas WK tender.
information that is open to the public, including: The low interest of investors in the oil and gas WK tender is
due to the fact that besides the unstable oil price in 2016,
1. Contract Disclosure some investors still needed time to consider the changes from
Currently, Production Sharing Contract (PSC) documents the PSC contract to the Gross Split contract.
of oil and gas companies, Contract of Work (KK)
documents of mineral mining companies, Coal Mining Meanwhile, in the mining sector, there is a new provision in
Business Working Agreement (PKP2B) documents of coal mining business license area (WIUP) tender procedure that is
mining companies and Mining Business License (IUP) regulated in the Regulation of the Minister of Energy and
documents of minerba companies are still not disclosed in Mineral Resources No. 11/2018 which is then amended by the
this report. Even though, the decision of the Central Regulation of the Minister of Energy and Mineral Resources
Information Commission (KIP) states that these documents No. 22/2018, in which tender is determined by the Minister of
are open documents. Energy and Mineral Resources and Governor in accordance
with the authorization area. No tender taken place in 2016
For the oil and gas sector, there is a Supreme Court (MA) because the Government determined new mining area in
decision which rejects KIP's appeal regarding the decision 2017.
of the District Court of Jakarta Selatan that granted the
claim of BP Migas (now SKK Migas) regarding the Fourth chapter The extractive industry contribution to the
cancellation of KIP's decision. national economy in 2016 tended to decline compared to
previous years. The extractive industry's contribution to total
For the mineral and coal sector, the Directorate General GDP in 2016 was 7% compared to 2015 which was 8% of the
of Mineral and Coal has not been able to disclose the total national GDP. The effect of the recovery of non-oil and
contracts to the public because it is related to civil aspects gas commodity prices in 2016 indirectly affected the increase
of the contract. in production of non-oil and gas commodities sector in 2016
compared to the previous year. Meanwhile, GDP of mining
sector still under pressure of oil price that has not recovered in
2016.
 Contextual Report 2016 11

The effect of the recovery of non-oil and gas commodity concerning Addition of State Equity Participation of the
prices in 2016 indirectly affected the increase in production of Republic of Indonesia into the Share Capital of PT Inalum
non-oil and gas commodities sector in 2016 compared to the (Persero).
previous year. Meanwhile, GDP of mining sector still under
pressure of oil price that has not recovered in 2016. As for the oil and gas sector, the oil and gas BUMN Holding
was officially established with Pertamina as the holding
Nominally, in 2016 the total revenue from extractive industry company and PGN as a holding member. On April 11, 2018,
decreased by 31% to 159,4 trillion IDR from the previous year an agreement on the transfer of rights on state shares has
which amounted to 232,4 trillion IDR. Overall in the period of been signed, in which 56.96% of government B series shares
2012-2016, revenue from extractive industry in 2016 at PGN was transferred to Pertamina. This is in line with the
decreased by 61% from 2012. The decline was largely issuance of Government Regulation No. 6/2018 concerning
influenced by the declining of oil and mining commodity the Addition of the State Equity Participation of the Republic
prices. of Indonesia to the Share Capital of PT Pertamina (Persero).

In 2016, the mining export contribution to the total national Sixth chapter Environmental and social responsibilities of
export was quite significant, amounting to 21%. The mining extractive industry companies in Indonesia are regulated by
export was dominated by the export of oil, gas and coal. Oil various laws, government regulations and ministerial
and gas exports contributed around 8% of the total value of regulations. Companies are obliged to provide a number of
national export while the value of coal export reached 10% of funds that are used as collateral for the cost of environmental
the total value of national export. The largest contributor to oil restoration / reclamation called the Abandonment and Site
export in 2016 was Riau Province with an export value of US Restoration Fund (ASR) for oil and gas companies, and the
$2,254 million and the largest contributor to gas export was Reclamation Guarantee and Post-Mining Funds for mineral
Kalimantan Timur Province with an export value of US $2,782 and coal companies.
million. Kalimantan Timur Province was the largest contributor
to coal export in 2016 with coal export contributing 58% of Until 2016, oil and gas ASR fund collected in bank accounts
total national coal export. amounted to US$901 million with details: i)Bank Negara
Indonesia amounting to US$322.47 million, ii)Bank Rakyat
The mining sector has an important role in the regions’ Indonesia amounting to US$285.13 million, and iii) Bank
economy, especially in mine producing areas, with a Mandiri amounting to US$293.16 million.
contribution of 20-43% of GRDP.
As for the mineral and coal sector, until now there has been
Fifth chapter The State-Owned Enterprises (BUMN) no information that can be accessed by the public regarding
discussed in this report are PT Pertamina, PT Aneka Tambang, the total amount of reclamation and post-mining funds paid
PT Bukit Asam, PT Timah and PT Perusahaan Gas Negara by minerba companies. The amount of reclamation guarantee
(PGN). All of these BUMN are in the form of Persero and four and post-mining funds paid by reporting companies included
BUMN, namely PT Aneka Tambang, PT Bukit Asam, PT Timah in the scope of reconciliation can be seen in the 2016 EITI
and PT PGN have been listed on the Indonesia Stock Reconciliation Report.
Exchange (IDX). The Indonesian government owns 65%
common shares and Dwiwarna shares which have veto rights Regarding Corporate Social Responsibility (CSR), every
at three Minerba BUMN, 56.97% common shares and one company incorporated as a limited liability company is
Dwiwarna share in PT PGN as well as 100% shares in PT required to carry out CSR programs (based on the Limited
Pertamina. The role of the Government in managing BUMN Liability Company Law), but the amount of CSR fund is not
engaged in extractive industry is represented by the Ministry regulated. As for BUMN, it is required to hold a Partnership
of BUMN, Ministry of Finance and the Ministry of Energy and and Community Development Program (PKBL) with a
Mineral Resources, each of which has authority in matters of maximum fund of 4% of the previous year's after-tax profit.
operational / management, capital and formulation,
stipulation and implementation of policies in the energy and Seventh chapter Management of state revenue from
mineral resources sector. extractive industry begins with planning, budgeting and
auditing processes. This section provides information about
In 2016, the government did not make additional equity the method of allocating revenues generated from extractive
participation in these 5 BUMN. Four state-owned enterprises industry to the regions.
engaged in extractive industry contributed to Rp 8.41 trillion
dividend for the Government of the Republic of Indonesia. PT All Non-tax State Revenues (PNBP) from extractive industry
Aneka Tambang (Persero) Tbk did not distribute dividend in are received in cash except for a number of revenues from the
2016 because of relatively small profit. upstream oil and gas sector related to the production sharing
contract received by the Government of Indonesia in the form
All five BUMN have an obligation to implement the of in-kind. The in-kind revenue consists of the government's
Partnership and Community Development Program (PKBL) share of oil and gas lifting and DMO (deducted by DMO fees)
and carry out public services. One form of public service related to production sharing contract which its management
carried out is a subsidy for oil fuel (BBM) by PT Pertamina authority is at SKK Migas. Tax revenue from the extractive
(Persero). PT Pertamina has a mandate from the Government sector is received entirely in cash. Since 2015, a regulation
to distribute subsidized BBM. Based on the 2016 EITI governing oil and gas tax revenue in the form of in-kind has
reporting form, Pertamina has provided BBM and 3 kgs LPG been implemented, but until now, there has been no
subsidies equivalent to Rp38,076 billion. realization of the arrangement. All state revenues from
extractive industry are deposited to the state treasury and
On November 29, 2017 the Government established a mining recorded in the Central Government Financial Statements
holding consisting of PT Inalum (Persero), PT Aneka Tambang (LKPP).
Tbk, PT Timah Tbk, and PT Bukit Asam Tbk. Three Mining
BUMNs, namely PT Antam Tbk, PT Bukit Asam Tbk, and PT This chapter also discusses the planning and budgeting
Timah Tbk held an EGMS and approved changes to the process along with the process of audit and the mechanism
Company's Articles of Association related to the change in the for allocating state revenue from extractive industry between
status of the Companies from Persero to Non-Persero. This the central government to local government. The public can
step is in accordance with Government Regulation No. access financial notes, LKPP and audited LKPP on the official
47/2017 websites of Ministry of Finance and BPK.
 12

For the outlook of the extractive industry, the public can Eighth chapter Recommendations given to improve the
access the Ministry of Energy and Mineral Resources' Strategic level of transparency and governance in the extractive
Plan for 2015-2019 on the official website of the Ministry of industry are related to beneficial ownership, contract
Energy and Mineral Resources. disclosure, and further studies on strategic issues of extractive
industry:
Allocation of extractive revenue from central to regions is
regulated in revenue sharing fund (DBH) in accordance with 1. The Directorate General of Oil and Gas and the
Law No. 33/2004 concerning fiscal balance. The realization of Directorate General of Mineral and Coal need to
DBH of oil and gas in 2014-2016 has experienced a significant formulate technical guidelines on how to implement
decrease due to the decline in oil price in 2015-2016 to the Presidential Regulation No. 13/2018 for companies that
range of US $ 40 / barrel compared to the oil price in 2014 have obtained licenses.
which was around US $ 100 / barrel. The recipient of the 2. The time provided to identify the beneficial owner in the
largest oil DBH is Riau Province with DBH amounting to Rp1 EITI reporting period is too short. The beneficial owner
trillion. Four regencies in Riau Province included in top 10 declaration form should be sent long before the EITI
recipients of oil DBH, namely Regencies of Bengkalis, Siak, reporting reconciliation period.
Rokan Hilir and Kampar. Meanwhile, the largest recipients of 3. EITI Implementation Team to request PPID of ESDM to
gas DBH are Kalimantan Timur Province and its subsidiaries, disclose documents of contracts and licenses in
namely: its regencies of Kutai Kertanegara, Penajam Paser, accordance with the KIP’s decree No. 197/VI/KIP-PS-M-
Cities of Bontang and Samarinda. Seven areas in Kalimantan A/2011 and report PPID of ESDM to the Minister of
Timur are included in the 10 largest recipients of mineral and Energy and Mineral Resources as a member of Steering
coal DBH. Team of EITI Indonesia as well as the supervisor of PPID of
Ministry of Energy and Mineral Resources (MoEMR).
Indonesia does not yet have petroleum fund both at the 4. It is recommended to expand the scope of EITI report and
national and regional level, but several initiatives have conduct separate study to explain issues that are
emerged. At the central level, the initiative is still in the early considered as strategic issues related to the performance
stage, for example derived from the revision draft of the Oil of the extractive industry. For example, regarding the
and Gas Law prepared by DPR. While at the level of Local performance of local government in utilizing revenue
Government, The Regency of Bojonegoro has already generated from the extractive industry and special study
initiated to establish the Petroleum Fund. However, this plan regarding the comparison between production report and
is suspended while awaiting clarity on the amount of profit domestic use and export in the minerba mining sector.
from the equity participation of the Cepu Block which is still in
the BPK audit process.
 Contextual Report 2016 13

01
INTRODUCTION
Extractive Industries Transparency Initiative (EITI) is a global Indonesia then received compliant status in 2015. Until now
initiative aim to encourage the transparency of revenue and Indonesia has published the EITI Report for the scope of years
management information of extractive industry. This initiative 2009 to 2015.
can drive public debate and encourage shared understanding
among stakeholders so that it can strengthen extractive On February 23, 2016, the EITI Board approved the new EITI
industry governance systems. EITI in each country is assisted standard (2016 EITI Standard). This standard replaces the
by multi-stakeholder partnerships consisting of representatives 2013 EITI Standard. The 2016 EITI standard extends the
of relevant government agencies, non-governmental requirements for contextual information disclosure and
organizations, industry associations, representatives of State- encourages the development of corporate and government
Owned Enterprises (BUMN) and companies. In Indonesia , this reporting systems. This report uses and best meets the 2016
partnership is called the Transparency Team. EITI Standard requirements.

EITI issued a global standard that requires disclosure of KAP Heliantono dan Rekan, affiliated with Parkel Randall
information in the extractive industry value chain until how International, has been appointed as Independent
revenue from this industry can benefit the public. Such Administrator on August 28, 2018.
information includes revenue received by the government
from the company, the process of licenses / contracts This report uses the definition of extractive industry in
awarding, fiscal provisions, cadastral information and others. accordance with Presidential Regulation (Perpres) Number 26
The EITI Standard also requires an Independent Administrator of 2010 concerning Transparency of National/Local Extractive
to issue an annual report that contains the results of Industry Revenues. According to this Perpres, the definition of
reconciliation of material payments from the company and Extractive Industry is any activity that takes natural resources
those received by the government and contextual information directly from the bowels of the earth in the form of minerals,
as required by the EITI Standard. coal, oil and gas. This definition is the definition of upstream
activities in the mining industry.
Indonesia has been a candidate for EITI implementing country
since 2010 and in 2013 has published the first EITI report with
a scope of year 2009.
 14

02
THE GOVERNANCE OF EXTRACTIVE INDUSTRY
The mining industry itself is broadly divided into two types of Currently, the management of oil and gas upstream and
activities, namely: upstream business activities and downstream business activities regulated under Law No.
downstream activities. Upstream activities are business 22/2001, in which the operational implementation is
activities that are based on exploration and exploitation represented by the following institutions based on the
activities. Exploration activities are activities that aim to obtain activity sector:
information about geological conditions to find reserve
estimates. Exploitation is a series of activities aimed at • Upstream activities of oil and gas are managed by a
producing oil, gas, coal and other minerals, consisting of special unit for upstream oil and gas (SKK Migas) in
drilling/mining, construction of transportation facilities, accordance with the Presidential Regulation No.
storage, processing for separation and refining activities. 9/2013, whose duties and responsibilities are
While downstream activities are processing activities which supervised by the Supervisory Commission in
consist of purifying, enhancing quality, enhancing added accordance with the Article 3 of the regulation,
value, then transportation, storage and / or commercial consisting of:
processes. This report focuses on upstream business activities. - Chairman: Minister of Energy and Mineral Resources
- Vice Chairman: Vice Minister of Finance in charge of
This chapter includes a discussion of the governance legal state budget matters
framework that regulates the extractive industry in Indonesia, - Members: 1) Head of Investment Coordinating Board
the duties and functions of government institutions related to (BKPM); 2) Vice Minister of Energy and Mineral
extractive industry and extractive industry contracts and Resources
licensing. In addition, in the last section of this chapter we also The Supervisory Commission submit a report to the
discuss changes and improvements in extractive industry President at least once within six months (Article 5).
governance that are being carried out at the time of writing • Downstream activities of oil and gas are managed by
this report. regulatory agency for downstream oil and gas (BPH
Migas) that is in accordance with the Law No. 22/2001
2.1 The Overview of Upstream and Downstream article 46, supervises the implementation of the supply
Activities and distribution of oil fuel (BBM) and transportation of
2.1.1 Oil and Gas Sector gas through pipelines so that the availability and
distribution of fuel determined by the Government can
Upstream oil and gas activities include exploration or
be guaranteed throughout the territory of Indonesia
search for oil reserves and exploitation or drilling and
and increase the domestic utilization of gas in the
development to produce oil and gas from commercial
country.
reserves. While downstream activities include processing,
• Ministry of Energy and Mineral Resources cq. The
transportation, storage and commercial activities. Figure
Directorate General of Oil and Gas has a role in setting
1 describes the oil and gas business activities from
technical regulations of the oil and gas sector both
upstream to downstream.
upstream and downstream businesses.
Figures 1 Upstream and downstream activities in oil and gas sector

Source: various sources

 Contextual Report 2016 15

2.1.2 Mineral and Coal Sector in which everyone has the right to communicate and obtain
Similar to the oil and gas industry, the mineral and coal information and has the right to seek, obtain, possess, store,
industry also has a value chain that is categorized as process and convey information using all types of available
primary (upstream) and secondary (downstream) channels.
industries. Upstream business activities are in the form of
exploration activities aim to find and determine the More detailed discussion can be seen in the 2015 EITI Report.
values of resources, reserves, and production operation
to find mine excavation materials. While the mineral and 2.3 Legal Hierarchy of Extractive Industry
coal downstream business is in the form of processing As stipulated in Law No. 12/2011 concerning the formulation
business activities to increase the added value of mining of laws and regulations, the legal hierarchy in Indonesia
minerals, in which the first added value is to produce raw consists of the 1945 Constitution, Decree of the People's
materials / products which are then used for advanced Consultative Council, Law / Government Regulation in Lieu of
industries to produce final products. Law, Government Regulation (PP), Presidential Regulation
(Perpres), then Local Government Regulation (Perda). Figure 3
The final products of mining minerals are in the form of illustrates the legal hierarchy in the extractive industry.
finished goods products while the final products of
mining coals are energy sources for industry or for power
2.3.1 Legal Framework of Oil and Gas (Migas)
plants, factories and other industrial activities. Figure 2
illustrates the link of the mineral and coal mining Mining
business.
Figure 2 Upstream and downstream activities in mineral and coal sector

Source: Modified, Research and Development Agency of ESDM, MoEMR

2.2 The Mandate of the 1945 Constitution of the Law No.22/2001 concerning Oil and Gas becomes the
Republic of Indonesia highest legislation after the constitution in the oil and gas
mining sector. In its implementation, Law No. 22/2001,
Article 33 of the 1945 Constitution (UUD) regulates the basic has been supported by a number of regulations /
principles of family-based economic activities in Indonesia implementation instructions in the form of Government
which prioritize the principles of togetherness, efficiency, Regulations (PP), Presidential Regulations (Perpres) and
justice, continuity and environmental perspective and create Instructions, Minister of Energy and Mineral Resources
an independent nation and advance the national economy. Regulations and Decrees (Permen of ESDM and Kepmen
Article 33 is the basis of the legal framework governing of ESDM), Minister of Finance Regulations and Decrees
several provisions of legislation in extractive industry in as well as Regulations, Decrees, Instructions and Circular
Indonesia, namely Law No. 22/2001 concerning Oil and Gas Letters issued by Director General of Oil and Gas. The
and Law No. 4/2009 concerning Mineral and Coal Mining. Ministry of Energy and Mineral Resources (MoEMR) has
provided regulatory information regarding oil and gas in
Related to EITI, the amendment to the 1945 Constitution, full and can be downloaded at the link
namely Article 28F also regulates Transparency http://jdih.esdm.go.id/?page=peraturan.
16

Figure 3 Legal hierarchy of extractive industry

Source: Law No. 12/2001

Matrix of Discussion Topics and Related Laws Amendments and New Implementing
and Regulations in the Oil and Gas Sector Regulations in the Oil and Gas Sector
The EITI 2016 scope report recommends this report to Regulation of the Minister of Energy and
discuss revisions or regulations that have not been
discussed in the 2015 EITI Report. Therefore, we only
Mineral Resources No. 52/2017 concerning The
present a matrix for significant regulatory topics Amendment to the Regulation of the Minister of
according to the 2015 EITI Report without further Energy and Mineral Resources No. 8/2017
discussion which can be seen in Table 1. Then, the regarding Gross Split Production Sharing
discussion will continue for new regulations or revisions. Contract

For significant regulatory topics in accordance with the

2015 EITI Report with more in-depth details, please
check the following link http://eiti.ekon.go.id/preference-
keb Policy-perundangan-sektor-migas/.

Table 1 Matrix of Discussion Topics and Related Laws and Regulations in the Oil and Gas Sector

Topic Related Laws and Regulations Description

Control and Law No. 22/2001 Article 3 to Article 30 These regulations aim to provide a provision stating that oil
Operation PP No. 42/2002 concerning the and gas are national assets controlled by the state which are
Implementing Agency for Upstream Oil operated by the Government as Mining Authorities that form
and Gas Business Activities the Implementing Agency. The Government's presence is
PP No. 30/2009 concerning the Second represented by SKK Migas and BPH Migas. The
Amendment to PP No. 36/2004 characteristics of the cooperation contracts are also
concerning Downstream Oil and Gas emphasized in these regulations.
Business Activities
Perpres No. 95/2012 concerning
Transfer of Duties and Functions of
Upstream Oil and Gas Business Activities
Perpres No. 9/2013 concerning the
Implementation of Management of
Upstream Oil and Gas Business Activities
Permen of ESDM No. 48/2017
concerning Business Supervision in the
Energy and Mineral Resources Sector
Permen of ESDM No. 4/2018
concerning Business of Gas in
Downstream Oil and Gas Business
Activities
 Contextual Report 2016 17

Topic Related Laws and Regulations Description

Working Area Law No. 22/2001 Article 33 These regulations aim to establish the provisions of the
PMK No.SE-75/1990 concerning Tax Indonesian mining area as places for implementing oil and
Identification Number (NPWP) and Cost gas business activities and Business Entities or Permanent
Calculation Guidelines in the context of Establishments that carry out such business activities.
Taxation of Production Sharing Contracts
PP No. 22/2010 concerning Mining
Area
Permen of ESDM No. 40/2006
concerning Procedures for Determining
Working Areas
Permen of ESDM No. 35/2008
concerning Procedures for Determining
Working Areas of Oil and Gas
Permen of ESDM No. 28/2018
concerning the Management of the Oil
and Gas Working Areas which the
contract of cooperation will end

Cost Recovery Law No. 22/2001 Article 13 These regulations aim to establish provisions for the recovery
PP No.79/2010; PP No. 27/2017 of costs spent by contractors in carrying out exploration and
exploitation activities as well as other costs permitted to be
recovered.

Income Tax Law No. 22/2001 Article 31-32 These regulations aim to establish an approach in calculating
PP No. 79/2010; PP No. 27/2017 income tax based on the calculation of income and cost of
income which follows the provisions in the production sharing
contract, which is different from the calculation of the general
income tax (uniformity principle).

(DMO) Law No. 22/2001 Article 8 and 22 These regulations aim to stipulate the obligation for contractors
PP No. 27/2017 to deliver a certain amount of oil and gas to prioritize domestic
PMK No. 139/PMK.02/2013; PMK No. market obligation throughout the production period in
230/PMK.02/2015 accordance with the provisions of the cooperation contracts,
amounting to a maximum of 25% of the lifting part of the
contractor. Provisions on pricing and payment arrangements
are also stipulated in this regulation.

Determination of Law No. 22/2001 Articles 28 and 46 These regulations aim to determine the provisions of gas prices
gas prices for Permen of ESDM No. 40/2016 with certain considerations for certain industries, in the event
certain industries that gas prices are higher than US $ 6 / MMBTU. Certain gas
prices can be set for, among others, the fertilizer,
petrochemical and steel industries.

Participation of Law No. 22/2001Article 9 These regulations aim to stipulate the provision of a 10%
BUMD PP No. 35/2004; PP No. 55/2009 Participating Interest (PI) to the local government-owned
Permen of ESDM No. 37/2016 company in which the oil and gas working area is located
since the Plan of Development (POD) has been approved by
the Minister of Energy and Mineral Resources.

Cooperation Law No. 22/2001 Articles 1 and 6 These regulations aim to determine the provisions of
Contract - PP No. 79/2010; PP No.27/2017 cooperation contract form in upstream business activities
Scheme of Cost based on the principle of production sharing contract (PSC) in
Recovery which the contractor will bear the risks and costs of upstream
oil and gas business activities. The contractor regains
operating costs in accordance with the work and budget plan
that has been approved by SKK Migas, after the working area
has produced commercial production.

Cooperation Law No. 22/2001 Articles 1 and 6 These regulations aim to establish provisions of production
Contract - Permen of ESDM No. 8/2017; Permen of sharing between the government and contractors by providing
Scheme of Gross ESDM No. 52/2017 incentives for contractors to be free in determining the costs
Split (non-Cost incurred under the gross split scheme based on the calculation
Recovery) of gross production without a cost recovery mechanism. Base
split for the government and the contractor is 57:43 for oil and
52:48 for gas.
Source: various sources
18

The purpose of this regulation is to improve the efficiency In order to make the upstream oil and gas industry
and effectiveness of oil and gas production sharing activities more productive, the Ministry of Energy and
contract by providing incentives for exploration and Mineral Resources synergizes with SKK Migas, the
exploitation activities because contractors are free to Directorate General of Customs and Excise and the
determine their own costs so that contractors can focus Administrator of Indonesia National Single Window
on cost efficiency and reduce the bureaucratic flow of the Portal (PP INSW) to develop an information integration
cost approval process which has been issued. The basic system related to the provision of fiscal facilities for
difference between gross split and PSC is related to the imported operation goods needed by Cooperation
base split in which 57% for the government and 43% for Contract Contractor (KKKS) for upstream oil and gas
the contractor in oil sector. While, in gas sector, the base business activities. The procedure for import of goods for
split is 52% for the government and 48% for the upstream oil and gas operation has been cut from 42
contactor. The implementation of this regulation shows days to 24 days. Then, another important point is the
that the gross split concept has already been accepted Government applies the online management of oil and
by investors, especially after there has been an gas licensing. The existence of this system is able to
explanation of gross split rules through regulatory accelerate the process of obtaining licenses which was
amendments issued by the government. Until mid-2018, originally 40 days to only 10 to 15 days. In fact, with an
there are 25 oil and gas Working Areas (WK) using the online system, the licensing process can be completed in
Gross Split scheme. However, the implementation of this around 5 days.
regulation still has problems, namely the unclear tax
system that has been implemented for this gross split According to the Permen, the licensing process must be
scheme and the types of operational costs that can be completed within 10-15 days after the complete
deduction factors for income tax. requirements received by the Ministry of Energy and
Mineral Resources. The time required for submission is 1
Government Regulation No. 53/2017 day, then the evaluation takes 7 days, and the issuance
concerning Tax Treatment in Upstream Oil and of license by the Minister of Energy and Mineral
Gas Business Activities with Gross Split Resources takes 2 days. All six licenses can be submitted
Production Sharing Contracts online. The license applicant does not need to come and
meet face to face with officials of the Ministry of Energy
Government Regulation (PP) of the Republic of Indonesia and Mineral Resources, nor does it need to use the
No. 53/2017 concerning Taxation in Upstream Oil and service of a third party to apply for license. Starting at the
Gas Business Activities with a Gross Split Production end of 2017, the licensing process has been carried out
Sharing Contract shall come into force when online. However, there are still more than 200 licenses in
promulgated on December 28, 2017. various agencies that need to be simplified. The license
simplification at the Ministry of Energy and Mineral
Overall, PP of Gross Split Tax contains several important Resources is expected to be followed by other agencies
points as stated in Article 9 to Article 12. Article 9 that also deal with licenses in the oil and gas sector.
paragraph 2 states "Expenditures which have a useful life
of more than 1 (one) year during the Commercial Regulation of the Minister of Energy and
Production period are charged as expenses through Mineral Resources No. 40 /2017 concerning
depreciation or amortization. Another incentive as stated Delegation of Authority for Granting Licensing
in Article 26 paragraph 3 is the imposition of joint facility in the Field of Oil and Gas Business Activities to
operation cost by the Contractor in the utilization of state the Head of BKPM
property in the upstream Oil and Gas sector is excluded
from deduction from income tax and is not subject to Permen No. 40/2017 stipulated by the background that
additional tax value. to carry out the delegation of authority to grant licenses
in the field of oil and gas activities in the context of
In PP No. 53/2017, the government provides a number integrated one stop service, the Minister of Energy and
of tax incentives to oil and gas contractors, such as tax Mineral Resources needs to delegate the authority to
exemption at the exploration and exploitation stage until grant oil and gas business licenses to the head of BPKM.
the start of production. In addition, the exemption of
Value Added Tax (PPN) and PPN of Luxury Goods for the Licensing contained in Article 1 Paragraph 1 is licenses
acquisition and utilization of oil and gas operating which is the authority of the Minister of Energy and
services. The contractor also obtains the exemption of Mineral Resources as stipulated in the laws and
income tax (PPh) article 22 on the import of oil and gas regulations concerning licensing in the oil and gas
operating goods and the reduction of Land and Building business which includes: 1. License for Survey; 2. License
Tax (PBB) up to 100%. The government also provides tax for Utilization of Oil and Gas Data; 3. Oil and Gas
loss carry forward or compensation for tax losses that is Processing Business License; 4. Oil and Gas Storage
extended from 5 years to 10 years. Business License; 5. Business License for Transporting Oil
and Gas; 6. Oil and Gas Commercial Business License.
Regulation of the Minister of Energy and
Mineral Resources No. 29/2017 concerning Regulation of the Minister of Energy and
Licensing in Oil and Gas Business activities Mineral Resources No. 47/2017 concerning The
Amendment to Regulation of the Minister of
This regulation is stipulated to regulate oil and gas
licensing to be more simple, transparent, effective, Energy and Mineral Resources No. 26/2017
efficient and accountable. Until 2015, there were a total regarding The Recovery of Investment Cost
of 104 licenses for oil and gas business activities, then in Mechanism in Upstream Oil and Gas Business
2016 it was cut to 42 licenses and starting in 2017 only 6 Activities
licenses remained. This regulation provides facilities for
oil and gas actors. According to the Permen, the Ministry
of Energy and Mineral Resources only has to deal with six
licenses and four non-licenses.
 Contextual Report 2016 19

The stipulation of this regulation was motivated by the The professional group mentioned above is under and
consideration to provide legal certainty towards the responsible to the Deputy and is further regulated by the
mechanism of returning investment cost in upstream oil Head and is effective starting September 13, 2017.
and gas business activities at the end of the Cooperation
Contract period. In the event that the Cooperation Regulation of the Minister of Energy and
Contract is not renewed, the new Contractor must settle Mineral Resources No. 28/2018 concerning
the return on Investment Cost. The obligation for the Management of the Oil and Gas Working Areas
completion of returning investment cost is included in
which Cooperation Contracts Will End
the stipulating letter of the management of new working
area and new Cooperation Contract. The amount of the In this latest regulation, there is a change in the provision
Investment Cost returned received by the Contractor of Article 12 regarding the amount of signature bonus. In
from the settlement made by the new Contractor will be the latest regulation, it is stated that the signature bonus
calculated as a deduction of operating costs to the is at least US$ 1 million, and there is no maximum
existing Cooperation Contractor. The returning of amount or no upper limit, so the potential for state
investment cost settled by the new Contractor will be revenue can be greater. Meanwhile, in Article 12 under
calculated as the operating cost of the new Contractor. the old regulation, the signature bonus limit is pegged at
least US $ 1 million and at most US $ 250 million. Based
With respect to the Cooperation Contracts that were on Permen of ESDM No. 23/2013 as amended by
signed prior to the enactment of this Ministerial Permen of ESDM No. 28/2018, it is determined that the
Regulation and investment at the end of the Cooperation management of oil and gas block with contract that
Contract period based on the approval of SKK Migas expire can be carried out through an extension by an
which has not been returned, then the provisions in this existing contractor, managed by Pertamina, joint
Ministerial Regulation are applied as stated in the Article management between the contractor and Pertamina and
13 of the Regulation. through a tender. The new regulation has been issued
on May 7, 2018.
Regulation of the Minister of Energy and
Mineral Resources No.51 /2017 concerning 2.3.2 Legal Framework in Mineral and Coal
Guidance and Management of BMN in (Minerba) Mining
Upstream Oil and Gas Business Activities
Law No.4/2009 concerning Mineral and Coal Mining is
This regulation is motivated and aimed at realizing the highest legislation after the constitution in the
effective, efficient and integrated governance of State mineral and coal sector. In its implementation, Law No.
Property (BMN) and increasing cost recovery efficiency 4/2009, has been supported by a number of regulations
through optimizing the management of state property in / implementation instructions in the form of Government
upstream oil and gas business activities. The issuance of Regulations (PP), Minister of Energy and Mineral
the Permen is expected to simplify the bureaucracy and Resources Regulations (Permen of ESDM), Minister of
make the cost of renting storage space for goods more Finance Regulations and Regulations issued by the
efficient. Current condition causes high operating costs Director General of Mineral and Coal. The Ministry of
due to the cost of renting and transporting goods Energy and Mineral Resources (MoEMR) has provided
because the Contractor rent BMN storages that spread in regulatory information regarding mineral and coal in full
several places without being able to be controlled by the and can be downloaded at the link
government. http://jdih.minerba.esdm.go.id/.

Article 3 of this regulation states that the supervision of Matrix of Discussion Topics and Related Laws
BMN used for upstream oil and gas business activities is and Regulations in the Mineral and Coal Sector
carried out by the Minister of Energy and Mineral
Resources. In carrying out this supervision, the Minister The EITI 2016 scope report recommends this report to
of Energy and Mineral Resources conducts arrangements discuss revisions or regulations that have not been
regarding BMN needs planning, procurement, discussed in the 2015 EITI Report. Therefore, we only
administration, transfer, utilization, elimination, present a matrix for significant regulatory topics
destruction, security, maintenance, guidance and according to the 2015 EITI Report without further
supervision of BMN. discussion which can be seen in Table 2. Then, the
discussion will continue for new regulations or revisions.
Permen of ESDM No. 51/2017 has been revoked
pursuant to Permen of ESDM No. 6/2018 in order to
simplify legislation in the oil and gas sector.

Regulation of the Minister of Energy and

Mineral Resources No. 53/2017 concerning The
Amendment to Regulation of the Minister of
Energy and Mineral Resources No. 17/2017
regarding The Organization and Working
Procedure of SKK Migas
This regulation stipulates provisions related to changes to
the Permen of ESDM concerning the organization and
working procedure of the Special Unit for Upstream Oil
and Gas Business Activities (SKK Migas). This regulation
was issued for sharpening the nomenclature of the
position of the SKK Migas functional group to become
the Professional Group listed in the Minister of Energy
and Mineral Resources Regulation No. 17/2017
concerning the Organization and Working Procedure of
SKK Migas.
20

Table 2 Matrix of Discussion Topics and Related Laws and Regulations in the Mineral and Coal Sector

Topic Laws and Regulations Description

Mining Area Law No. 4/2009 concerning Mineral Mining Areas (WP) are part of the national spatial plan which
and Coal Mining, Chapter V Article 9 to is the basis for mining activities. The determination of the WP
Article 33 and Chapter XII Article 87 to along with aspects in it such as area and boundary of the
Article 89 region provide legal guarantees for mining activities in
PP No. 22/2010 concerning Mining Indonesia.
Area
Permen of ESDM No.11/2018
concerning Procedures for Granting
Territory, Licensing, and Reporting on
Mineral and Coal Mining Business
Activities, as amended by Permen of
ESDM No. 22/2018

Divestment of UU No. 4/2009 concerning Mineral and PP No.23 / 2010 as amended several times, the latest by PP
Shares on IUP / K Coal Mining, Chapter XIII Article 112 No.8 / 2018 requires all foreign IUP / K to divest their shares
owned by Foreign PP No.23/ 2010 concerning the gradually after 5 years of production, so that in the 10th year,
Investor Implementation of Mineral and Coal at least 51% shares owned by the Indonesian counterpart. The
Mining Business Activities, Chapter IX regulation does not distinguish whether or not IUP/Ks do the
Article 97 up to Article 99 and Chapter refining by themselves and does not distinguish the types of
XIV Article 112D stages of the IUP. Permen of ESDM No.9 / 2017 specifically
Permen of ESDM No. 9/2017 regulates the procedure for implementing the divestment of
concerning Procedure for Divesting shares.
Minerba Shares, as amended by Permen
of ESDM No.43 / 2018

Export Restrictions UU No. 4/2009 concerning Mineral and These regulations are intended to increase Indonesia's
and Increased Coal Mining Chapter XIII Articles 102 and domestic revenue and protect the sustainability of Indonesia's
Value Added 103 mineral production, in which only high-quality minerals can be
PP No.23/2010 concerning the exported without going through processing and small-scale
Implementation of Mineral and Coal mines which are generally aimed at short-term profits are
Mining Business Activities, Chapter VIII restricted. In Permen of ESDM No.25/2018, the substance
Article 93 up to Article 96 and Chapter related to export restrictions and increase in added value is
XIV Article 112C regulated in Chapter IV Implementation of Activities of IUP-OP
PP No. 1/2014, the second amendment and IUPK-OP, Article 16 up to Article 19.
to PP No. 23/2010
PP No. 1/2017, the fourth amendment to
PP 23/2010
Permen of ESDM No.25/2018
concerning the Business of Minerba
Mining

Reclamation and Law No. 4 /2009 concerning Mineral As a substitute regulation for Permen of ESDM No. 07/2014
Post-mining and Coal Mining,Chapter XIII Articel 99 concerning the Implementation of Reclamation and Post-
up to Article 101 Mining in Minerba Mining Business Activities, Permen of
PP No. 78/ 2010 concerning ESDM No.26 / 2018 Article 22 stipulates that holders of IUP
Reclamation and Post-mining / K -Exploration and Production Operations must submit
Permen of ESDM No.26/2018 plans, place guarantees, and carry out reclamation and post-
concerning Good Mining Practices and mining in accordance with the stipulation of the Minister or
Minerba Mining Supervision Governor in accordance with the authority. The Minister sets
guidelines for implementing reclamation and post-mining.

DMO Law No. 4/2009 concerning Mineral As a substitute regulation for Permen of ESDM No. 34/2009
and Coal Mining, Chapter III Articles 4 concerning Prioritizing Mineral and Coal Needs for Public
and 5 Interest, Permen No.25/2018 Article 32 stipulates that the
PP No. 23/2010 concerning the Minister controls Minerba sales by determining the amount
Implementation of Mineral and Coal and type of Minerba to meet domestic needs
Mining Business Activities, Chapter VII (domestic market obligation).
PP No. 8/2018
PP No. 8/2018 regulates the determination of coal selling
price in the context of domestic interest that is determined by
the Minister of Energy and Mineral Resources.
 Contextual Report 2016 21

Topic Laws and Regulations Description

Local Government UU No.4/2009 concerning Mineral and Local government has the authority to
Authority Coal Mining Chapter XVII State and Local issue an IUP, depending on an area coverage of the mining
Revenue business and certain criteria. Other than that, the local
Law No. 23/2014 concerning Local government can issue local regulations regarding local tax
Government and retribution,
Law No. 28/2009 concerning Local Tax for example, taxes on non-metallic minerals and
and Retribution rocks, taxes on heavy equipment usage, taxes on
Permen of ESDM No. 43/2015 groundwater use, taxes on land and building acquisitions, etc.
concerning Procedures for Evaluating the
Issuance of IUP of Mineral and Coal
Source: various sources

Amendments and New Implementing Enforcement of Permen of ESDM No. 25/2018

Regulations in the Mineral and Coal Sector concerning Minerba Mining Business effectively revokes:
In 2018, the Government through the MoEMR
• Permen of ESDM No.25/2008 concerning Procedures
reorganized regulations in the Minerba sector by
for Determining the Policy for Limiting the Production
simplifying all existing regulations at the level of
of National Mineral Mining
Ministerial Regulation into only three regulations 1 . The
• Permen of ESDM No.23/2009 concerning Prioritizing
three main regulations of the Minerba sector are
Supply of Mineral and Coal for Domestic Interests
designed to cover the three main substances related to
• Permen of ESDM No.17/2010 concerning Procedures
minerba mining, namely: first, related to substances of
for Determining Benchmark Price for Minerba Sales
area, licensing, and reporting on minerba mining
• Permen of ESDM No.33/2015 concerning Procedures
business activities (Permen of ESDM No.11 / 2018),
for Installing WIUP and WIUPK Boundaries of
second, related to the substance of business
Minerba
implementation in minerba mining business activities (
• Permen of ESDM No.41/2016 concerning
Permen of ESDM No. 25/2018), and third, related to the
Community Development and Empowerment in
substance of supervision on minerba mining business
Minerba Mining Business Activities
activities (Permen of ESDM No. 26/2018). The three
• Permen of ESDM No. 05/2017 concerning Increasing
regulations resulting from the simplification are then
Value Added of Minerals through Domestic Mineral
implemented under the instruction of 11 ministerial
Processing and Refining Activities
decisions which will provide guidelines for specific
• Permen of ESDM No. 06/2017 concerning
matters such as guidelines for issuing license, license
Procedures and Requirements for Giving
evaluation guidelines, and so forth. The simplification of
Recommendations for the Implementation of
regulations in the minerba sector is expected to facilitate
Overseas Mineral Sales which are the Results of
investment process and increase investor interest.
Processing and Refining Activities

Figure 4 Three main regulations of the Minister of Energy ad Mineral Resources regulating minerba mining issued in 2018

Source: Permen of ESDM No. 11, 22, and 25 of 2018

¹ Coffee Morning Discussion of DG of Minerba, MoEMR, 13 March 2018

22

Accordingly, all aspects related to minerba mining Through this regulation, it is expected that aspects of the
business activities regulated by the above ministerial region, licensing, and reporting specifically related to the
regulations are currently fully regulated singly by Permen authority to grant license and procedure for submitting
of ESDM No. 25/2018. The implementation of mining license can be more organized and can be implemented
business activities, along with the obligations of holders more regularly.
of IUP / K Exploration and Production Operation, which
were previously regulated in several separate ministerial One of the discussion points related to the changes
regulations are now regulated singly in this Permen. contained in this Permen is related to investment in the
Related to the aspects of mining business activities, other minerba sector. Through this regulation, BUMN and
regulations outside this regulation is to regulate the BUMD tend to be encouraged to have a greater role
procedures for implementation. Some important aspects related to the management of the mining area. It is
contained in this Permen: stated in Article 23 paragraphs (1) and (2) that private
business entities in the context of foreign investment can
• Implementation of IUP / K- Exploration and IUP / K - only participate in Metallic Mineral WIUP and Coal WIUP
Production Operation tenders with an area greater than 500 hectares.
discussion of increasing mineral value added through Furthermore, the awarding of Metallic Mineral WIUPK
domestic mineral processing and refining activities and Coal WIUPK is prioritized to BUMN and / or BUMD.
• Divestment of Shares If there are more than 1 BUMN or BUMD that are
• Production and Sales Control interested in the WIUPK offered, then the awarding of
discussion on prioritizing domestic needs (domestic WIUPK is carried out by tender. WIUPK can only be
market obligation) offered to private business entities if there is no BUMN
• Benchmark prices of mineral and coal commodities or BUMD interested in the WIUPK offered and / or if
there is no BUMN or BUMD that meet the required
One of the points of discussion in this Permen is related requirement.
to the obligation of holder of IUPK - Production
Operation resulting from a change of mining concessions Good Mining Practices and Minerba Mining
from KK to IUP to implement the 51% divestment of
Supervision
shares in 2019. Please note that PT Freeport Indonesia is
one of the mining business companies which fall into this Enforcement of Permen of ESDM No. 26/2018
category. concerning the Implementation of Good Mining
Practices and Mineral and Coal Mining Supervision
effectively revokes:
Procedures for Granting Territory, Licensing, and
Reporting on Minerba Mining Business Activities • Permen of ESDM No. 02/2013 concerning
Permen of ESDM No.11/2018 concerning Procedures for Supervision of the Implementation of Management
Granting Territory, Licensing and Reporting on Mineral of Mining Businesses Implemented by the Provincial
and Coal Mining Business Activities , as amended by Government and Regency / City Government
Permen of ESDM No. 22/2018 effectively revokes: • Permen of ESDM No. 07/2014 concerning the
Implementation of Reclamation and Post-Mining in
• Permen of ESDM No. 12/2011 concerning Minerba Mining Business Activities
Procedures for Determining Mining Business Areas • Permen of ESDM No. 38/2014 concerning the
and Minerba Mining Area Information System Implementation of the Minerba Mining Safety
• Permen of ESDM No.28/2013 concerning Procedures Management System
for the Tender for WIUPK in the Business Activities of
Metallic Mineral and Coal Mining Thus, all aspects related to the implementation of good
• Permen of ESDM No.15/2017 concerning Procedures mining practices as referred to in Article 95 letter a and
for Granting IUPK - Production Operation as Article 96 of Law No. 4/2009 concerning Minerba Mining
Continuation of KK or PKP2B Operations are now fully regulated in this Permen. Furthermore, this
• Permen of ESDM No. 34/2017 concerning Licensing regulation is also intended to implement the provisions
in the Minerba Mining Sector of Article 35 PP No. 55/2010 concerning Guidance and
Supervision of the Implementation of Minerba Mining
Thus, all aspects related to the territory, licensing, and Business Management. With the enactment of this
reporting on mining business activities are now fully regulation, all aspects of security, safety, environmental
regulated in this Permen which covers aspects of: management, post-mining, governance, and utilization of
domestic resources and services related to mineba
• Preparation and stipulation of WIUP or WIUPK mining and its supervision are fully regulated under the
• WP information system framework of the Good Mining Practices.
• Procedures for granting WIUP and WIUPK
• Procedures for granting licenses (IUP/K - exploration By content, this regulation collects all the rules governing
and production operations, IUP of special production the implementation of mining business and its
operations for processing and/or refining, IUP of supervision in the context of the Good Mining Practice as
special production operations for transportation and a guideline for mining business companies.
sales, and IUJP)
• Rights, obligations and restrictions for IUP and IUPK
holders
• RKAB and Reporting
 Contextual Report 2016 23

Regulation of the Minister of Energy and Mineral Regulation of the Minister of Energy and Mineral
Resources No. 25/2018 Article 32 concerning Resources No. 9/2017 concerning Procedure for
Coal DMO Policy Divesting Minerba Shares, as amended by
In order to guarantee the supply of domestic Minerba Regulation of the Minister of Energy and Mineral
needs, maintain economic resilience, maintain defense Resources No.43 / 2018
and security stability, and control Minerba prices, the The most important change in the Permen of ESDM No.
Government through Permen of ESDM No. 25/2018 9/2017 compared to its predecessor Regulation (Permen
gives authority to the Minister of Energy and Mineral of ESDM No. 27/2013 concerning Procedures and
Resources to control Minerba sales through the Determination of Divestment Share Prices) is a
determination of the amount and type of Minerba for mechanism used to determine the price of share
fulfilling domestic market obligation and the divested. Previously, in the Permen of ESDM No.
determination of the amount and type of Minerba that 27/2013, the divestment share price is determined based
can be sold abroad. Determination of the amount and on the replacement cost for the investment of the IUP / K
type of Minerba that can be sold is carried out through - Production Operation holder (Article 13 paragraph (1)
coordination with relevant government agencies and / or Permen of ESDM No. 27/2013). With the enactment of
provincial governments. Permen of ESDM No. 9/2017, the determination of the
divestment share price is determined based on fair
Through the Kepmen of ESDM No.23 K / 30 / MEM / market value by not taking into account mineral or coal
2018, the Minister of Energy and Mineral Resources sets reserves at the time of the share divestment offering
a minimum percentage of coal DMO for all PKP2Bs and (Article 14 paragraph (1) Permen of ESDM No. 9/2017).
Production Operation IUPs of 25% of the planned total This change of mechanism shows the Government's
production in 2018. Companies that do not meet the paradigm shift regarding the process of divesting shares
DMO are subject to sanction in the form of production from compensation into a market transaction.
cut in 2019 amounting to a maximum of 4 times the
realization of the DMO in 2018. Furthermore, through the
Kepmen of ESDM No.1395 K / 30 / MEM / 2018, the
2.3.3 Other Laws and Regulations Related to
selling price of coal for electricity supply for the public Extractive Industry
interest is set at US$ 70 per metric ton (HBA). The US$ 70 In addition to the Oil and Gas Mining Law and the
HBA is valid for 2018 and 2019 with a maximum volume Mineral and Coal Mining Law, the management of
of coal sales of 100 million metric tons per year. extractive industry is also regulated by other related laws.
The following table is a list of significant laws related to
extractive industry:

Table 3 List of laws related to extractive industry

Laws Description

Law No. 9/2018 concerning Non-Tax - This law regulates levies paid by individuals or entities for the acquisition of direct
State Revenue (PNBP) or indirect benefits from resource utilization services, services and other rights
obtained by the state which become the state revenues that do not originate from
tax revenues and grants (Articles 3, 4 and 5) .
- PNBP rates originating from the use of natural resources (renewable and non-
renewable) are regulated by Laws, contracts and / or related Government
Regulations (Article 7). PNBP rates are determined based on consideration of the
value of benefits, levels and quality of natural resources; the impact of rates on
society, the business world, natural and environmental conservation and social
and cultural aspects; aspects of justice; and government policy.
- All of these receipts must be deposited immediately as soon as possible to the State
Treasury and managed in the system of the State Revenue and Expenditure Budget
(Articles 29 and 20)
- PNBP payer who do not make PNBP payment up to maturity date is subject to a
fine of 2% per month for a maximum of 24 months (Article 31).
- PNBP management agencies can propose the use of PNBP funds they manage to
the Minister of Finance (Article 33). The Minister of Finance can ask the examining
agency to inspect PNBP management agencies (Article 50).

Law No. 17/2003 concerning State - This law regulates all state rights and obligations that can be valued with money,
Finances either in the form of money or in the form of goods that can be used as state
property (Article 1 paragraph 1).
- All state rights and obligations mentioned above, in the relevant budget year must
be included in the state budget (APBN). Meanwhile, local government rights and
obligations in the relevant budget year must be included in the local budget
(APBD) (Article 3 paragraph 5 and 6).
- The Central Government allocates balancing funds to the Local Government based
on the central and local balancing funds laws (Article 22 paragraph 1).
24

Laws Description

Law No. 01/2004 concerning State - This law regulates the management and accountability of state finances, including
Treasury investments and separated assets, which are stipulated in the APBN and APBD
(Article 1 paragraph 1).
- Regarding the accountability of the APBN and APBD, the Minister of Finance and
the Head of the Local Finance Management Work Unit, each have the task of
preparing Central and Local Government Financial Statements (Article 55
paragraph 1 and Article 56 paragraph 1).

Law No. 14/2008 concerning Public - This law regulates public information which is information that is produced, stored,
Information Transparency managed, sent, and / or received by a public agency and / or the other
organizer of public agencies in accordance with this Law and other information
relating to public interests (Article 1 paragraph 2)
- Every public information, except excluded public information, is open for public
and can be accessed by each User of Public Information (Article 2 paragraph 1).
- Public information that is excluded is confidential in accordance with the Law,
propriety, and public interest based on testing of the consequences that arise when
an information is given to the public and after careful consideration that closing
Public Information can protect a greater interest than opening it or vice versa
(Article 2 paragraph 4).

Law No. 30/2007 concerning Energy - Law No. 30/2007 regulates energy, including regulating the National Energy
Law No. 30/2009 concerning Electricity Policy whose design and formulation is the task of the National Energy Council
(Articles 11 and 12).
- The supply of electricity is controlled by the state, which is carried out by the
Government and the Local Government based on the principles of local autonomy
(Article 3 paragraph 1).

Law No. 32/2009 concerning - The Environmental Law requires every business and / or activity that has an
Environmental Protection and important impact on the environment, such as businesses and / or exploitation of
Management natural resources, both renewable and non-renewable, to have an AMDAL
Law No. 41/1999 concerning Forestry document (Article 22 paragraph 1 and Article 23 paragraph 1 letter b).
- Amdal documents will be assessed by the AMDAL Assessment Commission and the
results of the assessment will be the basis for the Minister, Governor or Regent /
Mayor to issue environmental permits (Articles 29, 31 and 36 paragraph 2).
- The use of forest areas for mining purposes is carried out through the granting of
borrow-to-use licenses by the Minister by taking into account the broad
boundaries and a certain period of time as well as environmental sustainability
(Article 38 paragraph 3). Borrow-to-use licenses that have an important impact
and have a broad and strategic value are given by the Minister with the approval
of the DPR (Article 38 paragraph 5).
- It is prohibited to mine with open mining patterns in protected forest areas (Article
38 paragraph 4).
- Holders of mining licenses must carry out reclamation in ex-mining forest areas in
accordance with the stages of mining activities (Article 45 paragraph 2).

Law No. 25/2007 concerning Investment - Every investor is obliged to apply the principles of good corporate governance
Law No. 40/2007 concerning Limited and implement corporate social responsibility (Article 15 letters a and b).
Liability Companies - Law No. 40/2007 regulates limited liability companies, including the obligation
to implement Social and Environmental Responsibilities for the Company that runs
its business activities in the field of and / or related to natural resources (Article
74).

Law No. 25/2009 concerning Public - Services of public goods, including: procurement and distribution of public goods
Services carried out by a business entity whose capital is partly or wholly sourced from state
assets and / or separated local government assets; and / or its availability
becomes the state mission stipulated in laws and regulations (Article 5 paragraph
3 letters b and c).
- One form of public goods services is the implementation of the PSO (public service
obligation) of PT. Pertamina (Persero) by distributing subsidized fuel.
 Contextual Report 2016 25

Laws Description

Law No. 23/2014 concerning Local - The Local Government implements Concurrent Government Affairs as the basis for
Government the implementation of Local Autonomy, which consists of Mandatory Government
Affairs, both Basic Services and non-Basic Services related, and Preferred
Government Affairs including: a. marine and fisheries; b. tourism; c. agriculture; d.
forestry; e. energy and mineral resources; f. trading; g. industry; and h.
transmigration (Article 9 paragraph 4, Article 11 paragraph 1 and 2 and Article
12 paragraph 3) .
- Implementation of Government Affairs in the field of forestry, marine affairs, and
energy and mineral resources divided between the Central Government and
Provincial Government (Article 14 paragraph 1), in which matters relating to the
management of oil and gas are the authority of the Central Government (Article 14
paragraph 3) and matters relating to direct use of geothermal energy in the
Regency / City Region are the authority of the Regency / City Government
(Article 14 paragraph 4).
- Producing and Non-Producing Regency / City Regions receive production sharing
from the administration of Government Affairs as referred to in paragraph (1)
(Article 14 paragraph 5).

Source: various sources

Regulations regarding Contract and License Based on information from PPID of ESDM 2 , the public
Disclosure can make a request for the disclosure of a copy of the
contract of the upstream Minerba contractor. This is
There has been no significant development, until the
done based on compliance with the decision of the
date of this Report, on compliance with the Requirement
Central Information Commission (KIP) No. 197 / VI / KIP-
2.4 of 2016 EITI Standard which requires the disclosure of
PS-M-A / 2011 which decides that KK documents are
contract content in the extractive industry. Currently, the
fully open information 3 . Likewise with the IUP document,
oil and gas production sharing contract (PSC) and
a number of KIP decisions that are strengthened by the
contracts related to minerba mining are not yet opened
decision of the Supreme Court (MA) state that the IUP
for public. Disclosure of the provisions in contracts both
document is an open document. However, up to the
by the government and companies is still very limited.
reporting date, these contracts have not been accessible
One of the reasons that the related agencies cannot fully
to the public. According to the Directorate General of
disclose contracts is this information is considered to be
Mineral and Coal, data on mineral contracts have not
excluded public information (in accordance with Articles
been open to the public because of the civil aspects
17 and 11 of Law No. 14/2008) because it can reveal the
related to the contract.
information regarding natural wealth owned by the
Republic of Indonesia.
General provisions in contracts that apply in the oil and
gas mining sector and mineral and coal mining sector
For production sharing contract (PSC), disclosure is only
can be accessed in the 2015 EITI Report.
limited to the date of the contract, the contract period,
the number of firm commitments, and general provisions
It is expected that the regulation on disclosure of
in the contract. Regarding disclosure of production
contract can be applied as a transparency initiative, for
sharing contract, Decision of KIP No. 356 / IX / KIP-PS-M-
example, in each contract negotiation process. Contract
A / 2011 stated that a copy of the PSC contract is
disclosure implementation must be started from the
partially open information. BP Migas then submitted the
stages of planning, tender up to the stage of signing
cancellation of the decision to the District Court of
contract. For example, regulatory reform regarding
Jakarta Selatan and was granted and strengthened by the
contract disclosures in Peru shows the benefits of
Decision of the Supreme Court (MA) which rejected the
transparency in contract disclosures from the negotiation
appeal from KIP. One of the considerations of the
process to the publication of contracts 4 .
Supreme Court is that BP Migas is not a public agency as
in the definition of Law No. 14/2008.
Cadastre Information
The Law No. 14/2008 on Public Information Transparency
Requirement 2.3 of 2016 EITI Standard requires EITI
generally regulates the obligations of the public agency
implementing countries to provide lists or cadastral
to provide information to the public, unless such
information for each license (mining license or contract)
information is an excluded information. Excluded public
related to the company included in the scope of the EITI
information should be based on a consequential test
report, i.e: i. the owner of the license; ii. coordinate point
conducted by the Information and Documentation
of the mining area; iii. application date, date of award
Management Officer (PPID) at the relevant public agency.
and duration of license / contract; and iv. types of
Several consequence tests regarding the disclosure of
commodities produced (if it is in production stage).
contracts have been carried out by PPID of ESDM such as
in Central Java in February 2018 and in Jakarta.

² EITI Indonesia.2017.”Rapat Koordinasi Keterbukaan Kontrak Pertambangan”. ³ One of them was on March 18, 2016, through the Decision of the Supreme
http://eiti.ekon.go.id/rapat-koordinasi-keterbukaan-informasi-kontrak Court No. 614 K / TUN / 2015, Chief Judge H. Yulius, SH., MH again won
pertambangan/ and interview with PPID of ESDM. Accessed on November 1, JATAM Kaltim for his demands against the Regent and the Distamben of Kutai
2017 Kartanegara (Kukar). This reinforces the decision of the KIP and PTUN which
previously ordered the Regent and Distamben of Kukar to submit all the
Decision Letter of Mining Business License (IUP) throughout the Kutai
Kartanegara Regency and state that the requested information is open data,
not confidential.
⁴ Transparansi Kontrak dan Perizinan dalam Industri Ekstraktif, Publish What you
Pay Indonesia, February 2018 accessed via: HTTPS://PWYP-INDONESIA.ORG
26

Ministry of Energy and Mineral Resources has published However, this application does not yet contain
a web-based information system or called by ESDM One information on the date of application, date of award and
Map that capable of displaying various thematic map the duration of the license / contract as required by the
information of the ESDM sector by online (WebGIS). This EITI Standard. The following is a matrix of cadastre
application can be accessed at information as required by the EITI Standard along with
http://geoportal.esdm.go.id which contains the the link of the information:
information in Table 4.

Table 4 Matrix of cadastre information

Cadastre Information Link Note

License owner • http://geoportal.esdm.go.id Geoportal:

• http://portal- Migas: name of operator dan non – operator
ekstraktif.ekon.go.id/license companies
Minerba: name of license owner companies

Area coordinate of the license. If not • http://geoportal.esdm.go.id

published, the size and location as
well as coordinate can be accessed
by the public at the authorized
agencies at a reasonable cost.

Application date, date of award and • https://skkmigas.go.id/publikasi/la • In the attachment of SKK Migas annual
duration of license poran-tahunan report, there is a map of the oil and gas
• http://portal- working area, including information on
ekstraktif.ekon.go.id/license the date of validity and expiration
• Information on the validity date and
expiration date of the EITI reporting
companies’ licenses are available

Commodity (if already in production • http://geoportal.esdm.go.id Extractive portal is only provide information
stage) • http://portal- on EITI reporting companies
ekstraktif.ekon.go.id/license
Source: various sources

Table 5 ESDM One Map information related to extractive industry

Map Property

Migas Working Area • Name of working area

• Exploration • Type of cooperation contract
• Exploitation • Status: Exploration / exploitation / termination process
• Termination process • Operator
• Location: offshore/onshore
• Area (km)

Mining Business License Area • Location (province, regency, village)

• Contract of Work • Name of company
• PKP2B • Type of license
• IUP of Metallic Mineral • Commodities
• IUP of Coal
• IUP of Non-metallic Mineral
• IUP of Rocks
• IPR

Data on Upstream Oil and Gas Well 2D Seismic 3D Seismic

• Well • Name of well • contractor • contractor
• 2D Seismic • Name of contractor • name of area • name of area
• 3D Seismic • Status • date of study • date of study

Indonesian Forest Area • No of Decision Letter [Minister of Forestry]

• Conservation forest • Date of decision
• Protected forest • Designation area
• Production forest • Forest status (conservation, protection, production, limited production,
• Limited production forest convertible production)
• Convertible production forest
Source: summarized from http://geoportal.esdm.go.id
 Contextual Report 2016 27

Revision or issuance of new laws and In the SE, the Directorate General of Mineral and Coal
government/presidential regulations requires the obligation to attach the data of the directors
and commissioners including the amendments and a list
Transparency of Beneficial Owner(BO) of all final beneficial owners, both legal entities and
private individuals. In addition, the company is also
In March 2018, the government issued Presidential required to attach a Taxpayer Identification Number
Regulation (Perpres) No.13 / 2018 concerning the (NPWP) of the company as well as NPWP of
Principles of Recognizing Benefit Owners of Corporations shareholders, both legal entities and private individuals,
in the Context of Prevention and Eradication of Money who are domiciled in the jurisdiction of Indonesia. Then,
Laundering and Terrorism Crimes. The purpose of this foreign companies are also required to attach Permanent
regulation is to combat the practice of money laundering, Establishment (BUT) and NPWP. Minerba companies in
including the financing of terrorism. This regulation can the licensing process must at least convey the
also be a legal guideline for the government to hunt composition of shareholders. The format of the form that
down money laundering or tax evasion perpetrators. must be submitted can be seen on the mineral and coal
Following are some key rules of Presidential Regulation website link:
No. 13/2018: https://www.minerba.esdm.go.id/public/38617/format-
surat/.
To implement Presidential Regulation No. 13/2018,
Ministry of Energy and Mineral Resources issued Kepmen Following up on regulation relating to benefit owner, the
ESDM No. 1796 K / 30 / MEM / 2018 which stipulates requirements for all licenses held through the Integrated
that as a requirement for issuance of licenses, business Investment Information Service Room (RPIIT) of the
entities must provide information on the register of Directorate General of Mineral and Coal have required
shareholders up to the individual of final beneficial the inclusion of the beneficial owner at the time of
owner. submitting the license application. One example of
licensing requirements that require the inclusion of
Previously, the Directorate General of Mineral and Coal benefits owners can be accessed in the following link
issued Circular Letter (SE) No. 16.E/30/DJB/2017 https://www.minerba.esdm.go.id/public/38616/persyarat
concerning Licensing Service Requirements to obtain an/.
complete information on the final beneficial owner from
licensing applicants in the minerba mining sector and the Discussion of the implementation of benefit owners
compliance with tax regulations. transparency can be seen in section 2.6.3.
Table 6 Provisions of Perpres No. 13/2018

Topic Provision
Definition of benefit owner • Having capital, both in the form of money / shares / other assets that are worth
more than 25%
• Receiving gains or profits of more than 25%
• Having more than 25% voting rights
• Having the authority to appoint, replace or dismiss members of the board of
directors and board of commissioners
• Having the authority or power to influence or control the corporation without
having to get authorization from any party
• Receiving benefits from the corporation
• Being the actual owner of funds for paid-up capital / share ownership
(Articles 4-10)
Corporate Obligations • Determining the beneficial owners from various information and documents
(Articles 3 and 11)
• Establishing categories of benefit owners: i) identified; ii) has not been identified;
iii) not yet verified (Article 12)
• Applying the principle of recognizing the beneficial owners and appointing
officials and employees to apply the principle and providing information about the
beneficial owners (Articles 14-22)
• Providing correct information about the beneficial owners (Article 18)
• Providing updated information on beneficial owners every one year (Article 21)
Beneficial owner reporting procedure • Information on the beneficial owner is submitted by the founder / management /
notary / other party authorized by the competent agency (Article 18)
• The application of the principle of recognizing the beneficial owner is carried out
when: 1) the application for the establishment, registration, approval, approval or
licensing of a corporate business; ii) the corporation carries on its business or
activity (Article 15)
Information on beneficial owners • Full name • Address in country of origin, in the
• Identity number, driving license or case of foreign nationals
passport • NPWP or similar tax identification
• Place and date of birth number
• Citizenship • Relationship between corporation and
• Residential address listed on the beneficial owners
identity card
Source: Perpres No. 13/2018
28

Government Regulation No. 27/2017 Minister of Finance Regulation No.131 / PMK.03

concerning Operating Costs that Can Be / 2017 concerning Second Amendment to
Recovered and Income Tax Treatment in the Minister of Finance Regulation No.76 / PMK.03
Upstream Oil and Gas Business Sector / 2013 regarding Administration of Land &
Building Tax in Mining Sector for Oil and Gas
Government Regulation No. 27/2017 is issued in the
context of increasing the discovery of national oil and gas
and Geothermal Mining
reserves, driving the investment climate, providing legal This Permen aims to provide more convenience and legal
certainty in upstream oil and gas business activities, as certainty to accelerate the implementation of payment
well as providing flexibility in determining production for Land and Building Tax in the oil and gas and
sharing and providing incentives in upstream business geothermal mining sectors which are carried out through
activities both fiscal and non-fiscal incentives. overbooking or other mechanisms.

The following are the important points contained in PP In this PMK, an account for saving the state money is
No. 27/2017: stipulated by the Minister of Finance as the State General
1. The Minister of ESDM stipulates the amount and Treasurer to accommodate all state revenues and pay all
distribution of FTP in order to increase production, state expenditures to the central bank. The Oil and Gas
support economic growth and guarantee state Account is an account in USD to accommodate all
revenues; The Minister of Energy and Mineral revenues and expenses related to upstream oil and gas
Resources can establish upstream activity incentives business activities.
to encourage the development of WK; for incentives
in the form of DMO Holiday benefits, the Minister of Regarding the tax aspect of oil and gas, the object of the
Energy and Mineral Resources awaits the Minister of Oil and Gas PBB is the land and / or building within the
Finance's approval; The Minister of Finance provides area used for oil and gas mining business activities. Then,
tax incentives and PNBP incentives in order to help the oil and gas contract in the terminated tax year must
the economic of upstream activities. submit a written notification to the Tax Service Office.
2. The existence of a dynamic production sharing The Directorate General of Taxes coordinates with
(sliding scale split) clause in a Cooperation Contract related ministries / technical agencies for the
(PSC). implementation of socialization, accelerating the return of
3. Provision of tax incentives during the exploration the Tax Object Notification Letter (SPOP) along with
and exploitation period attachments (LSPOP), obtaining SPOP and LSPOP data
along with the implementation of clarification, and other
• Exploration period: exemption from import tax data acquisition.
duty, PPN or PPnBM and Article 22 of PPh on
import as well as 100% reduction in PBB during
PERMENDAGRI No.19/2017 concerning
the exploration period
• Exploitation period: exemption from Import
Guidelines for Issuing Hinder Ordonnantie in
Duty, PPN or PPnBM and Article 22 of PPh on Local Area
import as well as maximum 100% reduction in The Minister of Home Affairs Regulation was issued due
PBB. to the inconsistency between the regulation of the
• The imposition of cost sharing is exempt from establishment of Hinder Ordonnantie (HO) in the region
PPh and PPN. and the intention of the central government to improve
• Expenditures for indirect costs of head office business ease (ease of doing business) in Indonesia.
are not the object of PPh and PPN. Permendagri No. 19/2017 revokes all previous
regulations regarding the stipulation of HO in the Region.
4. Operating costs that can be returned in the
calculation of production sharing and income tax
must meet the requirements, including: a. issued to 2.4 Fiscal Policy on Oil & Gas and Mineral & Coal
obtain, collect, and maintain income in accordance
with the laws and regulations and are directly 2.4.1 Fiscal Policy on Oil and Gas Sector
related to oil operations in the working area of the
contractor concerned in Indonesia; b. use fair prices Tax and Rate Policies on Oil and Gas Mining
that are not affected by special relationships. The Sector
costs of developing the community and the
environment during the exploration and exploitation The government's revenue from the oil and gas mining
period include cost recovery costs. industry is in the form of in-kind and cash that will be
5. The imposition of Income Tax on income of uplift explained in the following section.
and transfer of Participating Interest is only
conducted once and is final (including PPh of Branch Table 7 summarizes the income tax, PBB and PPN
Profit Tax) policies in the oil and gas mining industry
6. Increase the authority of the Minister of Energy and
Mineral Resources to determine the calculation of
different depreciation in order to maintain
production level
7. The same standards and norms of examination are
prepared in the form of inspection guidelines used
by SKK Migas, BPKP, and DG of Taxes to audit
production sharing and income tax so that there is
coordination between Government auditors and
limit the period of tax audit to the issuance of the
tax assessment letter at a maximum of 12 months
after the SPT is received.
 Contextual Report 2016 29

Table 7 Tax policy in oil and gas mining sector

Type of Tax Description

Income Tax Scheme of Cost Recovery
The income tax rate follows the applicable tax rate at the time of signing the
production sharing contract (PP No. 79/2010, PMK No. 70/2015). Table 13 of
2015 EITI Contextual Report detailing tax rates from time to time.
Scheme of Gross Split
Net income will become object of corporate tax in accordance with general tax rules,
which is 25% tax rate, currently.
PBB of Oil and Gas The land and building tax object of the oil and gas sector is based on the concept of
the earth (surface and body of the earth) and / or buildings within the working area or
the likes relates to oil and gas mining. The procedure for the imposition of land and
building tax of Oil and Gas is regulated in the Regulation of the Directorate General of
Taxation No. PER-45 / PJ / 2013 and PMK No. 267/2014 for PSC which is still in
Exploration stage.
Dividend Tax Dividend tax (Branch Profit Tax - BPT) of PPh article 26 is 20%, except for the one that
implementing dividend tax relief in accordance with the tax agreement of the two
countries (tax treaty).
However, PSC after the issuance of PP No. 79/2010 generally includes a clause
regarding the reduction of the contractor's portion on before tax production sharing
(stabilization clause) in order that the government's share of production after the tax
has not diminished.
Indirect taxes, such as PBB, PPN, and Scheme of Cost Recovery
Local Tax and Retribution - For the oil and gas cooperation contracts prior to the issuance of PP No.
79/2010, the concept of assume and discharge arranged in Cooperation
Contract. In the concept, oil and gas companies are exempted from payment of
indirect taxes .
- Oil and gas cooperation contracts after the issuance of PP No. 79/2010 are
required to pay the indirect taxes but it can be included in cost recovery.
- Oil and gas cooperation contracts in the stage of exploration and exploitation are
exempted from Import Duty, PPN (for certain goods/services), PPh Article 22 on
imported goods and are given reduction in PBB (PP No. 27/2017 Chapter VA
Article 26 A – E)
Scheme of Gross Split
- There is no tax imposition from the exploration stage until the beginning of the
production period and the imposition of indirect tax during the production period
are calculated based on the economy of the field which will be compensated
through split adjustment (PP No. 53/2017).

Import Duty and Import Tax General rates are applied, except for contractors in stages of exploration and
exploitation
Other Taxes Following the rate based on the tax rules in general
Source: various sources

Policy on Non-Tax State Revenue in Oil and Gas 1. First Trance Petroleum (FTP) is a partial allowance of
Sector lifting. FTP is usually shared between the
government and the contractor in accordance with
Currently, there are two mechanisms for cooperation the proportion of production sharing in the
contracts in the upstream oil and gas sector, namely Cooperation Contract. However, there are PSCs
production sharing contract with cost recovery schemes that have a FTP share only for the government.
and gross split contract (non-cost recovery). Gross split 2. Investment Credit (KI) is an incentive given by the
contracts are applied for extension contracts and new government as an additional return on capital
cooperation contracts. directly related to oil and gas production facilities.
3. Cost Recovery (CR) is a mechanism of operating
Scheme of Cost Recovery cost reimbursement by the government to the
contractor.
A production sharing contract with cost recovery scheme 4. Equity to be Split (ETBS) is the amount of gross
is a cooperation contract for the distribution of profit lifting that has been reduced by FTP, KI (if any) and
between the government and the contractor with CR. ETBS will be shared between the government
operating costs that can be billed to the government. and the contractor according to the percentage of
Figure 5 illustrates the cash flow of the state revenue production sharing proportion stipulated in the
calculation that applies to the production sharing contract.
contract with cost recovery scheme.
30

Figure 5 Cash flow in production sharing contract with cost 5. Domestic Market Obligation (DMO) Gross is the
recovery scheme obligation to deliver contractor's part in the form of
oil and / or natural gas to fulfill domestic needs.
6. DMO Fee is the remuneration paid by the
government to the contractor for the delivery of
DMO.
7. Income Tax is determined based on the prevailing
laws and regulations in the taxation sector at the
time the PSC contract is signed.

In-kind government revenues in accordance with the

production sharing contract with CR scheme are as
follows:

• FTP of the government

• Equity to be Split of the government
• DMO net (DMO gross minus DMO fee paid to the
contractor)

Scheme of Gross Split (Non-Cost Recovery)

The transition of the scheme of the cooperation contract
between the government and the contractor from the
Production Sharing Contract with CR scheme to the
Gross Split scheme has begun since the issuance of the
Minister of Energy and Mineral Resources Regulation
(Permen of ESDM) No. 8/2017. Figure 6 a mechanism for
Sumber: pre-tax government revenues from gross split scheme.\

Table 8 describes the components in the gross split

contract as stated in Permen of ESDM No. 8/2017 and
their changes as stipulated in Permen of ESDM No.
52/2017.

Figure 6 Cash flow in gross split scheme

Base split can be adjusted by:

Variable components:

1. Status of the field

2. Location of the field
3. Depth of reservoir
4. Availability of supporting infrastructure
5. Type of reservoir
6. CO2 content
7. H2S content
8. Density of oil
9. Domestic component level
10. Production stages

Progressive components:

1. Price of oil
2. Price of gas
3. Cumulative amount of oil and gas production

Table 8 Components of gross split contract

Article Definition Permen of ESDM No. 8 /2017 Permen of ESDM No. 52 /2017

Article 5 Base Split • Oil, State’s share: 57%;

Contractor’s share: 43%
• Gas, State’s share: 52%; No changes
Contractor’s share: 48%

Article 6 Variable Component a. Status of the field

Paragraph b. Location of the field
(2) c. Depth of reservoir
No changes
d. Availability of supporting
infrastructure
e. Type of reservoir
 Contextual Report 2016 31

Article Definition Permen of ESDM No. 8 /2017 Permen of ESDM No. 52 /2017
f. CO2 content
g. H2S content
h. Density of oil
i. Domestic component level
j. Production stages
Article 6 Progressive component a. Price of oil a. Price of oil
Paragraph b. Cumulative amount of oil and gas b. Price of gas
(4) production c. Cumulative amount of oil and gas
production
Article 6 Progressive component For the cumulative amount of oil and gas
Paragraph production as referred to in paragraph
(4a) (4) letter c, the Minister can set a
production bonus of 0 (zero)
Article 7 Discretion component The minister's discretion to increase
revenue sharing to oil and gas
contractors whose working areas are not
economical can be given a maximum of An additional percentage of 5% is
5%. Conversely, if it exceeds a certain eliminated
economy, the minister can increase the
profit share for the country to a maximum
of 5%.
Source: Permen of ESDM No. 8/2017, and Permen of ESDM No. 52/2017

Government revenue in cash in accordance with the Policies on PNBP and Other Related Taxes
production sharing contract scheme, other than tax
revenues are as follows: Implementation of utilization of state property in
the framework of providing infrastructure –
• Signature bonus, arranged based on the status of Regulation of the Minister of Finance No. 164 /
new WK or further managed WK (termination). PMK.06 / 2014
 New WK, bonus amounts ranging from 1 - 41
According to this Regulation, Utilization Cooperation
million US Dollars refer to Permen of ESDM No.
(KSP) is the utilization of BMN by other parties within a
30/2017. Bonuses are determined based on the
certain period of time in the context of increasing non-
value of the signature bonus stated in the
tax state revenues and other financing sources. The
notification of tender results issued by the
Minister of Finance as Property Manager has the
Director General to the tender winner.
authority and responsibility to determine the rental rate
 Further managed WK (termination), in general
formula / amount of state revenue contribution from
the amount of bonus ranges from 1-250 million
BMN Utilization that is under the Property Manager in
US Dollars, refer to Permen of ESDM No.
the context of providing infrastructure as well as to
23/2018 and Kepmen of ESDM No. 1794 K / 10
approve the application for rental rate formula / amount
/ MEM / 2018. The bonus amount is determined
of state revenue contribution from BMN Utilization that is
by the formula:
under User of Property in the context of providing
25% x (NPV10% Contractor - Investment costs that
infrastructure submitted by the User of Property. In
have not returned - NPV10% Firm Work Commitment) accordance with Article 10 of this regulation, BMN
Utilization Partner in the context of providing
NPV10% is Net Present Value of cash inflow and infrastructure has the authority and responsibility to pay
cash outflow from upstream oil and gas business the contribution of state revenue related to BMN
activities for a certain period with a 10% discount Utilization in the context of providing infrastructure in
rate. accordance with the agreement. While, Article 19 of this
• Information service on potential auction of oil and Regulation stipulates that BMN Rental Revenue in the
gas working areas (Bid Document) refers to Permen context of providing infrastructure in the form of rent
of ESDM No.30/2017 money which is Non-Tax State Revenue must be
• Production bonus is the amount of money to be paid deposited into the State General Cash account. Thus,
to the Government if an oil / gas working area according to Article 24 of this Permen, the KSP of BMN
reaches a certain production or achieves certain revenue in the context of providing infrastructure
cumulative production in the amount specified in the consists of state revenue which is Non-Tax State
production sharing contract. Revenue that must be deposited into the State General
• The financial obligation for the termination of a Cash account.
Cooperation Contract (Termination) that has not
fulfilled a firm commitment of exploration Thus, based on this regulation, it provides provisions for
rental payment from the new contractor to the
The PNBP is deposited to the State Treasury through an government for assets from the management of the old
Online Non-Tax State Revenue Information System working area used by new contract in which the DGSA of
(SIMPONI). This information system is managed by the the Ministry of Finance imposes rental fee on BMN assets
Directorate General of Budget which includes PNBP that provide additional PNBP that adds cost recovery
Planning Systems, Billing Systems, and PNBP Reporting and oil and gas production share of the government
systems. which also relates to the decrease in the DBH of oil and
gas natural resources to oil and gas producing regions.
32

Regulation of the Minister of Energy and Mineral While the procedures for collection and rates according
Resources No. 30/2017 concerning the to Article 7 are as follows:
procedure for imposing, collecting, and paying / a. The type of PNBP in the form of information service
on the potential auction of the Oil and Gas Working
depositing non-tax state revenues that applies
Area as referred to in Article 2, letter a, must be
to the Directorate General of Oil and Gas of paid by prospective auction participants for the Oil
Ministry of Energy and Mineral Resources and Gas Working Area before obtaining Bid
Article 2 of this Permen states that the type of PNBP Document access.
applicable to the Directorate General of Oil and Gas b. Rate for the type of PNBP as referred to in
includes: paragraph (1) is in accordance with the provisions of
a. Information service on potential auction of oil and laws and regulations concerning the types and rates
gas working areas (Bid Document); for the types of PNBP applicable to the Ministry of
b. Signature bonus that is the obligation of the Energy and Mineral Resources.
Contractor; and
c. The financial obligation for the termination of a 2.4.2 Fiscal Policy on Mineral and Coal Sector
Cooperation Contract (Termination) that has not Government revenue from the minerba mining industry is
fulfilled a firm commitment of exploration. entirely received in cash.

The procedures for imposition in accordance with Article

Tax Policy on Mining Industry
3 are the following:
a. The type of PNBP as referred to in Article 2, letter a, Table 9 summarizes policies on income tax, PBB and PPN
is imposed on the utilization of information services in minerba mining industry
on potential auction of the Oil and Gas Working
Area.
b. The type of PNBP in the form of information services
Policy on Non-Tax Revenue in Mineral and Coal
on the potential auction of the Burni Oil and Gas Mining Sector
Work Area as referred to in paragraph (1) shall be The Government of Indonesia applies several fees and
imposed on the Business Entity or Permanent charges that must be paid by the IUP holders and
Establishment of prospective tender participants for contractors of KK and PKP2B in the form of the following:
the Oil and Gas Working Area.

Table 9 Tax policy on minerba mining sector

Type of Tax Description

Corporate Income Tax IUP

The income tax rate is 25% of taxable income
Reduction by 5% if the company is listed on the stock exchange
KK/PKP2B
The income tax rate follows the prevailing tax rate at the time of signing the contract

PBB The object of PBB for is the earth and / or buildings within the area used for mineral
and coal mining activities. Included in the object of the land and building tax is the
earth body in the exploration period. The procedure of imposingland and building tax
in mineral and coal mining sector is regulated in the Regulation of the Directorate
General of Taxes No. PER-47 / PJ / 2015.

PPN Mining production is discharged from PPN. Processed material is subject to 10% PPN
– the same rate imposed on any other industries.

Other Taxes Follows applicable tax rate

Source: various sources

Table 10 Type and rate of non-tax state revenue in minerba sector

Type of Mandatory Fee and Calculation and Rate Regulation

Charge

Landrent [Total Area (Hectare) of KP/KK/PKP2B x Rate (IDR/US$)] PP No.9/2012

Tarif Iuran Tetap
Type of IUP Unit Rate
IUP and IUPK – exploration of metallic Per ha/year US$ 2,00
mineral and coal
IUP and IUPK – production operation Per ha/year US$ 4,00
People’s Mining License (IPR) of non- Per ha/year US$ 1,00
metallic mineral and rocks
People’s Mining License (IPR) of Per ha/year US$ 2,00
metallic mineral and coal
 Contextual Report 2016 33

Type of Mandatory Fee and Calculation and Rate Regulation

Charge

Exploitation/production fee [Volume of Production Sold x Percentage of Rate (%) x Selling Price PP No.9/2012
(royalty) (US$)]
Royalty of mineral for KK and IUP
Comodities Unit Royalty
Nickle Per Ton 5% of selling price
Tin Per Ton 3% of selling price
Copper Per Ton 4% of selling price
Bauxite Per Ton 3,75% of selling price
Gold Per Kilogram 3,75% of selling price
Iron ore Concentrate 3,75% of selling price
Silver Per Kilogram 3,25% of selling price
Royalty of coal for PKP2B and IUP
Open cut mining operation
Calories Unit Royalty
≤ 5.100 Per Ton 3% of selling price
> 5.100 – 6.100 Per Ton 5% of selling price
> 6.100 Per Ton 7% of selling price
Royalty of coal for PKP2B and IUP
Underground mining
Calories Unit Royalty
≤ 5.100 Per Ton 2% of selling price
> 5.100 – 6.100 Per Ton 4% of selling price
> 6.100 Per Ton 6% of selling price

Sales revenue share (PHT) • Fee imposed on PKP2B holders PKP2B Contract
• PHT is calculated based on the formula of Coal Production Fund
(DHPB) amounting to 13.5% less royalty rate
• Royalty rate is between 5%-7%, depending on the calorific value
of coal
Forestry fee Forest Resource Rent Provision (PSDH), Reforestation Funds (DR) and PP No. 12/2014,
Stumpage Value Compensation Permenhut No.
P68/Menhut
II/2014
Borrow-to-Use Forestry Permit • For open mining, the rate is Rp3,500,000 per hectare multiplied PP No. 33/2014
(IPPKH) by the land area and the multiplier number, depending on the
specification per section of mining area, as well as Rp1,750,000
per hectare for the mine buffer area. IPPKH is paid in the first year
and after three years of planting during land reclamation.
• For closed mining, the rate is Rp4,000,000 per hectare multiplied
by the size of the land and the multiplier number, depending on
the specification per section of mining area,as well as
Rp2,000,000 per hectare for the mine buffer area. IPPKH is paid
in the first year and after three years of planting during land
reclamation.
Source: various sources

The Directorate General of Mineral and Coal carries out 2. Implementation of the procedure for depositing
the following policies in the framework of governance of PNBP payment in advance, before shipping.
the PNBP in mineral and coal sector: Currently, the payment is deposited 1 month after
1. Increased collaboration with related institutions (local shipment.
government, KPK, BPKP, BPK, Ministry of Trade, 3. Provision of sanctions in the form of termination of
Ministry of Finance). shipments and revocation of licenses for companies
i. Audit of mineral and coal natural resources PNBP that still have arrears on PNBP obligations.
obligations (OPN-BPKP Team and BPK RI) 4. Implementation of the Minister of Energy and Mineral
ii. Collaboration on information on mineral and coal Resources Decree concerning Procedures for
export data with the Ministry of Trade, Ministry of Imposing, Collecting and Depositing the Mineral and
Transportation and Directorate General of Coal Non-tax State Revenue (Kepmen of ESDM No.
Customs and Excise of the Ministry of Finance 1823.K / 30 / MEM / 2018), which regulates the
iii. Requesting the local government to carry out its procedures for calculating and reporting PNBP.
functions, among others, supervises the 5. Increased coordination in order to increase
fulfillment of PNBP payment obligation. compulsory payment compliance and socialization of
the implementation of mineral and coal E-PNBP
system.
 34

2.5 Duties and Functions of Relevant Government monitoring the implementation of cooperation contract,
Agencies in the Extractive Industry reviewing and providing approval for development plan
and work and budget plan. Then, there is local
In general, there are two ministries involved in managing government that coordinates with the Directorate
state revenue from the extractive industry sector, namely General of Fiscal Balance for the percentage allocation of
the Ministry of Energy and Mineral Resources (MoEMR) the revenue sharing with the Central Government. Figure
and the Ministry of Finance. The MoEMR has the duties 7 illustrates the relationship between agencies involved
and functions of formulating policy, providing technical in managing state revenue in the oil and gas sector.
guidance, and supervising policy implementation. The
Ministry of Finance has the duties and functions of In the mineral and coal sector, provincial government has
formulating taxation and customs and excise policies, the authority to establish mining business license area for
managing state revenue derived from the extractive non-metallic minerals and rocks as well as to issue mining
industry, acting as government representative in terms of business license in the framework of domestic investment
investment policy setting and dividend distribution for within one province territory and sea territory up to 12
and from BUMN of extractive industry, and managing the miles. In addition, the Provincial Government is also
allocation of state revenue of natural resources to the authorized to issue people’s mining license, issue mining
region. business license of special production operation for
processing and refining mining commodities that come
In the oil and gas sector, the upstream activities are also from the same provincial territory, issue mining service
managed by the Special Unit for Upstream Oil and Gas business license and registered certificate and determine
Business Activities (SKK Migas) which functions for giving the benchmark prices for non-metallic minerals and rocks.
consideration to the Minister of Energy and Mineral The Local Government also coordinates with the
Resources at his discretion in terms of preparing and Directorate General of Fiscal Balance for the percentage
offering the Working Area, signing the cooperation allocation of revenue sharing with the Central
contract, Government.

Figure 7 Roles and responsibilities of government agencies in oil and gas mining sector Figure 8 illustrates the
relationships between agencies
involved in managing state
revenue in the mineral and coal
sector.

The Ministry of Environment and

Forestry also has a role in relation
to extractive industry activities,
namely issuing exploitation license
that use forest areas and
regulating and controlling the use
of the area.

In the downstream oil and gas

sector, there is the Regulatory
Agency for Downstream Oil and
Gas Business Activities (BPH
Migas) which was established to
ensure sufficient domestic oil and
Source: EITI Secretariat gas supply and ensure safe
operations for refineries, storage,
Figure 8 Roles and responsibilities of government agencies in mineral and coal mining sector transportation and distribution of
oil and gas products. BPH Migas is
also responsible for overseeing the
distribution and transportation of
oil and gas fuel through a pipeline
operated by the company
(Business Entity).

The detailed tasks of each of the

above agencies and their legal
basis can be seen at the 2015 EITI
Report.

Source: EITI Secretariat

 Contextual Report 2016 35

2.6 Improving Governance Related to Extractive Several intensive regulations and deregulations are
Industry carried out by the Government of Indonesia in the period
of 2015-2017, including the simplification of policies in
2.6.1 Delegation of Indonesia’s Integrated One oil and gas mining and mineral and coal mining sectors.
Stop Service (PTSP) These efforts, at least, have contributed to the upgrade
Indonesia’s Integrated One Stop Service (PTSP) was of Indonesia’s EODB (Ease of Doing Business) rank, in
formed to facilitate the licensing process in establishing a which Indonesia was ranked 106th in 2015, rising to 91st
business. PTSP aims to improve the service for the in 2016, up again in 2017 to 72nd and falling slightly to
community and shorten the service process in order to 73rd in 2018.
realize fast, easy, cheap, transparent, certain, and
affordable services. Based on BKPM Head Regulation No. Licensing in the Minerba sector
14/2015 and article 4 of Presidential Regulation No. In the mineral and coal sector, the Ministry of Energy and
97/2014 concerning the delegation of authority from 23 Mineral Resources has issued the Regulation of the
Ministries / Institutions, the services provided by BKPM Minister of Energy and Mineral Resources No.11 / 2018
include all licensing and non-licensing services that to rearrange the procedures for granting territories,
become the authority of the Government and Local licensing and reporting on minerba mining operations. In
Government. implementing this regulation, Minister of Energy and
Mineral Resources Decree No. 1796 K / 30 / MEM / 2018
In response to the issuance of Presidential Regulation No. concerning Guidelines for the Implementation of
97/2014, the MoEMR issued Permen of ESDM No. Request, Evaluation, and Issuance of Licenses in the
25/2015 concerning the delegation of authority to grant Minerba Sector has been issued.
investment licenses to the Head of BKPM.
The form of business licensing in the minerba sector as
Although there are several mining authorities at the shown in Table 12.
provincial level, the provincial government continues to
coordinate with the central government, one example of
which is related to the auction of the Mining Business
License Area in the province.

Table 11 Simplification of licensing in minerba sector

No. License Process Stages Time Description

1 IUP/K - 1. The WIUP tender winner submits an application to the minister / governor in accordance Validity period:
Exploration with the authority a. Mineral
2. Verification of the completeness of documents  1 day - metal: 8 years
3. Evaluation of administrative, technical, environmental, financial documents  3 days - non-metal: 3 years
4. Issuance of the license  7 days b. coal: 7 years
Total time needed : 11 days
2 IUP/K – 1. The WIUP tender winner submits an application to the minister / governor in accordance Validity period:
Exploration with the authority - Metallic mineral, coal,
2. Verification of the completeness of documents  1 day certain types of non-
3. Evaluation of administrative, technical, environmental, financial documents  6 / 3* metallic mineral: 20
days years + 2x10 years
4. Issuance of the license  7 days - non-metallic mineral:
Total time needed : 14 / 11*days 10 years + 2 x 5 years
*for IUPK - rocks: 5 years + 2x5
years
3 IUP/K - 1. Business entity / individual submits an application to the minister / governor in Validity period:
Processing and accordance with the authority 30 years and can be
Refining 2. Verification of the completeness of documents  1 day extended for 20 years
3. Evaluation of administrative, technical, environmental, financial documents  5 days every extension
4. Issuance of the license  8 days
Total time needed : 14 days
4 IUPK - 1. Business entity / individual submits an application to the minister / governor in Validity period:
Transportation accordance with the authority 5 years and can be
and Sales 2. Verification of the completeness of documents  1 day extended for 5 years every
3. Evaluation of administrative, technical, environmental, financial documents  5 days extension
4. Issuance of the license  8 days
Total time needed : 14 days
5 IUJP 1. Business entity / individual submits an application to the minister / governor in Validity period:
accordance with the authority 5 years and can be
2. Verification of the completeness of documents  1 day extended for 5 years every
3. Evaluation of administrative, technical, environmental, financial documents  5 days extension
4. Issuance of the license  8 days
Total time needed : 14 days
Source: Permen of ESDM No. 34/2017
36

Currently, the Directorate General of Mineral and Coal is Re-organizing IUP is in the context of revamping IUPs
developing an online mining license application for all that do not meet the criteria based on Permen of ESDM
types of licenses and non-licenses (recommendations / No. 43/2015, especially since the enactment of Law No.
approvals) of the mineral and coal sub-sector which have 4/2009 in which the local government has the authority
been processed within the MoEMR and BKPM. This to issue mining license. Permen of ESDM No. 43/2015
online licensing application is developed as a form of concerning Procedures for Issuance of Mineral and Coal
commitment from the Directorate General of Mineral and Mining Business Licenses stipulates IUP compliance
Coal to improve effective, efficient, transparent and criteria, namely: 1) administrative criteria; 2) territorial
accountable public services for both internal and external criteria; 3) technical criteria; 4) environmental criteria; 5)
of Directorate General of Mineral and Coal. financial criteria. This regulation also contains provision
for the Governor to carry out CnC evaluation procedures
Licensing in the Migas sector and submit the evaluation results to the Minister of
In the oil and gas sector, the Ministry of Energy and Energy and Mineral resources no later than 90 calendar
Mineral Resources has issued Permen of ESDM No. days from the date of signing of the minutes of hand
40/2017 concerning delegation of authority to grant over licensing from the Regent/Mayor.
licensing in the field of oil and gas business activities to
the head of BKPM. This regulation regulates the After updating the IUP database, DG of Mineral and Coal
simplification of licenses from 42 existing licenses in 2016 will block 2,509 non CnC IUPs. In the context of blocking,
to 6 licenses, which consist of 2 upstream oil and gas the DG of Mineral and Coal has also coordinated with
licenses and 4 downstream oil and gas licenses. relevant agencies such as Kemenkumham,

The simplification of licensing in the oil and gas sector is

shown in the table below.
Table 12 Simplification of licensing in migas sector

Licenses available at BKPM in 2016 Simplification in 2017 (Permen of ESDM No.

(Permen of ESDM No. 23/2015) 29/2017)

42 licenses in the oil and gas sector, including: General survey license
Supporting Business Ability Certificate (SKUP) of Oil and Gas Oil and gas data utilization license
RPTKA (Foreign Manpower Utilization Plan) Recommendation Processing license
IMTA (Foreign Manpower Employment Permit) Recommendation Storage license
Recommendation for Opening or Renewal of the Oil and Gas Business Transportation license
Representative Office Commercial license
RKBI (Needs Plan for Imported Goods) Recommendation/masterlist
General Survey License
License for Surveying Outside the Oil and Gas as well as Coal Bed Methane
(CBM) Working Areas
Approval of Abroad Shipping (Export) of Data from General Survey Activities,
Exploration and Coal Bed Methane (CBM)
Recommendation for Using Working Area for Other Activities
Approval of Oil Production on Old Wells
License for Utilization of Oil and Gas Exploitation Data
Recommendation on Export of Oil and Gas from Upstream Oil and Gas
Business Activities
Approval of Conventional, Coal Methane Gas, and Non-Conventional Joint
Evaluation / Study, etc
Source: Permen of ESDM No. 23/2015, and Permen of ESDM No. 29/2017

An Online Licensing system has been used for the DG of Customs and Excise, DG of Taxes, DG of Foreign
licensing process in the oil and gas sector. Trade, and does not provide services to non-CnC
companies 5. Details of non-CnC IUP by province are as
follows:
Online Single Submission (OSS)
In mid-2018, the Government launched the Online Single
Submission (OSS) system or electronic integrated
business licensing service to process business licenses.
However, according to the explanation of article 85 of PP
No. 24/2018, business licensing in the mining, oil and
gas sector is carried out outside the OSS by the ministry
that organizes government affairs in the fields of mining,
oil and gas in accordance with the laws and regulations.

2.6.2 Re-Organizing IUP through Clean and

Clear Certificate
Re-organizing IUP through Clean and Clear (CnC)
certification has been discussed in the EITI Report in the
last two years.

5 DG of Minerba, 2017 Performance Report, p. 38

 Contextual Report 2016 37

Table 13 Details of non-CnC IUP by province to implement the principle of recognizing the beneficial
owner (Article 14). Corporations must collect information
No Province Non-CnC IUP on the beneficial owner at the time of the application for
the establishment, registration, approval, and business
1 Bali - Nusatenggara 47 licensing. Companies that have obtained licenses or are
in the process of obtaining licenses must fulfill the
2 Maluku 61
provision of the principle of recognizing the beneficial
3 Jawa 573 owner no later than one year after the enactment of this
Perpres (Article 30). Beneficial owner is an individual who
4 Kalimantan 860 meet the criteria of the beneficial owner, see Table 6.

5 Papua 70 Presidential Regulation No. 13/2018 states that

corporations that do not determine the beneficial owner
6 Sulawesi 462 (Article 3), do not apply the principle of recognizing
beneficial owner (Article 14), do not submit correct
7 Sumatera 435 information about the beneficial owner (Article 18), and
do not administer documents related to the beneficial
8 Pusat 1 owner (Article 22 ) subject to sanctions in accordance
with the laws and regulations. The interpretation of
Total 2.509 "sanctions in accordance with laws and regulations" is
still unrestricted, can be based on the Money Laundering
Sumber:
Law or the Terrorism Funding Law or other related laws.
http://humas.minerba.esdm.go.id/1517063725/Pembahasan-
Progres-Pelaksanaan-Kegiatan-Penataan-Izin-Usaha-
Pertambangan-(IUP)

Figure 9 The latest development of the number of CnC and non-CnC companies as of October 1, 2018

Notes:
* IUPs of non-metallic mineral and rock do not need the status of CnC (Permen of ESDM No. 11/2018)
** The expired IUP is calculated until 31 December 2017
Source: DG of Minerba

Along with the end of IUP re-organizing process through The company is often run by other parties, but the real
CnC certification, based on Minister of Energy and benefit owner is not identified because of the layered
Mineral Resources Regulation No. 11/2018, export and complex ownership structure. However, corporations
recommendations (pure tin and coal) are no longer are still required to determine the beneficial owner not
needed. only from legal documents but also from various other
information such as information from private institutions
Figure 9 illustrates the latest developments in the that accept placement or transfer of funds in order to
number of CnC and Non CnC companies based on purchase shares, statements from members of the board
Directorate General of Mineral and Coal data as of of directors, commissioners and so on, other documents
October 1, 2018. or other parties which indicates that the individual is the
actual owner of the fund for the ownership of the limited
2.6.3 Transparency of Beneficial Ownership – liability company (Article 11).
Implementation of Presidential Regulation
No. 13/2018
This regulation requires each corporation to provide
detailed information on the beneficial owner and appoint
an official or employee
38

The 2016 EITI reporting form includes the beneficial on the importance of accurate BO transparency and can
owner's declaration form. The information requested is in be accessed by authorized institutions. Not only that,
accordance with Perpres No. 13/2018, which includes full Indonesia must also have domestic regulations that are in
name, date and place of birth, nationality, identity accordance with the FATF (Financial Act Task Force)
number, residential address, NPWP, address of country Standard to prevent money laundering practices.
of origin, relationship between the beneficial owner and
the corporation and the number of share ownership. 2.6.4 Regulation regarding Gross Split Scheme
However, in the process, the person in charge of the
reporting company is still having difficulties in reporting Until mid-2018, there are already 23 oil and gas WKs that
the beneficial owner. Here are some reasons we received use the Gross Split scheme. This positive development
during the reporting process: gives optimism to the government that the gross split
concept has begun to be accepted by investors,
• The process of obtaining information on beneficial especially after the explanation of gross split rules,
owners requires special expertise in determining the through amendments to the regulation, is issued by the
level of ownership of the company government.
• Authorities in the company do not have access to
parent company’s documents In order to regulate the taxation in gross split scheme,
• In several companies, no shareholder has 25% or the government issued Government Regulation No.
more of shares and the authorities cannot determine 53/2017 concerning Tax Treatment for Gross Split
the beneficial owner by using a qualitative definition Contract. Based on this PP, there is no tax imposition
from the exploration stage until the beginning of the
Therefore, the reporting company mostly can only report production period. While, the imposition of indirect tax
direct shareholder of the company and most of them are during the production period can be compensated
corporations instead of individual owner. through a split adjustment if the economic of the field is
bad
The implementation of BO transparency in Indonesia is a
collective work of a number of ministries and institutions. The net income for 1 fiscal year for the contractor, is
This is also supported by Indonesia's commitment as a calculated based on gross income minus operating costs.
member of a number of global initiatives. For the record, Tax loss can be compensated by income starting from
besides being an EITI member country, Indonesia is also the next fiscal year up to 10 (ten) years.
a G-20 member country that has agreed

Table 14 List of Gross Split Contracts until August 2018

No Working Area Operator Signing Date

1 Andaman I MP (Andaman 1) Rsc Ltd. 05/04/2018
2 Andaman Ii Premier Oil Andaman Ltd. 05/04/2018
3 Brantas Lapindo Brantas Inc. 08/08/2018
4 Bula (2018) Kalrez Petroleum (Seram) Ltd. 11/07/2018
5 Citarum (2018) PT Cogen Nusantara Energi 07/06/2018
6 East Ganal Eni East Ganal Ltd. 17/07/2018
PT Pertamina Hulu Kalimantan
7 East Kalimantan & Attaka 20/04/2018
Timur
8 East Seram Balam Energy Pte. Ltd. 17/07/2018
PT Pertamina Hulu Energi Jambi
9 Jambi Merang (2018) 31/05/2018
Merang
10 Kepala Burung (2018) Petrogas (Basin) Ltd. 11/07/2018
11 Malacca Strait Emp Malacca Strait S.A. 11/07/2018
12 Merak Lampung PT Balmoral Gas 07/06/2018
PT Pertamina Hulu Energi North
13 North Sumatra Offshore (2018) 20/04/2018
Sumatera Offshore
PT Pertamina Hulu Energi ONWJ
14 Offshore North West Java 18/01/2017
(PHE ONWJ)
PT Pertamina Hulu Energi Ogan
15 Ogan Komering (2018) 20/04/2018
Komering
16 Pekawai PT Saka Energi Sepinggan 14/05/2018
PT Pertamina Hulu Energi Raja
17 Raja/Pendopo 31/05/2018
Tempirai
18 Salawati (2018) Petrogas (Island) Ltd. 11/07/2018
19 Sanga Sanga (2018) PT Pertamina Hulu Sanga Sanga 20/04/2018
Repsol Exploracion South East
20 South East Jambi 17/07/2018
Jambi B.V.
21 Southeast Sumatra (2018) PT Pertamina Hulu Energi Oses 20/04/2018
PT Pertamina Hulu Energi Tuban
22 Tuban (2018) 20/04/2018
East Java
23 West Yamdena PT Saka Energi Yamdena Barat 14/05/2018
Source: SKK Migas
 Contextual Report 2016 39

Net income will be subject to corporate and dividend tax a. The ownership of natural resources remains in the
in accordance with general tax rules (current corporate hands of the government up to the point of transfer;
tax rate is 25% and the dividend tax rate is 15%). b. Upstream business activities are implemented based
Corporate tax is not fixed and will be adjusted to the on the upstream business license from the
provisions imposed by the government. government;
c. The establishment of a Special State-Owned
According to the article 4, gross income consists of those Enterprise (BUMN-K) which is a BUMN that obtains
directly related to and outside of PSC activities. Gross upstream oil and gas business license through
income directly related to PSC activities includes the cooperation with other parties and acts as
contractor's share of lifting deducted by the DMO and management controller;
over / under lifting, while those outside of PSC activities d. Pertamina's participation as follows:
includes Uplift (20% final), transfer of working interest of i. Pertamina is granted an independent oil and
PSC (5% for exploration block and 7% for production gas upstream business license. Other business
block), sales by product from upstream activities and entity or BUT shall be granted the license
other factors that generate benefit value. through a cooperation contract with BUMN-K;
ii. Working area offerings are tiered and
In article 5, the operational costs consist of : Pertamina obtains first priority;
1. exploration costs, consisting of exploration drilling iii. The working area business license is granted to
and geological and geophysical activities costs Pertamina for the second time extension of
2. exploitation costs which include development license;
drilling, direct production costs, processing costs, e. Establishment/designation of the aggregate
utilities and G & A as well as depreciation enterprise consisting of i) National Oil and BBM
3. other costs, such as hydrocarbon transportation Aggregate Enterprise and ii) National Gas
costs, LNG processing costs to the point of transfer. Aggregate Enterprise to meet domestic needs;
Similar to the previous PSC, interest costs (if f. All oil and gas production from Pertamina and
contractor funding comes from a loan) can not be BUMN-K shall be sold to Aggregate Enterprises with
included as a tax deduction. the economic price of field development;
g. The business license from the Government valid for
According to the characteristics of the above costs, the 30 years and can be extended for 20 years;
type of the costs is still the same as the type of costs h. The exploration period is 10 years.
regulated in the cost recovery mechanism of the previous
PSC contract. The Minerba Bill which was previously approved as an
initiative of the DPR is still in the stage of discussion
One of the differences between the previous PSC and between the DPR and the Government. Related to the
gross split is the costs incurred before the production Minerba Bill, the DPR proposed changes to several
period must be capitalized and amortized accelerated by points, including9:
the unit production method since it began in the month
of commercial production. a. The period of 5 years to divest is removed and there
is no information on the period of divestment. The
draft proposal only states that license holders whose
2.6.5 Current Status of the Revision of Oil and mines are integrated with smelters and PLTU can
Gas Law and Mining and Coal Law conduct divestments within 10 years of carrying out
As of this writing, revisions for both the Oil and Gas and mining activities;
Mineral and Coal Laws have not yet been completed and b. The right to extend the operating license directly for
still have to take several steps to be approved as a Law. 20 years as non-fiscal incentives to the holders of
IUP and IUPK-OP who build smelters or PLTU;
The latest development related to the Oil and Gas Bill is c. The Central Government has the authority to
the Legislative Body (Baleg) and the Commission VII of determine special prices for mineral and coal
DPR, which is the Proposing Commission of the Oil and commodities used for domestic interests in addition
Gas Bill, have agreed that the Oil and Gas Law Draft to the authority to control production and exports;
become the DPR’s initiative 6 and will be discussed at the d. KK, IUP and IUPK are required to carry out
next level. Some important things agreed upon in the Oil processing and refining no later than two years after
and Gas Law Draft of the DPR initiative are the the Minerba Law is promulgated; and
establishment of a Special Business Entity for Oil and Gas e. License holders who are building smelters are
which will be under the coordination of the Ministry of permitted to sell certain quantities of processing
BUMN and the oil import quota which will be regulated and refining products within a maximum of two
by BPH Migas 7 . Furthermore, in accordance with the years from the promulgation of the Minerba Law
DPR’s Regulation of Procedure 8 article 124 paragraph 9, and must pay export duty.
the bill approved at the DPR plenary meeting will be
submitted by the DPR leadership to the President. The The government also gave several recommendations for
President will appoint ministers as representatives to the Minerba Bill of the DPR’s Initiative. These
discuss the bill together with the DPR. recommendations include recommendations from the
Ministry of Marine Affairs and Fisheries to accommodate
Some important points that have the potential to change marine spatial plans and / or zoning plans of coastal areas
in the Oil and Gas Law, as discussed in the 2015 EITI and small islands in planning and managing mineral and
Contextual Report, are: coal mining and recommendation to add regulations
related to special ports10.
6 Baleg dan Komisi VII Sepakati RUU Migas Menjadi Usul Inisitaif DPR, diakses 9 RUU Minerba Telah Disetujui, accessed from
dari portal resmi DPR http://www.tribunnews.com/nasional/2018/04/10/ruu-minerba-telah-
http://www.dpr.go.id/berita/detail/id/22054/t/Baleg+dan+Komisi+VII+Sepa disetujui on 5 October 2018
kati+RUU+Migas+Menjadi+Usul+Inisitaif+DPR pada tanggal 5 Oktober 2018 10 Daftar Inventarisasi Masalah Rancangan Undang-Undang Tentang
7 Baleg dan Komisi VII Sepakati RUU Migas Menjadi Usul Inisitaif DPR, Perubahan Atas Undang-Undang Nomor 4 Tahun 2009 Tentang
accessed from the official DPR portal Pertambangan Mineral Dan Batubara Tahun 2018
http://www.dpr.go.id/berita/detail/id/22054/t/Baleg+dan+Komisi+VII+Sepa
kati+RUU+Migas+Menjadi+Usul+Inisitaif+DPR on 5 October 2018
8 Peraturan DPR RI Nomor 1 Tahun 2014 tentang Tata Tertib, accessed from
http://berkas.dpr.go.id/jdih/document/peraturan_dpr/perdpr8_2014_1.pdf
on 5 October 2018
40

2.6.6 The Debate and Progress of Regulation on the share price of divestment in minerba mining business
Increasing Mineral Value Added activities regulates that 51% share divestment can be
done through the issuance of existing shares, either
The 2015 EITI Report discussed the provisions of directly or indirectly. The divestment share ownership is
domestic processing and refining in order to increase offered to Indonesian participants in stages, with several
mineral value added. This provision is mandated by the sequences: (1) Government, through Minister with
Minerba Law and reiterated in PP No. 1/2017 which negotiation mechanism. If the Government is not
requires the Production Operation IUP to process and interested, shares shall be offered to (2) Provincial
refine domestic mining products. The government still Government and Regency/City Government in which the
provides tolerance / relaxation for a number of provisions location of the mining business area is located, with the
previously stipulated regarding activities to increase negotiation mechanism. Furthermore, if the Provincial
mineral value added through Permen of ESDM No. Government and Regency/City Government are not
5/2017 (revoking Permen of ESDM No. 1/2014 and interested or do not provide written answers, then the
revising it with Permen of ESDM No. 28/2017) and holder of the Production Operation IUP or Production
Permen of ESDM No. 6/2017 (revised with Permen of Operation IUPK must offer the divestment shares to (3)
ESDM No. 35/2017). This relaxation aims to provide legal BUMN and BUMD without going through an auction. In
and business certainties and provide relaxation of expressing interest in the offer of divestment share, the
refining products and reduced state revenues from the government, through the minister, can directly involve
mineral mining sector provincial governments, regency/city governments,
BUMN, and / or BUMD together. Furthermore, if BUMN
Until the end of 2017, Indonesia have 24 smelters that or BUMD are not interested, the company shall offer to
have been built and are still in progress, consisting of 15 (4) National Private Enterprises, if the auction is not
nickel smelters, 4 iron smelters, 2 bauxite smelters, 2 implemented (National Private Enterprises is not
manganese smelters, and 1 copper smelter. Appendix 2 interested), then PMA holders of IUP-OP and IUPK-OP
contains the list of smelters that have been built and are can offer divestment shares through (5) stock exchanges
still in progress. The target of the construction of smelter in Indonesia.
in the 2016 Strategic Plan (Renstra) is 9 smelters but only
2 smelters can be realized. Following are the constraints This new regulation changes the provisions of Article 14
in the construction of smelters according to DG of which are related to the procedure for determining the
Minerba: price of divested shares. The divested share price of the
Production Operation IUP or Production Operation IUPK
1. Difficulties in finding investors in conditions of having offered to Indonesian participants is calculated based on
no cash flow (no annual revenue). The construction of fair market value by not taking into account mineral or
a smelter takes 2-5 years, in which there is no cash coal reserves except those that can be mined during the
coming in. period of Production Operation IUP or Production
2. Indonesian banks have not enough confidence in the Operation IUPK. Calculation of fair market prices uses
processing and refining facilities industry. discounted cash flow method or through comparison of
3. Benefits from fiscal incentives offered by the market data (market data benchmarking).
Government are not yet optimal.
4. There is not enough infrastructure available to The implementation of the agreement of shares
support the construction of processing and refining divestment between foreign mining companies and the
facilities, including energy, electricity, road access, Indonesian government does not always run smoothly.
ports and so on. PT Freeport Indonesia share divestment case has
received a lot of attention from the public. Initially there
In order to support the regulations, especially to support was no agreement between the Government and PT
the downstream program of domestic mineral products, Freeport, especially regarding the pricing method of
the Minister of Finance issues the regulation No. divestment shares. In the end, the Government through
13/PMK.010/2017 13 concerning Stipulation of Export PT Inalum agreed to acquire 51% of PT Freeport's shares.
Goods Subject to Export Duty and Export Duty Tariff. The Head of Agreement (HoA) between PT Inalum,
This regulation regulates export duties for metallic Freeport McMoran and Rio Tinto was signed with a
mineral processing products, in which the determination transaction value of US$ 3.85 billion. The basis for
of export tariffs is related to phases of physical calculating the acquisition price is the business potential
construction of the smelter, namely: physical construction cash 14flow until 2041 . The conditions of the HoA
up to 30% of the total construction shall be subjected to agreement includes the construction of processing and
7.5% tariff; physical construction up to 30-50% subjects refining facilities within five years, stability of state
to 5% tariff; construction up to 50-75% of total subjects revenues, change from Contracts of Work (KK) to Special
to 2.5% tariff; and construction of above 75% subjects to Mining Business License (IUPK), environmental impacts
0% tariff. As for the export duty tariff of metallic mineral and taxation. Maximum production operations is 2x10
with certain criteria (nickel with <1.7% nickel content and years until 2041 in accordance with the provisions stated
washed bauxite with > 42% washed bauxite content) in the Law. The amount of corporate income tax for
subject to 10% tariff. The provisions contained in the minerba mining companies, including Freeport, is
regulation of the minister of finance are valid until reduced to 25 percent from previous 35 percent which
January 11, 2022. has been the Freeport tax rate.
2.6.7 Implementation of Share Divestment
Regulations
Permen of ESDM No. 43/2018 which amends Permen of
ESDM No. 09/2017 concerning the procedure for
divestment of shares and the mechanism for determining

11 Ibid 14 Reuters. 2017. “Freeport at loggerheads with Indonesia over divestment”.

13 PMK 13/PMK.010/2017 revokes PMK 140/PMK.010/2016 that revokes PMK https://www.reuters.com/article/us-freeport-mcmoran-indonesia/freeport-at
75/PMK.011/2012 (has been amended for 4 times: PMK loggerheads-with-indonesia-over-divestment-letter-idUSKCN1C42HJ
128/PMK.011/2013; PMK 6/PMK.011/2014; PMK 153/PMK.011/2014; and accessed on 6 November 2017
PMK 136/PMK.010/2015).
 Contextual Report 2016 41

2.6.8 Contract Shifting to IUP Some of the important provisions that will be regulated in
the draft of PP include the period of application for the
Article 169 of Law No. 4/2009 regulates the mechanism extension of PKP2B to IUPK which can be submitted
of contract shifting to IUP, that are: (A) KKs and PKP2Bs maximum 5 (five) years and minimum 1 (one) year before
shall remain valid until the termination of the Contract / the expiration of PKP2B. The opportunity for PKP2B
Agreement; (b) The provisions in the KKs and PKP2Bs holders to submit applications for extension of PKP2B
shall be adjusted not later than 1 (one) year after Law No. into IUPK earlier is expected to provide an opportunity
4/2009 is enacted except for the components of state for businesses to make long-term investment plans. The
revenue; and (c) The exception is an effort to increase application for extension, according to Law No. 4/2009
state revenue. can be given 2x10 years, which will be carried out
through the tender procedure.
There are 6 strategic issues that still emerging in the
process of amendment (renegotiation) of KK and PKP2B Besides the revision of PP No. 23 of 2010, the
as described in Table 15, namely about: (1) Continuation government is also drafting a government regulation that
of mining operation; (2) State revenue; (3) Obligation for regulates the tax treatment for coal mining companies.
processing and refining; (4) Obligation to divest; (5) Area The framework of the PP will later refer to PP No.
of work; and (6) Obligation to use domestic labor, goods 37/2018 concerning Tax Treatment and PNBP in the
and services. In addition, changes in directors also Mineral and Coal Mining Business Sector. In the PP to be
hindered the shifting process of the contract system to issued, the state is expected to benefit with the increase
the IUP system. of state revenues.

Table 15 Strategic issues in the renegotiation of mineral and coal industry contracts

Strategic Issue Description

Continuation of mining operation The continuation of mining operations is proposed 2 years before the end
of the contract, in the form of a Special Mining Business License (IUPK) for a
period of 2x10 years.

State Revenue Corporate Income Tax is set in accordance with nail down scheme, while
royalty and other taxes are set in accordance with the laws and regulations.

Obligation for processing and refining The company is obliged to conduct refining in the country

Obligation to divest Divestment of 51% of total shares (upstream)

Area of work The company must submit a Long-term Work Plan, which is the work plan
until the contract expires

Obligation to use domestic labor, Prioritizing utilization of domestic labor, goods and services
mining goods and mining services
Source: 2017 Performance Report of DG of Minerba

See Appendix 3 for a list of KK and PKP2B that have Therefore, DHPB (Coal Production Fund) rate is proposed
signed amendments and shifted to IUPK, including a list to increase to 15% from the current position of 13.5%. In
of KK that have not signed amendments as of January addition, there is also an additional PNBP for the central
2018. and local governments with a total of 10% of net income,
with a distribution of 4% for the central government, and
2.6.9 Draft of 6th Amendment of PP No. 6% for the local government.
23/2010 and Draft of Government
Regulation concerning Coal Taxation In general, the total tax and PNBP collection according to
this draft of PP is 8.5% lower than the current rules. With
The government is drafting the sixth amendment of PP Indonesia's coal reserves remaining around 69 years,
No. 23/2010 concerning Implementation of Mineral and state revenues from coal mining must be optimized.
Coal Mining Business Activities. The 6th revision is Moreover, the performance of this sector contributed
intended to provide business certainty for holders of greatly to the receipt of Corporate Income Tax which
PKP2B, especially the 1st generation, whose validity grew 23.3% or as of August 2018 reaching Rp 154.6
period will expire then will be converted into IUPK in trillion. Currently, the draft of government regulation on
accordance with the mandate of Law No. 4/2009 coal tax and PNBP is being discussed by the Fiscal Policy
concerning Mineral and Coal. As is known, there are Agency (BKF), the Ministry of Finance, and the Ministry
around 7 companies holding 1st generation PKP2B of Energy and Mineral Resources. In the proposed draft
whose validity period will expire in the years of 2019- of PP, it is stated that the holders of the PKP2B will be
2025. Therefore, the draft of PP is expected to be a legal subject to a corporate income tax of 25% from the
basis for the certainty of long-term business for ex-1st previous 45%.
generation PKP2B IUPK holders.
42

2.6.10 Oil Fuel concerning the Fifth Amendment to Permen of ESDM

No. 39/2014 regarding Calculation of the Retail Price of
Supply and distribution of BBM Oil Fuel, in which the paragraphs in article 4 change to:
On May 24, 2018, the Government issued Presidential 1. Calculation of the retail selling price of General BBM
Regulation No.43/2018 concerning the Supply, types at the point of delivery, for each liter
Distribution and Retail Price of Oil Fuel (BBM). This determined by the Business Entity with the highest
regulation is a revision of the Presidential Regulation price determined based on the base price plus
issued previously (Perpres No.191 in 2014). With the Value Added Tax (PPN) and Motor Vehicle Fuel Tax
issuance of this new Perpres, even though Jawa, Madura (PBBKB) with a maximum margin of 10% of basic
and Bali (Jamali) regions are not included in the price.
Assignment Area, they can still get premium allocations 2. The amount of Motor Vehicle Fuel Tax (PBBKB) as
with assignment status as long as it is approved by the referred to in paragraph 1, is in accordance with the
results of the meeting with the Coordinating Minister for local provincial regulation.
Economic Affairs and approved by the related Minister. 3. The retail selling price of the General BBM type is
determined by the Business Entity and must be
Following the Perpres, on 28 May 2018 the Decision of reported to the Minister of Energy and Mineral
the Minister (Kepmen) of ESDM No. 1851 K / 15 / MEM / Resources.
2018 was issued regarding the Supply and Distribution of 4. Deleted.
Special Fuel Type for Assignment (JBKP) in the Jamali 5. Deleted.
region. In this Kepmen, the Regulatory Agency for 6. Report as referred to in paragraph 3 shall be
Downstream Oil and Gas Business Activities (BPH Migas) submitted to the Minister (ESDM) through the
will stipulate further provisions regarding the location and Director General (Oil and Gas).
allocation of assignment volume for the supply and 7. The Director General (Oil and Gas) evaluates the
distribution of JBKP. report.
8. If there is a mismatch in the implementation of the
With this new Perpres, premium with 88 octane level retail selling price of General BBM distributed
must be distributed throughout Indonesia, including in through the General Fuel Filling Station and/or the
Jamali region. The allocation for the 88 octane level Fisherman Fuel Station as referred to in paragraph
premium is added from 7.5 million kiloliters to 11.8 1, the Minister of Energy and Mineral Resources
million kiloliters in 2018 for all regions in Indonesia. shall determine the retail selling price of the General
BBM type.
Determination of retail price of BBM 9. Further provisions regarding the procedure for
submitting report and evaluation guidelines for the
Currently, the BBM pricing mechanism is divided into Retail Selling Price of General BBM are determined
two, namely those set by the Government and those set by the Director General (Oil and Gas).
by Business Entity (Pertamina). The government
stipulates the types of diesel fuel and kerosene which are
subsidized BBM, then Premium which is subsidized BBM The implementation of BBM one price
and Premium which is a JBKP (for areas outside Java and The government issued a policy of BBM one price in all
Bali). While for General BBM such as pertalite, pertamax regions of Indonesia through Permen of ESDM No.
series and non-Pertamina gas station products, the price 36/2016. This policy is to achieve equitable energy
is determined by the business entity. access, in which there is no longer a significant gap in
BBM price between one region and another in Indonesia.
Determination of the retail selling price of Certain Type The background of the implementation of the BBM one
of Fuel (JBT) or subsidized BBM and JBKP is carried out price policy, among others: The price of BBM is relatively
every 3 months. more expensive, especially in the 3T area (Frontier,
Outermost and Least Developed area) and limited
In accordance with Presidential Regulation No. 43/2018, distribution infrastructure owned by BBM distribution
the Government sets retail selling prices by considering institutions.
various aspects including the state financial capacity or
the economic situation, the purchasing power of the The implementation of one price is effective from
people and the real economy. January 1, 2017. The types of BBM regulated in the
regulation consist of:
Regarding the formulation of BBM prices, the Kepmen of
ESDM No. 2846 K / 12 / MEM / 2015 regulates the basic • JBT which includes diesel oil 48 (Gas Oil) and
price formula for JBTs whose prices are set by the kerosene
Government and are given subsidies namely Diesel Oil • JBKP which includes gasoline, minimum RON 88.
and Kerosene. Meanwhile, JBKP is not given subsidies,
even given an additional fee of 2% and distributed in However, there are some obstacles in the
non-Java, Madura, Bali (Jamali) areas, namely RON 88 implementation of the BBM one price policy, including:
premium. The market index price (HIP) is regulated
Kepmen of ESDM No. 2361 / K / 12 / MEM / 2017. • There are areas that do not have distribution
institutions, especially in the 3T area.
The BBM basic price component consists of acquisition • Land transportation infrastructure that is inadequate
cost, storage and distribution cost and margin. for the transportation and distribution of BBM which
Acquisition cost is the cost needed to provide BBM, requires the use of water or air transportation modes.
while storage and distribution cost is the cost needed to This greatly affects the selling price of BBM,
distribute fuel to all regions of Indonesia. especially in the 3T area.
• Establishment of distribution institutions is considered
In 2018, the Minister of Energy and Mineral Resources to be less economical, given the relatively small
issued Permen of ESDM No. 34 volume of BBM distributed, especially in the 3T area.
 Contextual Report 2016 43

Figure 10 Roadmap of BBM one price

Source : http://migas.esdm.go.id

According to the BBM one price roadmap, the However, since the granting of a judicial review of this
government is targeting the operation of 150 distribution PMK by the Supreme Court in Decision of the Supreme
institutions until 2019, each of which is 54 points in 2017, Court No. 5/2018, LNG is included in the type of goods
50 points in 2018, and 46 points in 2019. Figure 10 subject to PPN. The basis of this decision is LNG is not
illustrates the roadmap of BBM one price. natural gas taken directly from its source, but is the result
of processing according to the provision of Law No.
42/2009 concerning PPN and PPnBM.
2.6.11 Imposition of PPN on LNG Products
With the Supreme Court's decision, the LNG producer
Based on PMK No. 252/2012 article 1 paragraph 2, LNG
will impose PPN on the sale of LNG products which will
is not included in the type of goods subject to value
be borne by the buyers.
added tax (PPN).
 44

03
LICENSE AND CONTRACT

This chapter discusses licenses and contracts process in oil As illustrated in Figure 5, the PSC cash flow starts from
and gas mining and mineral and coal mining as well as types the Gross Revenue reduced by First Trance Petroleum
of license/contract and tender in 2016. (FTP), investment credit and cost recovery. The rest
(equity to be split) will be shared between the
3.1 Oil and Gas Mining Sector government and the contractor in accordance with the
split in PSC. The percentage of production sharing
3.1.1 Applicable Contract in Oil and Gas Sector between the government and contractors will be
different for each generation of contracts as summarized
Production Sharing Contract (PSC) in Table 13 of the 2015 EITI Contextual Report.

Currently, most of oil and gas blocks operated in

Indonesia still use this contract. The provision of in-kind Joint Operation Body (JOB)
production sharing between the Government of
Another type of PSC contract is known as Joint
Indonesia and the contractor is stipulated in the contract.
Operation Body (JOB-PSC). According to this contract,
The Contractor shall bear the risks and costs spent since
Pertamina will cooperate with other contractors by
exploration stage to production stage, including risk of
forming a joint operation body.
failing to find oil and gas (dry hole) in exploration stage.
 Contextual Report 2016 45

• Ownership of natural resources remains in the hands

of the State until the point of delivery of
hydrocarbon;
• Control over the operation of upstream oil and gas
activities remains in the hands of SKK Migas;
• All capital and risks are borne by the contractor; and
• Arrangement of gross split production sharing
contract scheme refers to regulations, including
Permen of ESDM No. 8/2017, Permen of ESDM No.
52/2017, and PP No. 53/2017. Please refer to section
2.4.1 for more information on gross split scheme.

3.1.2 Establishment of Working Area (WK)

There are no differences in procedures for establishing
oil and gas working areas since the publication of the
2015 EITI Report until the publication of this Report.

The proposed WK comes from open areas, namely:

• Areas that have not been established as working

areas
• Part of working areas set aside according to contract,
or set aside according to contractor’s/Minister’s
proposal
• WK whose contract is no longer valid

Working area established by the Minister of Energy and

Mineral Resources can be offered through tender and
direct offerings as summarized in Figure 11.

Figure 11 Two types of oil and gas working area offerings

In order to establish a WK, for both direct offer and

tender, DG of Oil and Gas is required to submit WK
establishment proposal to the Minister of Energy and
Mineral Resources. Together, the Minister and the DG
consult with local government, and as the last phase the
Minister may establish a WK.

Pertamina's ownership in the JOB block is a minimum of

50%, in which Pertamina representative will become the
GM of the block. JOB contracts that expire will be
returned to the government, then the government will
determine the next contractor.

Production Sharing Contract with Gross Split

Scheme
The Gross Split Scheme concept is based on the
distribution of production sharing that is carried out on
Gross Production, thus eliminating the Cost Recovery
concept that occurred in the previous PSC scheme.
However, there are several principles that remain in the
Gross Split scheme, namely:
46

Figure 12 Flow of oil and gas working area establishment

Source: Directorate of Upstream Business Development, MoEMR

3.1.3 Tender Procedure of Working Area or 45 days (for direct offer participants) since the date of
bidding or offer is announced. DG of Oil and Gas will
The tender process of WK is commenced with tender form a Bidding team (for tendered WK) and an
announcement and tender document issuance for each Assessment Team (for directly offered WK). The
WK tendered by DG of Oil and Gas. Companies that Bidding/Assessment Team will conduct technical,
purchase the documents will be noted as candidate financial, and performance evaluation based on the
bidders.Companies who wish to proceed in the bidding submitted documents. Figure 13 briefly illustrates the
will be required to submit their participation documents flow of the tender process.
at the latest 120 days (for bidding participants)

Figure 13 Flow of the tender process for oil and gas working area

1. WK tender is announced on print and electronic media, or the Ministry of

Energy and Mineral Resources website (www.migas.esdm.go.id or
www.wkmigas.com).
2. Tender/bid document should contain at least: i) bidding guidelines ii)
geological information and oil and gas potential iii) reserve and
production estimate iv) cooperation contract concept. Interested
participants must purchase bid document at DG of Oil and Gas. DG of
Oil and Gas has launched e-tender (http://e-wkmigas.esdm.go.id) in
which tender/bid document can be accessed electronically.
3. Interested participants must purchase geological and geophysical data
of tendered WK from DG of Oil and Gas Data Management (MDM).
4. Government holds clarification forum to explain tender process to
participants that purchase bid document.
5. Participants must submit participation document within 120 days (tender)
or 45 days (direct offer) since the announcement of tender.
6. Bidding team will make technical evaluation on 3-year firm commitment,
financial capacity, and company performance. Table 16 describes the
assessment criteria for evaluating participants of WK tender.
7. Minister of Energy and Mineral Resources decides the winner of tender
based on recommendation from Bidding Team.
8. SKK Migas and the contractor sign the cooperation contract.

Source: Directorate of Upstream Business Development, MoEMR

 Contextual Report 2016 47

Table 16 Assessment criteria for WK of oil and gas

Technical assessment: Financial assessment:

a. Seismic survey commitment; a. Amount of signature bonus;
b. Commitment of the quantity of new field wildcat well as well as b. Ability to finance firm commitment during the first three
plan of drilling location; and years of exploration;
c. Reasonable and feasible technical proposal. c. Budget for firm commitment;
d. Last three years financial statements audited by public
Performance assessment: accountant; and
a. Experience in oil and gas business; and e. Financial statements of holding company audited by
b. Compliance with laws and regulations applicable in Indonesia public accountant.

Other administrative requirements:

a. Completed application form;
b. Company profile;
c. Last three years financial statements;
d. Proposed work plan for 6 years of exploration;
e. Commitment statement to pay bonuses;
f. Statement affirming consortium establishment agreement and operator appointment;
g. Statement of commitment and ability to perform contract;
h. Statement from holding company on new entity to sign PSC;
i. Copy of incorporation deed;
j. Support letter from holding company to back the commitments;
k. Original copy of bid bond;
l. Statement of compliance with bid announcement;
m. Receipt of bid document purchase;
n. Data package license;
o. Statement of bidder to comply with bid announcement.

Online WK tender 3.1.4 WK Offering in 2016

Since 2016, the tender of oil and gas WK has been One of the measures that the government takes to
conducted online. The online tender was done as an increase reserves and production of oil and gas other
effort to facilitate investors in participating in the tender than accelerating exploration activities from existing
process. With this online system, all questions for contracts is by developing new contracts.
clarification are done online so there is no face-to-face
process. This is expected to avoid undesirable things like WK Offering in 2016
corruption. In 2016, the Government of Indonesia offered WK
through Direct Proposal and Tender. Please refer to
The online oil and gas WK tender procedure is as http://www.wkmigas.com/uncategorized/indonesia-
described below. conventional-oil-and-gas-bidding-first-round-year-2016/.

Figure 14 The online oil and gas WK tender procedure

Source : http://e-wkmigas.esdm.go.id

Bid document purchase will be charged US$ 5,000 for 1 Offered through direct proposal:
block. • Bukit Barat
• Batu Gajah Dua
In accordance with Permen of ESDM No. 30/2017, • Kasongan Sampit
payment for bid document, signature bonus and financial • Ampuh
obligation for not fulfilling firm commitment of • Ebuny
exploration, will be deposited to the State Treasury • Onin
through an Online Non-Tax State Revenue Information • West Kaimana
System (SIMPONI) managed by the Directorate General
of Budget of the Ministry of Finance.
48

Offered through regular tender: Based on Minister of Finance Regulation No.SE-75/1990,

• South CPP one Oil and Gas Working Area is for one Business Entity
• Oti or Permanent Establishment and has one NPWP
• Suremana I (principle of "Ring Fencing"). This principle regulates the
• Manakarra Mamuju Cost Recovery procedure which states that costs incurred
• SE Mandar in one Working Area cannot be charged to other
• North Arguni Working Areas in order to alleviate the taxes of other
• Kasuri II Working Areas.

Of all the WK offered, there was only one winner, which 3.1.6 Transfer of Participating Interest (PI)
is for Migas Oti working area. However, due to a change Regarding the transfer of PI of a block as discussed
in the Gross Split contract scheme, Migas Oti working earlier in the 2015 EITI Contextual Report, there are
area will be re-tendered, so that practically no company several things that must be considered, including:
has won the 2016 oil and gas WK tender.
1. PI transfer must be approved by Minister of Energy
The Implementation Team suggested that this Report and Mineral Resources and take into account SKK
mention the causes of the low investor interest in Migas’ consideration.
participating the WK oil and gas tender in 2016. One 2. During the first three years of exploration,
reason for the low investor interest in the 2016 WK of oil contractors may not transfer PI to parties that are
and gas tender is the oil price which was not stable at not affiliated to the company.
that time. Furthermore, some investors still need time to 3. The disclosure of data for the purpose of PI transfer
consider changes from PSC contract to Gross Split to other parties needs to be approved by the
contract . Appendix 4 summarizes the results of tender in Minister of Energy and Mineral Resources through
2016. SKK Migas.
4. Contractors are required to offer 10% of PI (with
Along with the issuance of Permen of ESDM No. 52/2017 investment replacement equal to 10%) to BUMD
as a revision of Permen of ESDM No. 8/2017 related to since the approval of POD-1, in which BUMD may
changes in oil and gas production sharing for K3S as well not sell its PI, partially or entirely, for three years
as PP No. 53/2017 concerning Tax Treatment for Gross since the effective date of participation.
Split Contract, there was an improvement in investor 5. Other contractor’s revenue outside the Cooperation
interest. Of the 10 WK of Migas offered in September Contract generated from the transfer of
2017, 5 WK of Migas were successfully signed in 2018. participating interest shall be subject to final income
tax at the rate of :
However, this situation has not been confirmed as the a. 5% of gross amount for the transfer of
recovery of investor interest in the oil and gas WK tender. participating interest during the exploration
Some issues that have arisen after the issuance of the period or
gross split tax regulation include (1) unclear b. 7% of gross amount for the transfer of
implementation of additional production sharing rules for participating interest during the exploitation
indirect taxes imposed on oil and gas contractors after period.
the start of production. Related to this, the government However, the transfer of Participating Interest can
has ensured that it will not revise the existing ministerial be exempted from the imposition of Income Tax in
regulation to include a new clause for this split addition order to share the risk during the exploration
and will continue to refer to article 31 of PP No 53/2017, period if it meets following criteria:
in which the contractor can get additional production a. The contractor does not transfer all
sharing related to this indirect tax, if the field is not participating interest owned;
economical. (2) the provision of tax loss compensation b. Participating Interest has been owned for more
(tax loss carry forward) for 10 years is not in accordance than 3 (three) years;
with article 6 paragraph 2 of Law No. 368/2008 c. The exploration has been conducted and the
concerning Income Tax which stated that tax loss carry contractor has disbursed an investment to carry
forward is limited to 5 years. However, article 31 D of Law out the exploration activities; and
No. 368/2008, stated that provisions concerning taxation d. The transfer of participating interest conducted
for oil and gas, geothermal, coal and sharia-based by the contractor is not intended to make a
business sectors are regulated by / or based on profit.
Government Regulation. Thus, PP No. 53/2017 does not
conflict with Law No. 36/2008. List of PI transfer that took place in 2016 approved and
reported by DG of Oil and Gas is as follows:
3.1.5 The Rule of One Working Area for One
Company
Table 17 List of PI Transfer in 2016
Composition Before PI Composition After
No Letter No. Date Working Area Operator
Transfer PI Transfer
1 SRT-0014/SKKD 12-Jan-16 North Arafura Mandiri Arafura BP North Arafura Limited Mandiri Arafura
3000/2016/S0 Utara Limited 100% Utara Limited 100%
PT Pertamina PT Pertamina Hulu
PT Pertamina Hulu Energi
2 575/13/DJM.E/2 14-Jan-16 Randugunting Hulu Energi Energi
Randugunting 40%
016 Randugunting Randugunting 70%
PV Randugunting Co Ltd PV Randugunting Co
30% Ltd 30%
PC Randugunting Ltd
30%

16 PWC. 2018. “Oil and Gas inIndonesia-Investment and Taxation Guide”.

https://www.pwc.com/id/en/pwc-publications/industries
publications/energy--utilities---mining-publications/oil-gas-guide-2018.html.
 Contextual Report 2016 49

Composition Before Composition After

No Letter No. Date Working Area Operator
PI Transfer PI Transfer
3 2273/13/DJM.E/ 22-Feb-16 GMB Lematang PT Methanindo PT Medco CBM PT Medco CBM
2016 Energi Resources Lematang 55% Lematang 34%
PT Methanindo
PT Methanindo Energi
Energi Resources
Resources 40%
66%
PT Saka Energi
Indonesia 5%
4 2273/13/DJM.E/ 22-Feb-16 GMB Lematang PT Methanindo PT Medco CBM PT Medco CBM
2016 Energi Resources Lematang 55% Lematang 34%
PT Methanindo
PT Methanindo Energi
Energi Resources
Resources 40%
66%
5 2273/13/DJM.E/ 31-May-16 Wokam II PT Saka Energi Murphy Wokam Oil PT Saka Energi
2016 Wokam Company Ltd 100% Wokam 100%
6 6652/13/DJM.E/ 31-May-16 GMB Sanga VICO CBM Ltd VICO CBM Ltd 7.5% VICO CBM Ltd 7.5%
2016 Sanga
VIC CBM Limited VIC CBM Limited
15.625% 15.625%
BP East Kalimantan
BP East Kalimantan
CBM Limited
CBM Limited 26.25%
38.4375%
ENI CBM Limited ENI CBM Limited
26.25% 38.4375%
OPICOIL Energy 20%
Japan CBM Limited
4.375%
7 11128/13/DJM.E 22-Sep-16 Blok A Aceh PT Medco E&P PT Medco E&P PT Medco E&P
/2016 Malaka Malaka 41.6667% Malaka 58.3334%
KrisEnergy (Blok A KrisEnergy (Blok A
Aceh) BV 41.6666% Aceh) BV 41.6666%
Japex Blok A Ltd
16.6667%
8 15918/13/DJM.E 30-Dec-16 Randugunting PHE PHE Randugunting PHE Randugunting
/2016 Randugunting 70% 100%
PV Randugunting Co
Ltd 30%
Source: DG of Oil and Gas, Data of EITI for the period of 2016

3.1.7 WK with Expired Contract 3. Joint management between the Contractor and PT
Pertamina (Persero).
The new regulation related to oil and gas working area
(WK) management which its cooperation contract will
There are several things that must be considered by the
expire was issued by the Ministry of Energy and Mineral
Minister of Energy and Mineral Resources in determining
Resources on April 20, 2018. This Permen of ESDM No.
the management of WK which its cooperation contract
23/2018 revoked Permen of ESDM No. 15/2015. The
has ended, namely:
consideration for the issuance of this Regulation is to
maintain and improve oil and gas production and
1. Potential of oil and/or gas reserves in the relevant
maintain the continuity of investment in oil and gas WK
WK.
which the contract will end.
2. Potential or market certainty / needs.
3. Technical and economic feasibility.
In determining the management of oil and gas WK which
4. Commitment to prioritize the fulfillment of domestic
its cooperation contract has ended, there are 3 forms of
oil and/or gas needs.
management contracts in accordance with Article 2,
5. Performance of Cooperation Contract Contractors.
namely:
6. The maximum benefit for the country.
1. The extension of the cooperation contract by the
Contractor.
2. Management handled by PT Pertamina (Persero).
50

In evaluating management request by the Contractor and PT Pertamina or the tender winner can conduct financing
/ or PT Pertamina (Persero), the Minister of Energy and or operating activities needed before the effective date
Mineral Resources can form a Management Team for Oil of the new cooperation contract to maintain the level of
and Gas WK which its cooperation contract will end. This oil and gas production in the WK. All costs incurred in
team consists of representatives from units within the preparing for operations can be recovered based on a
MoEMR, as well as other relevant agencies, if needed. new cooperation contract. In the case of PT Pertamina
(Persero) or Contractor not applying for an extension, the
In accordance with Article 18, the WK tender can be Minister may offer the WK through tender.
carried out before the cooperation contract ends. If PT
Pertamina (Persero) or a New Contractor has been Article 25 paragraph (1) states that in the event that the
declared as an tender winner, a cooperation contract cooperation contract has ended and the Minister of
may be signed before the expiration of the previous Energy and Mineral Resources has not yet determined
cooperation contract and is effective from the expiration the manager of the WK, the Minister may stipulate the
date of the previous cooperation contract. Furthermore, old Contractor to carry out temporary management until
activities can be done to prepare for operations after a Contractor is definitively determined for the WK.
obtaining approval from SKK Migas.
The following contracts will expire before 2024:

Table 18 List of PSC contracts that will expire before 2024

No Working Area Operator Expiry Date

1 Bula Kalrez Petroleum (Seram) Ltd. 31-Oct-19

2 Seram-Non Bula Block CITIC Seram Energy Ltd. 31-Oct-19

3 Pendopo & Raja Block JOB Pertamina - Golden Spike Energy 5-Jul-19
Indonesia, Ltd.

4 Jambi-Merang Block JOB Pertamina - Talisman Jambi Merang 9-Feb-19

5 South Jambi B Block Conocophillips (South Jambi) Ltd. 25-Jan-20

6 Makassar Strait - Offshore Area A Chevron Makasar, Ltd. 25-Jan-20

7 Malacca Strait Emp Malacca Strait S.A 4-Aug-20

8 Brantas Lapindo Brantas Inc. 22-Apr-20

9 Salawati Block Job Pertamina-Petrochina Salawati Ltd. 22-Apr-20

10 Kepala Burung Blok Petrogas (Basin) Ltd. 14-Oct-20

11 Rokan Chevron Pacific Indonesia, Inc. 8-Aug-21

12 Bentu Segat EMP Bentu Ltd. 19-May-21

13 Selat Panjang Petroselat, Ltd. 5-Sep-21

14 Coastal Plains And Pekanbaru (Cpp) Block BOB Pertamina – Bumi Siak Pusako 8-Aug-22

15 Tarakan Block PT.Medco E&P Tarakan 13-Jan-22

16 Tungkal Montd'or Oil Tungkal Limited 25-Aug-22

17 Sengkang Block Energy Equity (Sengkang) Pty. Ltd. 23-Oct-22

18 Jabung Block Petrochina International Jabung Ltd. 26-Feb-23

19 Rimau Block PT. Medco E&P Rimau 22-Apr-23

20 Corridor Block Conocophillips (Grissik) Ltd. 19-Dec-23

Source : SKK Migas

 Contextual Report 2016 51

3.2 Mineral and Coal Mining Sector 3.2.2 Establishment of Mining Area

3.2.1 Applicable Licenses in Mineral and Coal Establishment of Mining Area

Mining Sector
A mining area (WP) is an area with mineral and/or coal
Mineral and coal mining license based on Law No. potential that is not bound by government’s
4/2009 adopts a licensing system called Mining Business administrative boundaries and is part of national spatial
License (IUP) which can be classified by mining area planning. An area can be established as a WP given the
permit: following criteria:

1. Mining Business License (IUP) is a license to conduct • There is indication of mineral or coal deposits; or
mining business activities in Mining Business License • It has potential of mining commodity resources
Area (WIUP), which is divided into:
WP is further categorized as Mining Business Area (WUP),
a. IUP-Exploration People’s Mining Area (WPR), and State Reserve Area
b. IUP-Production Operation (WPN). WUP is part of WP that has data, potential
identification, and/or geological information. WPR is part
2. People’s Mining License (IPR) is a license to conduct of WP whereby mining activities are carried out by local
mining activities in People’s Mining Area (WPR) with communities, while WPN is WP reserved for national
limited area and investment. strategic interest.
3. Special Mining Business License (IUPK) is a license
to conduct mining activities in Special Mining
Business License Area (WIUPK).

Authority to grant IUP for exploration and production

based on Laws No. 4/2009 and No. 23/2014 is given to:

Table 19 Authority to grant IUP - exploration and production based on laws No. 4/2009 and No. 23/2014

IUP - Exploration IUP – Production Operation

Licensor
Mining Area Mining Area and Impacted Area
Located and affecting more than one
Minister Located in more than one province province
Foreign investor
Located in several regencies/cities within Located and affecting several
Governor one province regencies/cities within one province
Located in one regency/city Located and affecting one regency/city

Source: Law No. 4/2009 and Law No. 23/2014

Meanwhile, the IPR is issued by the Governor and IUPK is

issued by the Minister of Energy and Mineral Resources.
IUPK is granted irrespective of the geographical location
of the associated mining area. Provincial Government has
authority to establish Mining Business License Area
(WIUP) in the existing mining area in its territory, while
cross-provincial mining areas as well as foreign
investment become the central authority represented by
the MoEMR.

With the existence of the licensing system as described

above, KK and PKP2B, which are the contract products of
the previous Mineral and Coal Law, are still valid until the
contracts / agreements expire. Similarly, KK and PKP2B
signed before the enactment of PP No. 23/2010 (as the
implementing regulation of Law No. 4/2009) are
declared to remain in effect until the terms expire.

KK and PKP2B which have not obtained the first and/or

second renewal can be extended to IUP without tender
process (Article 112 PP No. 23/2010).
52

Figure 15 Types of mining areas

Mining Area (WP)

Mining Business Area (WUP) People’s Mining Area (WPR) State Reserve Area (WPN)

Mining Business License Area

People’s Mining License (IPR) Mining Business Special Mining Business
(WIUP) Area (WUP) Area (WUPK)

Special Mining Business License Area (WIUPK)

Source: Warta Minerba, XV Edition April 2013

To establish a WP, the central government (assisted by A number of criteria apply in WIUP establishment:
the local government) conducts mining investigation and
research activities. In conducting such activities, the • Geographical location;
government may assign assignments to state research • Conservation principles;
institutions or local research institutions. Under certain • Carrying capacity of the environment;
conditions, the government may cooperate with foreign • Optimization of mineral and/or coal resources; and
research institutions after obtaining approval from the • Population density.
Minister of Energy and Mineral Resources.
Minister of Energy and Mineral Resources decides tender
The WP plan is established by the Minister of Energy and base price based on data compensation price and/ or
Mineral Resources to be a WP after the coordination recovery of investment costs given the availability of:
between the government and the local government,
based on data held by both parties, and reported in a. Distribution of metallic mineral and coal formation;
written form to the DPR. Some of the central b. Indication of metallic mineral and coal deposits;
government's authority in establishing WP allocations can c. Data on metallic mineral and coal potential;
also be delegated to the provincial government. The d. Metallic mineral and coal reserve data; and
establishment of WP allocation is regulated in PP No. e. Supporting infrastructure.
22/2010.
This compensation is recorded as non-tax state revenue.
3.2.3 The Establishment of Mining Area and IUP
in 2016 In terms of license grant for WIUPK to interested BUMN
and BUMD, the compensation payment must be made at
In 2016 there were 10 recommendation proposals for least 30 days since the party is established as WIUPK
coal and mineral WIUP, respectively. However, there was holder. Five days after establishment, BUMN/BUMD must
no mining area and IUP establishment in 2016. submit IUPK - Exploration request.

3.2.4 The Establishment of Mining Business

3.2.5 Tender Procedure of Mining Business
License Area (WIUP)
License Area
Local government determines WIUP for metallic mineral
The procedure for WIUP tender is regulated in Permen of
and coal within one WP and Minister of Energy and
ESDM No. 11/2018 which was later amended by Permen
Mineral Resources ratifies this decision. Prior to deciding
of ESDM No. 22/2018 and PP No. 23/2010.
WIUPs, the target areas must be announced to the public
by the local government. If the metallic mineral and coal
WIUP is situated in forest area, the local government
needs to coordinate with the Ministry of Forestry.

Figure 16 Flow of mining business license area establishment

Local Government Minister of EMR Minister of Forestry

WIUP Forest Area

WIUP Determination WIUP Establishment
Announcement Utilization

Source :PP No. 22/2010

 Contextual Report 2016 53

The tender plan must first be announced no later than 1 b. Employing at least 1 mining expert and/ or
(one) month prior to the tender. The announcement of geological expert with minimum 3 years of
the WIUPK tender plan is carried out by the Minister of professional experience;
Energy and Mineral Resources, while the WIUP tender c. Preparing work and budget plan for 4 years of
plan can be carried out by the Minister or the Governor exploration activities.
depending on the location of the WIUP:
3. Financial requirements, among others:
• Minister of Energy and Mineral Resources - for WIUP a. Last year financial statements audited by Public
that cross provincial boundaries or sea territory over Accounting Firm;
12 miles from coastline. b. Bid bond in cash deposited to government
• Governor – for WIUP within a province or sea territory bank in the amount of 10% (ten percent) of
4 to 12 miles from the coastline. compensation value of data and/or investment
recovery of WIUP tendering;
To prepare bidding round, Minister of Energy and c. Statement of willingness to pay for WIUP
Mineral Resources or Governor forms Bidding tender value at least within five working days
Committee, comprising of personnel with competence in after winner announcement.
mining engineering, mining legal system, and mining
financial system, with at least 3 years of experience
working in the mining sector.

Figure 17 Flow of the tender process for WIUP

Tender 1 1. Minister or Governor announces tender at least 1 month prior through:

announcement a. At least 1 local and/or national print media; and
b. Official MoEMR’s/provincial government website.

Prequalification 2 2. Following 3 months of announcement, prequalification document needs to be submitted at the

announcement latest 30 days since prequalification announcement.

3. Bidding committee selects tender participants based on the completeness of administrative,

Prequalification 3 technical, and financial requirements, and technical evaluation based on committee’s minimum
document evaluation evaluation standard. If there is only one participant, the committee must re-announce
prequalification round at the latest 5 days since prequalification document submission
deadline.
4
Qualification process 4. Qualification process starts with participants that pass prequalification round to collect tender
document within 7 days after the committee announces document collection. The committee
will also explain tender process and the condition of potential WIUP.
5
Price quotation 5. Tender participants are given 5 days since tender explanation minutes of meeting is signed, or
after field visit.

6 6. Bidding committee establishes rank of potential winners based on prequalification score (40%)
Evaluation and price bid (60%). Committee reports this rank to the Minister or Governor in accordance
with their authorities

Determination of 7 7. Minister or Governor decides the winner at the latest 5 days since the rank report is received.
tender winner

Source : DG of Minerba, MoEMR

In order to participate in the bidding round of WIUP, 3.2.6 WIUP Tender and the Issuance of IUP in
bidders must meet the following requirements: 2016
1. Administrative requirements, among others: There is no new IUP issuance in 2016 because the
a. Completed tender form; Government establishes new Mining Areas in 2017.
b. Entity’s profile and incorporation deed;
c. Taxpayer Identification Number (NPWP).
3.2.7 The Rule of One IUP for One Company
2. Technical requirements, among others: One private company may have only one IUP and only
a. Having minimum 3 years business experience listed companies (in the stock exchange) and companies
in mineral or coal mining; new companies need that obtain WIUP for non-metallic minerals and / or rocks
to have endorsement from holding company, that may own more than one IUP.
business partner, or affiliated company in
mining sector;
 54

04
CONTRIBUTION OF EXTRACTIVE INDUSTRY
IN INDONESIA

As a country that has abundant potential energy and mineral Indonesia also has an important role in world mineral mining.
resources, the contribution of extractive industry plays an Based on U.S. Geological Survey statistics in 2017, Indonesia's
important role in the Indonesian economy. Although currently tin reserves and production were ranked second after China.
the role began to be replaced by other industries, the In addition, Indonesia's gold reserves contribute 5% in global
contribution of this industry is still relied on by the reserves or are ranked 5th highest.
government because there are still many potential energy and
mineral resources that have not been explored, especially in 4.1 Distribution and Potency of Extractive Industry in
eastern Indonesia.
Indonesia
Indonesia has proven oil reserves of 3.3 MMSTB/billion barrels 4.1.1 Oil and Gas Sector
and proven gas reserves of 101 TSCF / trillion standard cubic
feet as of January 1, 2016. The amount of Indonesia's oil The prospect of Indonesia's oil and gas resources is still
reserves and production is not significant compared to other quite large and the largest distribution is in Sumatra,
oil producing countries. Indonesia's oil reserves and Kalimantan, Papua and Jawa. The prospect of Indonesia's
production constitute 0.2% and 1% of the world's total oil oil resources is concentrated on the island of Sumatra by
reserves and production, respectively. While Indonesia's gas 50%, followed by Jawa by 35% of national oil reserves.
reserves are 1.5% of the world's gas reserves and the 12th While the largest gas reserves are in Natuna by 35% and
largest producer of gas compared to other countries or the rest are spread in eastern Indonesia such as Papua by
constitute 2% of the world's total gas production15. 13%, followed by Maluku by 12% of the total prospects
of gas resources in Indonesia.
Indonesia is one of the highest coal producers in the world
(5th), 6% of world coal production comes from Indonesia. For
coal reserves, Indonesia currently ranks 9th with around 2.2%
of global proven coal reserves16.

15 Peringkat cadangan dan produksi berdasarkan BP Statistic Review tahun

2017
16 Idem
 Contextual Report 2016 55

Figure 18 Distribution of Indonesia's oil and gas reserves

7,56 Natuna Reserves (MMSTB)

NAD 111,86 0,8
303,91
184 49,87
Sumatera ,64
Utara 7,52
Sumatera 2.331,49 Papua
Kalimantan 526,22
Tengah 14,75
12,92 2,6 19,03
100,25
Sumatera 1.092,85 45,43
Selatan 10,33
Sulawesi 16,73
6,2 Maluku
Jawa Barat 1.324,61 3 1.219,52
6,04
Jawa Timur

Proven = 3.306,9 MMSTB

Oil reserves Potensial = 3.944,2 MMSTB
TOTAL = 7.251,1 MMSTB

Proven = 101,2 TSCF

Gas reserves Potensial = 42,8 TSCF
TOTAL = 144,1 TSCF

Source :Statistik Minyak dan Gas Bumi 2016, DG of Oil and Gas, MoEMR

Figure 19 Distribution of coal reserves in Indonesia

Aceh Cadangan (juta ton)
417
Kalimantan
Riau
944 Utara
609
Jambi
Sumatera Barat 198 Kalimantan 7.195
666 Tengah Kalimantan
2.001 Timur
Bengkulu
79 0,12 Sulawesi
11.067 Sumatera 5.270 Selatan
Selatan Kalimantan
12 Selatan
Lampung

Total probable reserves = 11.484,76 juta ton

Total proven reserves = 16.972,53 juta ton
Total reservees = 28.457,29 juta ton

Source: DG of Minerba, modified

4.1.2 Coal Mining Sector Table 20 shows the total major metal mineral reserves in 2016.
Indonesia's coal reserves at the end of 2016 reached
28.5 billion tons. The distribution of coal reserves is
concentrated in three regions, Sumatera Selatan (39%), 4.2 Contribution of Oil and Gas GDP and Mining
Kalimantan Timur (25%), and Kalimantan Selatan (19%). GDP in Indonesia
Chart 1 outlines the contribution of the Indonesian mining
4.1.3 Mineral Mining Sector sector to national GDP at current price. Since 2012 to 2016
the contribution percentage of the mining sector to national
Papua has primary gold, copper and silver reserves
GDP has continued to decline from 12% in 2012 to 7% in
amounted to almost 80% of total national reserves.
2016. The mining sector's GDP contribution in 2016
Almost all tin reserves are located in Bangka Belitung.
decreased by around 1% compared to 2015. The effect of the
The island of Kalimantan holds many iron and bauxite
recovery in non-oil and gas commodity prices in 2016
reserves in Kalimantan Barat17.
indirectly affected the increase in production of this sector in
2016 compared to the previous year. Meanwhile, oil price has
Map of resources and reserves distribution by region and
not recovered in 2016.
commodity can be accessed at
http://psdg.bgl.esdm.go.id/images/stories/neraca/2016/
executive%20summary%20neraca%20mineral%20psdmb
p%202016.pdf and
http://psdg.geologi.esdm.go.id/kolokium/2017/Buku%2
02%20Bidang%20Mineral%20-
%20Prosiding%20Hasil%20Kegiatan%202017_PSDMBP.p
df.

17 Based on data from Geology Agency website at

http://webmap.psdg.bgl.esdm.go.id/geosain/neraca-mineral
strategis.php?mode=administrasi
56

Table 20 Total mineral reserves in Indonesia in 2016

Probable Proven Total Reserves (Ton)

No Commodity
Ore Metal Ore Metal Ore Metal
1 Primary Gold 281.19 - 2,626.66 - 2,907.85 -
2 Bauxite 1,045.78 482.26 236.71 100.35 1,282.49 582.61
3 Nickel 2,917.04 44.29 238.64 4.28 3,155.68 48.57
4 Copper 325.28 1.75 2,750.98 26.17 3,076.26 27.92
5 Primary Iron 852.46 97.56 45.85 91.20 898.31 188.76
6 Iron Sand 829.14 361.46 67.87 6.61 897.01 368.07
7 Manganese 84.56 40.93 2.67 2.20 87.23 43.13
8 Zinc 14.59 1.50 5.28 0.78 19.87 2.28
9 Tin 1,035.02 0.68 826.27 0.22 1,861.29 0.90
10 Silver 265.92 1.11 2,564.81 0.58 2,830.73 1.69
Source: Lakip KESDM 2016

Chart 1 Contribution of mining GDP to total national GDP (at current price)
12%
11%
10%

8%
7%
7% 7%
Contribution of Mining Sector to GDP,
1.026 1.039
972 891
5% 882
5% 5%
4% 4%
GDP of Mining Sector,

4%

530 3% 3%
% of Total GDP

625
586 497
526
Trilion IDR

387 401 510 385 365

2012 2013 2014 2015 2016

Total Mining 972 1.026 1.039 882 891

General Mining 586 625 530 497 526

Oil and Gas Mining 387 401 510 385 365

% Oil and Gas Mining 5% 4% 5% 3% 3%

% General Mining 7% 7% 5% 4% 4%

% Total Mining 12% 11% 10% 8% 7%

Total National GDP, Triliun IDR 8.231 9.087 10.570 11.526 12.407

Source: BPS (GDP based on business field – oil and gas (migas) mining and mining without migas)
 Contextual Report 2016 57

GDP at current price based on business field can be 4.3.1 Oil Sector
found on the National Statistics Agency (BPS) website:
https://www.bps.go.id/linkTableDinamis/view/id/826 National Production and Lifting Volume
untuk tahun 2014 - 2018. Chart 3 shows an increase in oil production by 6% in
2016 after experiencing a decline in production during
4.3 State Revenue form Oil and Gas Sector and the period of 2013-2015.
Mineral and Coal Sector
Chart 2 State revenue from the extractive industry

31% 34.5
51.0 37.0
35.5
28%
24.0 28.4 28%

Contribution of Extractive Industry to Total

Sttate Revenue from Extractive Industry,

108.0
109.7
25%
103.3 24%

national Revenue (%)

23%
249.5 15%
Trilion IDR

232.0 32.9
230.6
29.6
10% 24.9
75.4
11% 27.2
51.4
6% 94.6 7%
5% 55.9
5% 4%
3%

2012 2013 2014 2015 2016

Migas – PNBP Contribution of Industry Extractive %

Migas – Tax Contribution of Oil and Gas Revenue %

Minerba – PNBP Contribution of Mineral and Coal Revenue %

Minerba – Tax

Source: LKPP, Annual Reports of DG of Taxes

Chart 2 illustrates the contribution of extractive industry The increase in 2016 production was largely contributed
to state revenue in the period of 2012-2016, excluding by Banyu Urip, which is fully operated in that year18.
dividend income from BUMN engaged in extractive Meanwhile, despite an average decline of ICP of 17%
industry. The contribution of revenue generated from from 2015, along with the increase in production, oil
extractive industry to state revenue tends to decline from lifting has increased from the previous year. As shown in
year to year. Nominally, in 2016 the total revenue from chart 4, national oil lifting increased by 6.8% from the
extractive industry decreased by 31% to 159 trillion IDR previous year.
from the previous year which amounted to 232 trillion
IDR. Overall in the period of 2012-2016, revenue from
extractive industry in 2016 decreased by 61% from 2012. Chart 4 Oil lifting in 2012-2016
The decline was largely influenced by the declining of oil 112
and mining commodity prices. 105
96

Chart 3 Oil production in 2012-2016

48
40
Oil Production, Mbopd

859 825 790 776 829

2012 2013 2014 2015 2016
Oil LIfting, Mbopd
860 824 789 786 831 Average ICP, US$/bbl

2012 2013 2014 2015 2016 Source : Annual Reports of SKK Migas in 2012 - 2016
Source : Annual Reports of SKK Migas in 2012 - 2016

18 SKK Migas Annual Report 2016

58

Production Volume, Lifting Volume and Lifting The next position was held by the Indonesian Block managed
Value of Oil by Main Working Areas by PT Pertamina EP with production and lifting of 31 million
barrels and 30 million barrels respectively in 2016 which
Chart 5 illustrates 15 main working areas which account
constitute 10% of the total national oil production and lifting.
for around 92% of national oil production and lifting. In
2016, Rokan Block managed by Chevron Pacific
Chart 6 depicts 15 main working areas based on oil lifting
Indonesia was the largest contributor to oil production in
value in 2016. The Rokan block ranked first with oil lifting
Indonesia with 92 million barrels of production and
value of US$ 3,62 billion or 30% of total oil lifting value.
lifting, which represents 30% of total oil production and
Furthermore, the Cepu Block and Indonesia Block occupied
lifting in 2016. The second largest contributor to
the second and third positions with lifting values of US$ 2,47
production and lifting of oil was the Cepu Block
billion and US$ 1,21 billion, or 20% and 10% of the total oil
managed by Exxonmobil Cepu Ltd. The Cepu Block
lifting value in 2016.
produced 63 million barrels of oil or 21% of the total oil
production in 2016. Lifting oil in the Cepu Block was 62
million barrels or 21% of the total national lifting in 2016.

Chart 5 Oil production and lifting of 15 main working areas

Production and Lifting, million barrels

92
92

63
62

31
30 23 25
24 25
13 13 12 12
7 7 7 6 6 6 6 5 5 5 4 4 4 4 3 3 3 3

Source: Reconciliation Data of SKK Migas in 2016

Chart 6 Oil lifting value of 15 main working areas

3.62

2.47
Lifting Value, billion USD

1.21
1.01 0.99
0.52 0.48
0.28 0.25 0.25 0.23 0.20 0.18 0.15
0.13 0.13

Source: Reconciliation Data of SKK Migas in 2016

 Contextual Report 2016 59

4.3.2 Gas Sector Production Volume, Lifting Volume and Lifting

Value of Gas by Main Working Areas
National Production and Lifting Volume
Chart 9 illustrates the main blocks that contribute 89% to
Chart 7 and Chart 8 show a decrease in gas production
the volume of national gas production and lifting.
and lifting in 2016. The decline in production and lifting
Mahakam Block managed by Indonesia Petroleum Ltd.
was caused by a decrease in natural production and the
and Total E & P Indonesie became the largest contributor
end of export contracts.
to production and lifting of gas in 2016 with total
production and lifting of 626 million MSCF and 514
Chart 7 Gas production in 2012-2016 million MSCF or 22% of the volume of national gas
production and lifting. The second largest contributors to
gas production were Berau, Muturi, Wiriagar Blocks
Gas Production, MMscfd

managed by BP with gas production volume of 471

million MSCF or 16% of the total national gas production
volume in 2016. Meanwhile, gas lifting volume of Berau,
Muturi, Wiriagar Blocks was 377 million MSCF or 16% of
the national gas lifting volume. Furthermore, the
Indonesian Block managed by PT Pertamina EP is the
third largest contributor to gas production and lifting in
2016 with production and lifting volumes of 362 million
MSCF and 277 million MSCF which constitute 12% of the
8150 8130 8218 8078 7938 total national gas production and lifting.

2012 2013 2014 2015 2016 Chart 10 shows 15 main working areas by the value of
gas lifting in 2016. Mahakam block with gas lifting value
Source : Annual Reports of SKK Migas in 2012 - 2016 of US$ 3,08 billion or 23% of total gas lifting value was
the largest contributor of gas lifting in 2016. Then, the
Chart 8 Gas lifting in 2012-2016 second and third largest contributors were Berau, Muturi,
11 Wiriagar Blocks dan Indonesia Block with lifting value of
10.7 US$ 2,13 billion and US$ 1,69 billion or amounting to
9.64 16% and 12% of total gas lifting value in 2016,
respectively.
6.2 The relevant agencies in the oil and gas sector only
5.62 provide lifting values and no production value. The
reason is the recording of value realization is only
conducted at the time of lifting since production is not a
realization of sales.
7181 7176 6869 6972 6857

2012 2013 2014 2015 2016

Gas LIfting, BBTUD
Average Gas Price, US$/MMBTU

Source : Annual Reports of SKK Migas in 2012 - 2016

Chart 9 Gas production and lifting of 15 main working areas

Production and Lifting, million

626

514
471 Production
377 Lifting
362 357 310
292
277
252
MSCF

117 112
95 88 72 87 83 85
53
82 85 63 57 48 49
21 42 7 38 36 3632

Source: Reconciliation Data of SKK Migas in 2016

 60

Chart 10 Gas lifting value of 15 main working areas

3.08

2.13
Lifting Value, billion USD

1.69
1.57
1.35

0.54 0.50 0.49 0.45 0.39 0.32 0.31

0.29 0.19
0.18 0.17

Source: Reconciliation Data of SKK Migas in 2016

4.3.3 Coal Sector In 2016 about 90% of coal production activities are
Chart 11 shows stable production of coal in Indonesia concentrated in the island of Kalimantan because coal
during the period of 2012-2016. infrastructure is mostly found on the island of Kalimantan.
The largest producers of coal were:
Chart 11 Coal production in 2012-2016 • PT Kaltim Prima Coal located in Kalimantan Timur
95 contributed around 13% of total national production
in 2016.
83 • PT Adaro Indonesia located in Kalimantan Selatan
73 contributed 12% of total national production in 2016.
60 62 • PT Kideco Jaya Agung located in Kalimantan Timur
contributed 7% of total national production in 2016.

384 474 458 461 434 Provision of production value information by relevant
institutions is not common. DG of Minerba shows
2012 2013 2014 2015 2016 production data per company in 2016 Performance
Coal Production, million tons
Report that can be accessed at
https://www.minerba.esdm.go.id/library/publish/LAKIN%
HBA 6322, US$/ton 20MINERBA%202016.pdf

Source: Performance Reports of DG of Minerba in 2012-2016

Chart 12 Coal production by producing provinces in 2016 4.3.4 Main Minerals Production
221 After experiencing a sharp decline in 2015 due to export
restriction, copper production increased again in 2016
Production (million ton)

along with the construction of copper processing plants

in Indonesia. Meanwhile, the production of gold, tin and
115 matte nickel declined in 2016, which was due to a
decline in the main mineral content in major mining
companies.
36 33
19
5 5
1

Source: Performance Reports of DG of Minerba in 2012-2016

 Contextual Report 2016 61

Table 21 Volume of main minerals production in 2012-2016

Main Mineral Unit 2012 2013 2014 2015 2016

Copper Ton 410.228 521.025 617.840 197.634 246.155

Gold Ton 53 57 69 97 91

Silver Ton 203 208 252 318 322

Tin Ton 130.809 82.954 60.038 70.073 62.877

Nickel Matte Ton 72.899 78.074 80.341 82.440 78.748

Source : Performance Reports of DG of Minerba in 2012-2016

4.4 Contribution of Oil and Gas Export and Mineral The contribution of mining export in 2012-2016
and Coal Export experienced a downward trend due to international
commodity price pressure.
4.4.1 Oil & Gas and Mineral & Coal Sector
Other mining products as shown in charts above, among
Charts 13-15 illustrate mining commodity export and others, consist of iron ore, zinc ore, lead ore and other
their contribution to national export for the period of mining and quarrying products such as gravel,
2012-2016. The contribution of mining export to the total ornamental stones and pumice. Commodity-based
national export was quite significant, ranging between national export lists can be found in the Buletin Statistik
21% -34%. The export value was dominated by the Perdagangan Luar Negeri Ekspor Menurut Komoditi dan
export value of oil and gas and coal. In 2012-2016, oil Negara, a bulletin that can be accessed at the official BPS
and gas export contributed around 8% -17% of the total website.
value of national export while the value of coal export
reached 10% -14% of the total value of national export.

Chart 13 Export value of mining sector by main commodities, in billion USD

64.2
59.5
By Main Commodities,

49.2
Mining Export Value

26.2
Billion USD

36.3
24.5
30.3
2.6 20.8
3.0 16.0
1.7 14.5
12.3
10.2 3.3
9.2 3.5
6.5
5.2
20.5 18.1 17.2
10.3 7.0

2012 2013 2014 2015 2016

Total Export of Mining Commodities 64.2 59.5 49.2 36.3 30.3
Other mining products 0.5 0.6 0.2 0.2 0.2
Granite - - - - -
Bauxite 0.6 1.4 - - -
Coal 26.2 24.5 20.8 16.0 14.5
Nickel Ore 1.5 1.7 0.1 - -
Copper One 2.6 3.0 1.7 3.3 3.5
Oil 12.3 10.2 9.2 6.5 5.2
Gas 20.5 18.1 17.2 10.3 7.0
Total National Export 190 183 176 150 144

Source: Buletin Statistik Perdagangan Luar Negeri, BPS

62

Chart 14 Export volume of mining sector by main commodities, in million tons

619.7

By Main Commodities, Million Tons

526.6

Mining Export Volume

465.2

422.3 426.8
424.3
384.3

408.2
367.0 368.9
3.5
15.0 13.0 12.4 15.6 17.0
27.8 25.1 23.8 24.8 23.4

2012 2013 2014 2015 2016

Total Export of Mining Commodities 526.6 619.7 465.2 422.3 426.8
Other mining products 18.1 33.6 13.7 13.2 15.6
Granite 2.3 0.3 - - -
Bauxite 29.5 57.1 2.1 - -
Coal 384.3 424.3 408.2 367.0 368.9
Nickel Ore 48.4 64.8 4.2 - -
Copper One 1.1 1.5 0.7 1.7 1.9
Oil 15.0 13.0 12.4 15.6 17.0
Gas 27.8 25.1 23.8 24.8 23.4
Total National Export 600 700 549 508 514

Source: Buletin Statistik Perdagangan Luar Negeri, BPS

Chart 15 Contribution of Mining Sector to Total Value of National Export

33.8%
32.6%
Contribution of Mining Sector to Total Export,

28.0%
13.8%
13.4% 24.1%
21.0%
% of Total Export

11.8%
1.4% 10.6%
1.6%
1.0% 10.0%
6.5%
5.6% 2.2%
5.2%
2.4%
4.3%
3.6%
10.8% 9.9% 9.8%
6.9% 4.8%
10.3 7.0

2012 2013 2014 2015 2016

Total Export of Mining Commodities 33.8% 32.6% 28.0% 24.1% 21.0%
Other mining products 0.2% 0.3% 0.1% 0.1% 0.1%
Granite 0.0% 0.0% 0.0% 0.0% 0.0%
Bauxite 0.3% 0.7% 0.0% 0.0% 0.0%
Coal 13.8% 13.4% 11.8% 10.6% 10.0%
Nickel Ore 0.8% 0.9% 0.0% 0.0% 0.0%
Copper One 1.4% 1.6% 1.0% 2.2% 2.4%
Oil 6.5% 5.6% 5.2% 4.3% 3.6%
Gas 10.8% 9.9% 9.8% 6.9% 4.8%

Source: Buletin Statistik Perdagangan Luar Negeri, BPS

 Contextual Report 2016 63

4.4.2 Export of Oil Sector by Main Provinces 4.4.3 Export of Gas Sector by Main Provinces

The value and volume of oil export in 2016 are shown in Charts 18 and 19 illustrate the value and volume of gas
Chart 16 and Chart 17. The largest contributor to oil export from each gas exporting region in 2016. The
export in 2016 was Riau Province with an export value of largest contributor to gas export was Kalimantan Timur
US $2,254 million and export volume of 7.35 million tons Province with an export value of US $2,782 million and
which was 43% of the total value and volume of national an export volume of 9 million tons which is 40% and 36%
oil export. Meanwhile, the provinces of Jawa Timur and of the total national gas export value and volume.
Kalimantan Timur were the second and third largest Kepulauan Riau and Papua Barat Provinces were the
contributors to oil export with an export value of US $982 second and third largest gas exporters with export values
million and US $861 million respectively. Most of the of US $1,846 million and US $1,718 million respectively.
exported oil is the contractor’s share. Most of the exported gas is the contractor’s share.

Chart 16 Oil export value by provinces in 2016

2,254.16
Export Value, million USD

Percentage of Total Export Value, %

981.76

43% 861.45

5
346.18 5
19% 297.47
17% 150.53 93.50 95.70 68.09 47.89 0.00
7% 3% 2% 2% 1% 1% 0.0%
6%

Source: Statistik Perdagangan Luar Negeri Menurut Kode ISIC 2016-2017, BPS

7.35 Chart 17 Oil export volume by provinces in 2016

Net Weight, million tons

Percentage of Total Export Quantity, %

3.11
43.4%
2.79

1.22

5 0.95 0.55
5
18.4% 0.27 0.26
16.4% 0.24 0.20 0.00
7.2% 1.6% 1.5% 1.4%
5.6% 3.3% 1.2% 0.0%

Source: Statistik Perdagangan Luar Negeri Menurut Kode ISIC 2016-2017, BPS
64

Chart 18 Gas export value by provinces in 2016 4.4.4 Export of Coal Sector by Main Provinces
40% In 2016, around 81% of national coal production was
exported abroad. Chart 20 shows the volume and value
26% of coal export (ISIC codes 051 and 052) from each
25% region. Kalimantan Timur Province was the largest
contributor to coal export in 2016 with coal export
contributing 58% of total national coal export. The
9% second and third largest contributors to coal export were
provinces of Kalimantan Selatan and Kalimantan Utara
with coal export contributing 34% and 4% of the total
2,782 1,846 1,718 646 national coal export.

Export data from the province of origin and its

commodities in value and volume can be found in the
Statistik Perdagangan Luar Negeri Menurut Kode ISIC
2016–2017, a bulletin published by BPS.
Export Value, million USD

Percentage of Total Value, % 4.5 Significant Exploration Activities

Source: Statistik Perdagangan Luar Negeri Menurut Kode ISIC The Implementation Team decides that the definition of a
2016-2017, BPS significant exploration project is an exploration project that
has proven reserves and will enter the exploitation stage
(development).
Chart 19 Gas export volume by provinces in 2016
Oil and Gas Sector
36%
Table 22 represents nine significant development projects in
30% terms of the size of the reserves and their scope of work
according to Annual Report of SKK Migas in 2016. Public can
26% keep up with the latest development of the projects from the
most recent official SKK Migas Report, which is Annual Report
of SKK Migas at http://skkmigas.go.id/publikasi/laporan-
tahunan.
8%
Mineral and Coal Mining Sector

9 7 6 2 Exploration mining status data can be accessed in detail

based on commodities and provinces on the Geology Agency
website, http://webmap.psdg.bgl.esdm.go.id/geosain/neraca-
mineral-strategis.php?mode=administrasi.

Net Weight, million tons

Percentage of Total Export Quantity, %

Source: Statistik Perdagangan Luar Negeri Menurut Kode ISIC

2016-2017, BPS

Chart 20 Coal export by provinces in 2016

8,827

Net Weight, million tons

Export Value, million USD

4,510

5 5
560
223 293
115
214 125 16
5 5 4
Kalimantan Kalimantan Kalimantan Sumatera Lampung Lainnya
Timur Selatan Utara Selatan

Source: Statistik Perdagangan Luar Negeri Menurut Kode ISIC 2016-2017, BPS
 Contextual Report 2016 65

Table 22 Significant oil and gas development projects

First
Name of Project Location Estimated Production
Production

Jangkrik field and Jangkrik Blok Muara Bakau, Selat 2017 450 MMscfd
North East Makassar 200 bopd

Madura BD dan MDA-MBH Blok Madura Strait 2017 Madura BD 110 MMscfd
6600 bopd

2019 MDA-MBH 175 MMscfd

Wasambo Sulawesi Selatan 2017 80 MMscfd

Jimbaran Tiung Biru Bojonegoro, Jawa timur 2019 330 MMscfd

Ande Ande Lumut Barat Laut Natuna, 2021 25.000 bopd

Kepulauan Riau

Jambu Aye Utara Aceh 2020 110 MMscfd

Tangguh Train – 3 Tangguh Block, Bintuni, 2020 700 MMscfd

Papua Barat 3.200 bopd

IDD Project (joint Ganal, Rapak, Makasar 2023 Gehem Hub 420 MMscfd
development) Strait and Muara Bakau 27.000 bopd

2022 Gendalo Hub 700 MMscfd

20.000 bopd

Abadi Inpex Masela Masela Block, Arafuru 2027 TBD

Sea Maluku
Source : Annual Report of SKK Migas in 2016

4.6 Contribution of Extractive Industry to National 4.7 Contribution of Extractive Industry in the Region
Employment (Several Regional Examples)
The BPS data in chart 21 illustrates the contribution of worker The mining sector has an important role in the regions’
in the mining and quarrying sector which contributed around economy, especially in mine producing areas. Chart 22 shows
1.48 million workers (or 1.25% of the total workforce) in 2016. that although the mining sector accounts for only about 7.6%
Extractive industry is technology intensive sector, so that of national GDP (at current price), the mining sector can
employment is not as high as labor intensive industries such as contribute 20-43% of the Gross Regional Domestic Product
the trade sector (22.5%) and the industrial sector (13%). (GRDP). This role is enhanced by the movements of the
followers' sectors (e.g. construction, trade and services) and
the emergence of supporting businesses (food and clothing
Chart 21 Contribution of extractive industry to national employment suppliers) in the regional economy. Charts 23 and 24 show
that Kalimantan Timur is the region with the highest natural
1.42 % resources of extractive industry compared to other provinces,
1.27% indicated by the great contribution of extractive sector and
1.25 % 1.25 % large amount of revenue sharing fund (DBH) received by
1.15%
Kalimantan Timur Province. Charts 24-25 show the
significance of the contribution of the mining sector to
producing regions’ workforce absorption and regional export
compared to the national average.

Local government direct revenue from the mining sector, such

as DBH and retribution can be used for infrastructure
development and community welfare improvement. The
contribution of extractive industry should not be seen only
1.60 1.43 1.44 1.32 1.48 from the size of the GRDP contribution or revenue alone, but
2015 2016 also its contribution to sustainable economic development
2012 2013 2014
through reducing unemployment, reducing poverty and
Total Worker (million) % of Total National Employment equalizing the income.

Source: BPS, August survey

Data of working population of 15 years old and above based

on business field can be accessed at website of BPS:
https://www.bps.go.id/statictable/2009/04/16/970/penduduk-
15-tahun-ke-atas-yang-bekerja-menurut-lapangan-pekerjaan-
utama-1986---2017.html.
66

Chart 22 Contribution of mining and quarrying sector to provincial

GRDP

Nasional 7.6%
Jawa Timur 3.8%
Sulawesi Selatan 5.6%
Papua Barat 19.1%
Sumatera Selatan 19.6%
Kalimantan Selatan 20.9%
Riau 28.1%
Papua 34.9%
Kalimantan Timur 43.2%
Province
Source: BPS of Provinces, GRDP in 2016

Chart 23 Natural resources DBH in 2016 (in billion IDR)

Papua Barat 163

Sulawesi Selatan 170
Papua 1,267
Jawa Timur 1,386
Sumatera Selatan 2,408
Riau 2,497
Kalimantan Selatan 2,575
Kalimantan Timur 6,342
Province

Source: DJPK

Chart 24 Contribution of mining ang quarrying sector to the

employment

Nasional 1.25%
Jawa Timur 0.71%
Papua 0.81%
Sulawesi Selatan 1.10%
Riau 1.50%
Sumatera Selatan 1.76%
Papua Barat 2.03%
Kalimantan Selatan 2.83%
Kalimantan Timur 8.23%
Province
Source: BPS of Provinces

Chart 25 Contribution of oil and gas sector and mineral and coal
sector to export

Total Nasional 21%

Papua Barat 98%
Papua 95%
Kalimantan Timur 90%
Kalimantan Selatan 80%
Riau 16%
Sumatera Selatan 11%
Jawa Timur 5%
Sulawesi Selatan 0%
Province
Source: Statistik Perdagangan Luar Negeri, BPS
 Contextual Report 2016 67

Charts 26-27 show the gini index and poverty level in the
mine-producing areas that vary in relation (either lower or
higher) with national ratios. Poverty and inequality rate in
some mine-producing areas are still high. However, to draw
the conclusion about the relevancy between mining sector
contribution and regional welfare, more in-depth study needs
to be conducted since there are a lot of factors that need to
be considered, among others, inequality of resources
ownership, policy in regional development, topology, skill
level and other factors.

Chart 26 Gini index in 2016

Nasional 39.4%
Kalimantan Timur 32.8%
Riau 34.7%
Kalimantan Selatan
35.1%
Sumatera Selatan 36.2%
Papua 39.9%
Sulawesi Selatan 40.0%
Papua Barat 40.1%
Jawa Timur 40.2%
Province

Source: BPS

Chart 27 Poverty percentage in 2016

Nasional 10.7%
Kalimantan Selatan 4.5%
Kalimantan Timur 6.0%
Riau 7.7%
Sulawesi Selatan 9.2%
Jawa Timur 11.9%
Sumatera Selatan 13.4%
Papua Barat 24.9%
Papua 28.4%
Province
Source: BPS
68

05
STATE-OWNED ENTERPRISES
 Contextual Report 2016 69

The establishment of State Owned Enterprises (BUMN) is

aimed primarily at contributing to the development of the
national economy, especially increasing state revenues, in line
with Law No. 19/2003.

BUMN in the form of Persero aim to gain profits, while those

in the form of Public Companies (Perum) are aimed at serving
the public interest in the supply of goods or services. State
ownership in the Persero is at least 51% of shares while in
Perum, the state has 100% shares. Five state-owned
enterprises engaged in extractive industry are all in the form
of Persero, namely PT Antam, PT Bukit Asam, PT Timah, PT
Pertamina and PT Perusahaan Gas Negara (PGN). Four BUMN
are listed companies on the Indonesia Stock Exchange,
namely PT Antam, PT Bukit Asam, PT Timah and PT
Perusahaan Gas Negara.

The role of BUMN is quite significant in the extractive industry

sector in Indonesia. Pertamina contributed 20% of oil lifting
and contributed 22% of gas lifting in 2016. While BUMN of
mineral and coal mining contributed 5% of state revenues
from minerba mining in 2016.

5.1 Relationship between BUMN and the

Government
5.1.1 Authority
An overview of the relationship between BUMN and the
central government is presented in Figure 20, illustrating
ministerial authority to appoint the directors of BUMN,
monitor and formulate technical policies.

• The Minister of BUMN serves as a shareholder in a

general meeting of shareholders (GMS) held by a
persero and is authorised to handle the BUMN’s
operational/managerial affairs, including appointing
directors based on decree of the Minister of BUMN.
• The Minister of Finance serves as state asset
manager, authorised over public capital as one of
BUMN funding sources.
• The Minister of Energy and Mineral Resources is
authorised to formulate, establish and put in place
policies on energy and mineral resources.

5.1.2 Financial
The Addition of State Equity Participation
The addition and subtraction of state equity participation
are proposed by the Minister of Finance to the President
based on the initiative of the Minister of Finance, Minister
of BUMN or Technical Minister. The procedure of state
equity participation is regulated in PP No. 44/2005. Each
participation and addition to the State Equity
Participation with funds derived from APBN must be
approved by DPR. But specifically for the establishment
of state-owned holding, government-owned shares in
one BUMN can be transferred into equity participation in
other BUMNs and not necessarily through the APBN
mechanism or DPR approval in accordance with PP No
72/201619.

For state equity participation (PMN) in BUMN, the value

is presented as a permanent investment in the balance
sheet of Central Government Financial Statements. PMNs
to state-owned enterprises which above 51% are
accounted for under the equity method. There is no
provision of free equity or carried interest from the
addition of state equity participation.

19 Source: http://jdih.bumn.go.id/berita/menjawab-isu-isu-di-seputar
terbitnya-pp-72-tahun-2016
70

Figure 20 Relationship between state-owned enterprises and government

Ministry of Energy and Mineral Ministry of State-Owned Ministry of Finance

Resources Enterprises

Shareholders
Sector / Technical Sources of funding

Board of Commissioners

Directors

Operational Financial
State-owned enterprises
Supervision
Technical consultation
Reporting

Source: Scoping Study of EY

The following is the amount of equity participation of the

Government of the Republic of Indonesia on Extractive
BUMNs over the last five years based on Companies’
Annual Reports:

Table 23 The amount of state equity participation

PT Aneka PT Bukit Asam PT Pertamina PT Perusahaan

Item PT Timah Tbk
Tambang Tbk Tbk (Persero) Gas Negara Tbk

(million IDR) million US$

Year 2012
The addition of state
equity participation in - - - 55 -
2012

Share value of the

Government as of 620,000 749,044 163,574 9,865 196
December 31
% of ownership 65% 65% 65% 100% 56.97%
Year 2013
Share value of the
Government as of 620,000 749,044 163,574 9,865 196
December 31

% of ownership 65% 65% 65% 100% 56.97%

Year 2014
The addition of state 78,479
equity participation in - - (distribution of - -
2014 bonus shares)

Share value of the

Government as of 620,000 749,044 242,053 9,865 196
December 31

% of ownership 65% 65% 65% 100% 56.97%

Year 2015
The addition of state
equity participation in 942,000* - - - -
2015
 Contextual Report 2016 71

PT Perusahaan
PT Aneka PT Bukit Asam PT Pertamina
Item PT Timah Tbk Gas Negara
Tambang Tbk Tbk (Persero)
Tbk
(million IDR) million US$
Share value of the
Government as of 1,562,000 749,044 242,053 9,865 196
December 31
% of ownership 65% 65% 65% 100% 56.97%
Year 2016
The addition of state
equity participation in - - - 3,552** -
2016
Share value of the
Government as of 1,562,000 749,044 242,053 13,417 196
December 31
% of ownership 65% 65% 65% 100% 56.97%
Notes:
* equivalent to depositing funds of Rp 3,494,820,000,000
** on December 14, 2015, the Ministry of BUMN approved the request for capitalization of retained earnings to be paid in profits of
Rp 50 trillion, which is equivalent to the equty participation of US $ 3,552,146

Source: Annual Reports of related BUMNs

Retained Earnings and Payment of Dividend Table 24 Pay out ratio and dividend received by the government
BUMN pays dividend to the government based on the Pay Out Dividend received
Payout Ratio (POR) – the percentage of net income that BUMN
Ratio by the government
BUMN pay out as dividend to shareholders. The POR is
decided every year in a GMS based on the BUMN’s PT Aneka Tambang 0% Nil
capability and future projection of capital needs. The
POR can also be decided based on proposition from the PT Bukit Asam 30,4% Rp 397 billion
directors, government policy, proposition from
Commission VI of DPR and a negotiation between the PT Timah 9,7% Rp 19,8 billion
Ministry of BUMN and the relevant BUMN.
PT Pertamina 15,8% USD 499 million
Moreover, Law No. 40/2007 on Limited Liability
Companies requires companies to form a general reserve PT Perusahaan Gas 55,3% USD 96 million
from net income, at least 20% of the amount of issued Negara
and fully paid capital.
Source:

Figure 21 Mechanism for dividend payout by BUMN

Pay Out Ratio Government’s portion of dividend=

GMS (POR) % of government shares x POR x Net profit

Dividend must be paid out to the government within one Private Equity Participation and BUMN Loan
month after they have been decided during the GMS.
Private equity participation, one of which is privatization,
BUMN deposits the dividend to state account in
is regulated in Government Regulation No. 59/2009. This
accordance with the Regulation of the Minister of Finance
PP states that privatization can be done by (1) selling
No. 5/PMK.02.2013.
shares based on the provisions of the capital market, (2)
selling shares directly to investors, and (3) selling shares
In 2016, the level of pay out ratio and the amount of
to the management and / or employees of the Persero
dividend received by the government from these five
involved.
BUMNs are
72

BUMN funding through loan, especially from foreign 5.2 PT Pertamina (Persero)
private creditors, is regulated by Minister of Finance
Regulation No. 45 / PMK.08 / 2014. This regulation Pertamina became a liability company (Persero) based on PP
regulates the procedure for procurement of financing No. 31/2003.
starting from the preparation of the selection of
prospective creditors until the signing of the loan In domestic and international oil and gas business activities,
agreement. PT Pertamina (Persero) operates alone/independent and in
partnership through Operation Cooperation (KSO), a Joint
Government Loan that Forwarded to BUMN Operation Body (JOB), Technical Assistance Contracts (TAC)
and the Indonesia Participating/ Pertamina Participating
For strategic projects, domestic or overseas government
Interest (IP/PPI). Oil and gas business activities through
borrowings may be forwarded to BUMN with the criteria
independent operations are conducted in Pertamina EP’s five
and procedure set out in Minister of Finance Regulation
assets: Asset 1 covering Aceh, Sumatera Utara and Riau; Asset
No. 108 / PMK.05 / 2016.
2 (Sumatera Selatan); Asset 3 (Jawa Barat); Asset 4 (Jawa
Tengah and Jawa TImur); and Asset 5 (Kalimantan and Papua).
Audit of Financial Report of BUMN in 2016 by
an Independent Auditor Meanwhile, oil and gas business activities through partnership
All five BUMNs engaged in the extractive sector have for working areas in Indonesia in 2016 are conducted with 21
been audited in 2016 by independent auditors. The oil and gas partnership projects, 14 Coal Gas Methane (GMB)
public may access the financial reports in the following partnerships,
websites:

Table 25 BUMN engaged in the extractive industry

Registration Status
No Name of BUMN in the Indonesia URL for the Audited Financial Report
Stock Exchange
1 PT Pertamina (Persero) Unregistered http://www.pertamina.com/investor-relations/laporan-
presentasi/
2 PT Aneka Tambang (Persero) Tbk Registered http://www.antam.com/index.php?option=com_jooget&task=
viewcategory&catid=51&Itemid=60
3 PT Bukit Asam (Persero) Tbk Registered http://www.ptba.co.id/id/company-report#afr
4 PT Timah (Persero) Tbk Registered http://www.timah.com/v3/ina/laporan-laporan-tahunan/
5 PT Perusahaan Gas Negara Registered http://ir.pgn.co.id/financial-information
(Persero) Tbk

The public can access the financial statement of the 2 Non-conventional Oil and Gas Partnership (MNK) , 7
BUMN to obtain information on various financial unitization areas, 15 TAC contracts (2 of which end in 2016),
conditions and transactions, such as acquisitions, 32 cooperation contracts, 6 IP contracts, 7 JOB-PSC contracts
receivable to government and private parties and short- and 2 PPI contracts. Detail of PT Pertamina’s working contracts
term and long-term loans from related BUMN. with partners can be seen in Annual Report of PT Pertamina
(Persero), note No 42.
Corporate Social Responsibility of BUMN
Engaged in the Extractive Industry Ownership
PT Pertamina (Persero) is 100% owned by the Government of
The Regulation of the Minister of BUMN No. PER-09 /
Indonesia
MBU / 07/2015 on Partnership and Community
Development Programs (PKBL) of BUMN regulates the Retained Earnings and Dividend
obligation of state-owned enterprises to implement
partnership and community development programs PT Pertamina (Persero) and its subsidiaries pay out US$ 499
which the source of funds can derive from a maximum million in dividend to the government in 2016 and is in
allowance of 4% of net profit after tax of the previous accordance with 2016 EITI reconciliation data.
year . This ministerial regulation is established to carry out
the mandate of Articles 88 and 90 of Law No. 19/2013 Table 26 Retained earnings and dividend payout by PT Pertamina
concerning BUMN, that is BUMN can set aside some of (Persero)
its net profit for the purposes of small business
development and community development around the Dividend and Retained Earning 2016
BUMN.
Dividend paid to shareholders US$ 499 million
PKBL fund from BUMN is relevant to the Requirement 6.1
of 2016 EITI Standard on social cost. Dividend paid to the Government US$ 499 million

Business Cooperation among BUMN Appropriated retained earnings US$ 4.631

million
In conducting their business, among BUMNs can conduct
business cooperation such as in sharing pipeline facilities Unappropriated retained earnings US$ 3.
for oil or gas transportation. For example, business
cooperation between Pertamina and PGN, in which PGN
hired a gas pipeline facility owned by Pertamina based Source: Annual Report of PT Pertamina (Persero) in 2016
on a toll fee agreed between the two parties in
accordance with standard business practices.
 Contextual Report 2016 73

Mandate of Fuel Subsidy Distribution Table 27 BBM and 3-kg LPG subsidy realization
The government through the Regulatory Agency for
2016
Downstream Oil and Gas (BPH Migas) has mandated No Product
Pertamina to distribute subsidized BBM. The mandate Volume Billion Rp
has also determined the quota of subsidized BBM that 1 Premium (million - -
must be distributed based on the APBN/APBN-P. Every kilolitres)
year, the Supreme Audit Board (BPK) audits the
reimbursement of fuel subsidy cost. Based on the audit 2 Kerosene (million 0,53 1.445
report, the Government pays the reimbursement of the kilolitres)
fuel subsidy to Pertamina. 3 Diesel fuel (million 13,56 10.034
kilolitres)
Pertamina’s cash flow report of 2016 shows that
Pertamina received cash from the Government related to 4 LPG 3 kg (cubic ton) 6.003.801 26.596
subsidies and marketing rewards in the amount of US $ TOTAL 38.076
2.3 billion in 2016 and US $ 3.21 billion in 2016.
Source : Data of EITI for the period of 2016
Figure 22 Cash flow of state-owned oil sales and BBM subsidies Pertamina’s role in Selling the Government
Share of Crude Oil/ Condensate
According to BP Migas’ guidelines on selling the state’s
crude oil/condensate share, BP Migas may directly
allocate crude oil or condensate to be processed by a
domestic refinery. PT Pertamina (Persero) may directly be
appointed to sell the state share of crude oil/condensate
for domestic refineries’ needs based on decree of the
Head of BP Migas No. KEP-0131/ BPO0000/2012/S2
dated October 8, 2012.

The government share of lifted oil that matches the

specification will be sent to a refinery operated by PT
Pertamina (Persero).

Pertamina’s role in Purchasing the Contractor

Share of Crude Oil/ Condensate
In accordance with Permen of ESDM No. 42 of 2018, the
Source: government requires contractor or affiliates to offer
contractor share of oil to Pertamina (Persero) and/or Oil
Processing Business License Holder Business Entity.
The amount of cash subsidy realization by PT Pertamina
(Persero) is as follow:
Government Loan that Forwarded to PT
Pertamina (Persero) and Government
Collateral for the Company Loan

Table 28 Loan that forwarded to PT Pertamina (Persero)

Balance as of
Lender Loan Amount Loan Purpose Repayment Period Interest Rate Desember 31,
2016
Overseas
Construction of
Economic May 2007 – ¥663,323,781
¥1,172,872,837 DPPU of Ngurah 3.1% per annum
Cooperation Fund November 2024 (US$5,697)
Rai
Japan
Japan
Lumut Balai
International March 2021 – ¥4,284,146,996
¥26,966,000,000 Geothermal Power
Cooperation March 2051 (US$36,798)
Plant Project
Agency (“JICA”)
International Bank Ulubelu and
for Reconstruction LA-8082-ID Lahendong October 2020 –
and Development amounting to Geothermal Clean October 2035 US$108,947
(“IBRD”) - World US$175,000 Energy Investment
Bank Project
International Bank Ulubelu and
for Reconstruction LA-TF10417-ID Lahendong October 2021 –
and Development amounting to Geothermal Clean April 2051 US$91,830
(“IBRD”) - World US$125,000 Energy Investment
Bank Project
Sumber : Laporan Tahunan PT Pertamina (Persero) Tahun 2016
74

Revenue from Transportation Service Corporate Social Responsibility of PT

PT Pertamina (Persero) through its subsidiary, Pertagas, Pertamina (Persero)
receives toll fee payment from KKKS, PGN and others for Social responsibility expense incurred by the company
transportation services of oil and gas products through includes CSR and PKBL expenses. Table 31 shows the
pipes owned by PT Pertamina. In 2016, PT Pertamina amount of CSR realization of PT Pertamina (Persero) in
(Persero) receives toll fee payment of US$112,401 2016. More information is available on the Annual Report
thousand 20. of PT Pertamina (Persero) in 2016 page 432 – 455.

Subsidiaries Table 31 CSR realization of PT Pertamina (Persero)

According to the Annual Report of PT Pertamina (Persero)
2016
in 2016, the Company had 27 subsidiaries, 5 association Activity
companies and 6 joint venture entities. The following is (Billion IDR)
list of 9 subsidiaries and 1 joint operation company Education 29,6
engaged in the oil and gas exploration and production
Health 5,7
sector and operated in Indonesia.
Environment 4,5
Changes in Ownership of Working Areas in Empowerment 7,7
Indonesia During 2016 PROPER 39,8
Table 30 lists acquisition conducted by Pertamina in Special Assistance 38,4
Indonesia during 2016, the transaction terms are partially
available in Annual Report of PT Pertamina (Persero) in TOTAL 125,6
2016 Source: Annual Report of PT Pertamina (Persero) in 2016, p. 437

Table 29 The list of subsidiaries and affiliates of PT Pertamina (Persero) engaged in the extractive sector
Percentage of
No Type of Ownership Company Business Field
Shares (2016)
Oil and gas exploration and
1 Direct ownership PT Pertamina Hulu Energi 100%
production
Oil and gas exploration and
2 Direct ownership PT Pertamina EP 100%
production
Oil and gas exploration and
3 Direct ownership PT Pertamina EP Cepu 100%
production
Pertamina E&P Libya Limited, Oil and gas exploration and
4 Direct ownership 100%
British Virgin Island production
Oil and gas exploration and
5 Direct ownership PT Pertamina East Natuna 100%
production
Oil and gas exploration and
6 Direct ownership PT Pertamina EP Cepu ADK 100%
production
PT Pertamina Internasional Oil and gas exploration and
7 Direct ownership 100%
Eksplorasi dan Produksi production
ConocoPhillips Algeria Limited, Oil and gas exploration and
8 Direct ownership 100%
Cayman Island production
Oil and gas exploration and
9 Direct ownership PT Pertamina Hulu Indonesia 100%
production
Joint operation with indirect Natuna 2 B.V.,
10 50% Exploration and production
ownership Belanda/Netherlands
Source: Annual Report of PT Pertamina (Persero) in 2016

Table 30 Changes in ownership of working areas of PT Pertamina (Persero)

Nama of Share Ownership /

No Transaction Price Remark
Block/Company Participating Interest

Etablissements Maurel Acquisition of US$227 Effective from August

1 24.53% of shares
et Prom SA (M&P) Participating Interest (PI) million 25, 2016

Effective from May 25 ,

Acquisition of No
2 East Ambalat 100% 2016 with a term of 30
Participating Interest (PI) information
years

Acquisition of No Effective from January

3 WKP Gunung Lawu 100%
Participating Interest (PI) information 11, 2016

Source: Annual Report of PT Pertamina (Persero) in 2016

20 Data of EITI for the period of 2016

 Contextual Report 2016 75

5.3 PT Aneka Tambang (Persero) Tbk Retained Earnings and Dividend

In 1997, PT Aneka Tambang (PT Antam) publicly offered 35% PT Antam did not pay dividend in 2016 due to relatively small
of its total shares in the Indonesia Stock Exchange. In 1999, profit that was earned in 2015. Hence, the Company decided
PT Antam Tbk registered its shares in Australia, acquiring the to retain the profit for the operational interest of the
status of a foreign exempt entity which was upgraded to ASX Company.
Listing with stricter rules in 2002.
Table 33 Retained earnings and dividend payout by PT Aneka
PT Aneka Tambang Tbk is a diversified, vertically-integrated, Tambang Tbk
export-oriented mining company. Through operation areas
throughout Indonesia that rich in minerals, the activities of PT Dividend and Retained Earnings 2016
Antam Tbk include exploration, mining, processing and
marketing of nickel ore, ferronickel, gold, silver, bauxite and Dividend paid to shareholders -
coal. Given the vast area of mining concessions and the large Dividend paid to the Government -
numbers of reserves and resources the company has, it has
established several joint ventures with international partners to Dividend paid to other shareholders -
utilise existing reserves to become profitable mines.

Appropriated retained earnings Rp 11.6 trillion

Ownership

Table 32 The composition of shareholders of PT Aneka Tambang Unappropriated retained earnings (Rp 1.9 trillion)
Tbk

Percentage of Source: Annual Report of PT ANTAM Tbk in 2016

Shareholder
Ownership (%)
Government of Indonesia 65% Loan Guarantee from the Government and
Public 35% Guarantee from PT Aneka Tambang for Other
Companies
Source: Annual Report of PT Antam Tbk in 2016 In 2016, PT Aneka Tambang Tbk did not receive loan
The government had shares in PT Aneka Tambang Tbk in the guarantee from the government, nor did it provide guarantee
amount of Rp 1.6 trillion in 2016. The government also has for other companies.
shares called ‘Dwiwarna’ share in PT Aneka Tambang Tbk that
giving the government the power of veto over the Subsidiaries
appointment and dismissal of directors and commissioners,
issuance of new shares, and a merger or liquidation of PT According to the Annual Report of PT Aneka Tambang Tbk in
Aneka Tambang Tbk. 2016, the Company had a number of subsidiaries engaged in
the extractive sector. Those subsidiaries were:

Table 34 The list of subsidiaries of PT Aneka Tambang Tbk engaged in the extractive sector

Percentage of
No Type of Ownership Company Business Field
Shares (2016)

Coal exploration and mining

1 Direct ownership Indonesia Coal Resources 100%
operator

2 Direct ownership PT Antam Resourcindo 99.98% Exploration and mining operator

PT Dwimitra Enggang
3 Direct ownership Khatulistiwa (not yet operating 99.5% Exploration and mining operator
commercially)

Exploration, mining construction and

development, mining, production,
4 Direct ownership PT Cibaliung Sumberdaya 99.15%
processing and refining, transportation
and sales in the gold industry

PT GAG Nikel Indonesia (not yet

5 Indirect ownership 100% Exploration and mining operator
operating commercially)

Coal exploration and mining

6 Indirect ownership PT Citra Tobindo Sukses Perkasa 100%
operator

PT Jatim Arindo Persada (not yet Coal exploration and mining

7 Indirect ownership 100%
operating commercially) operator
 76

Percentage of
No Type of Ownership Company Business Field
Shares (2016)

PT Antam Niterra Haltim (not Coal exploration and mining

8 Indirect ownership 100%
yet operating commercially) operator

9 Association PT Nusa Halmahera Minerals 25% Gold mining

10 Association PT Nikel Halmahera Timur 50% Nickel mining

Source: Annual Report of PT ANTAM Tbk in 2016

Changes in Ownership (Acquisition and Ownership

Divestment) in 2016
Table 36 The composition of shareholders of PT Bukit Asam Tbk
According to the Annual Report of PT Aneka Tambang Tbk in
2016, PT Antam did not conduct any divestment and Percentage of
acquisition in 2016.
Shareholder
Ownership (%)
Government of Indonesia 65,0%
Corporate Social Responsibility of PT Aneka
Domestic public 26,9%
Tambang Tbk
Foreign public 8,1%
PT Aneka Tambang Tbk implements PKBL with a purpose to
help the government achieve more equitable development Source: Annual Report of PT Bukit Asam Tbk in 2016
and improve people’s welfare.
As a shareholder, the government also has ‘Dwiwarna’ share
Partnership and community development program realization that giving the government the power of veto over the
of PT Aneka Tambang Tbk in 2016 was as follows: Company. The government has capital share amounting to
Rp750 billion.

Table 35 PKBL realization of PT Aneka Tambang Tbk

Retained Earnings and Dividend
2016 Table 37 Retained earnings and dividend payout by PT Bukit Asam
Activity
(Billion IDR) Tbk
Community Empowerment 68,24
Dividend and Retained Earnings 2016
Partnership Program 70,35
Dividend paid to shareholders Rp 610,8 billion
Community Development 1,47
Program Dividend paid to the Government Rp 387,0 billion
Environmental Management 57,07 Dividend paid to other shareholders Rp 213,8 billion
TOTAL 197.13 Appropriated retained earnings Rp 9,9 trillion
Source: Data of EITI for the period of 2016 Unappropriated retained earnings Rp 1,4 trillion
Source: Annual Report of PT Bukit Asam Tbk in 2016
5.4 PT Bukit Asam (Persero) Tbk
On 23 December 2002, PT Bukit Asam Tbk (PT BA) registered
itself as a public company in the Indonesia Stock Exchange
Loan Guarantee from the Government and
under the code “PTBA”. PT BA is engaged in the coal mining Guarantee from PT Bukit Asam for Other
industry, covering activities of general investigation, Companies
exploration, production operation, processing, refining, In 2016, PT Bukit Asam Tbk did not receive loan guarantee
transportation and trade, management of dock facilities for from the government, nor did it provide guarantee for other
coal both for its own and for other parties needs, operating companies.
steam power plants both for its own and for other parties
needs and provide consulting and engineering services in
fields related to the coal mining industry and their processed Payment for Transportation Service
products. PT Bukit Asam Tbk makes payments to PT Kereta Api
Indonesia (Persero) for coal transportation services. Payment
made by PT Bukit Asam Tbk for transportation service in 2016
is Rp1.9 trillion and US$67.4 million21.

Subsidiaries
According to the Annual Report in 2016, detail of subsidiaries
of PT Bukit Asam Tbk engaged in the extractive industry were
as follows:

21 Data of EITI for the period of 2016

 Contextual Report 2016 77

Table 38 The list of subsidiaries of PT Bukit Asam Tbk engaged in the extractive sector

Percentage of
No Type of Ownership Company Business Field
Shares (2016)

1 Direct ownership PT Batubara Bukit Kendi (not operating) 75% Coal mining

2 Direct ownership PT International Prima Coal 51% Coal mining

3 Direct ownership PT Bukit Asam Banko (not yet operating) 65% Coal mining

4 Direct ownership PT Bukit Asam Metana Ombilin (not yet 99,99% Methane gas mining
operating)

5 Direct ownership PT Bukit Asam Metana Enim (not yet 99,99% Methane gas mining
operating)

6 Direct ownership PT Bukit Asam Metana Peranap (not yet 99,99% Methane gas mining
operating)

7 Direct ownership PT Tabalong Prima Resources (in the 34,17% Mining

development stage)
Source: Annual Report of PT Bukit Asam Tbk in 2016

The complete list of subsidiaries and association companies of with a number of secondary operations taking place in
PT Bukit Asam Tbk is available in Annual Report of PT Bukit Kalimantan Selatan, Sulawesi Tenggara, Banten and Jakarta.
Asam Tbk in 2016.

Changes in Ownership (Acquisition and Ownership

Divestment) in 2016 Table 40 The composition of shareholders of PT Timah Tbk
Throughout 2016, PT Bukit Asam Tbk did not invest and
Percentage of
divest. Shareholder
Ownership (%)
Corporate Social Responsibility of PT Bukit Asam Government of Indonesia 65%
Tbk Public 35%
CSR program of PT BA is a PKBL consisting of Community
Development Programs and Regional Development Programs. Source: Annual Report of PT Timah Tbk in 2016
The government has Dwiwarna share which enable the
The CSR realization of PT Bukit Asam Tbk integrated into its government to have special rights in making strategic
partnership and community development program (PKBL) in decisions. The shares owned by the government were around
2016 was as follows: Rp 242 billion in 2016.

Table 39 CSR program realization of PT Bukit Asam Tbk

Retained Earnings and Dividend
2016
Activity Table 41 Retained earnings and dividend payout by PT Timah Tbk
(Billion IDR)
Community Relation 6.7 Dividend and Retained Earnings 2016
Community Service 0.6 Dividend paid to shareholders Rp 30,5 billion
Community Empowerment 22.4 Dividend paid to the Government Rp 19,8 billion
Dividend paid to other shareholders Rp 10,7 billion
Infrastructure Development 18.6
Appropriated retained earnings Rp 4,7 trillion
Environmental Management 0.2
Unappropriated retained earnings Rp 688 billion
TOTAL 48.5
Source: Annual Report of PT Timah Tbk in 2016
Source: Annual Report of PT Bukit Asam Tbk in 2016
Loan Guarantee from the Government and
More information on social responsibility activities
Guarantee from PT Timah for Other Companies
implemented by PT Bukit Asam Tbk is accessible at
http://www.ptba.co.id/en/csr. In 2016, PT Timah Tbk did not receive loan guarantee from
the government, nor did it provide guarantee for other
companies.
5.5 PT Timah (Persero) Tbk
PT Timah Tbk is the largest tin producer in Indonesia, Subsidiaries
integrated into exploration, mining, processing, smelting and
marketing operations. Moreover, PT Timah Tbk is one of the According to the Annual Report in 2016, detail of subsidiaries
largest tin exporters in the world that is located in Bangka of PT Timah Tbk engaged in the extractive industry were as
Belitung Province. follows:

The mining business license area of PT Timah Tbk includes

Bangka Belitung and Kepulauan Riau,
 78

Table 42 The list of subsidiaries of PT Timah Tbk engaged in the extractive sector

Percentage of
No Type of Ownership Company Business Field
Shares (2016)

mining of non-tin
1 Direct ownership PT Timah Investasi Mineral (TIM) 99.9%
minerals and coal marketing

Mineral exploration (activity has

2 Direct ownership PT Kutaraja Tembaga Raya 100%
been stopped)

PT Timah Tbk and

Direct and indirect
3 PT Tanjung Alam Jaya PT TIM each Coal mining
ownership through PT TIM
owns 50%

Indirect ownership through

4 PT Truba Bara Banyu Enim (TBBE) 99.8% Coal mining
PT TIM
5 Direct ownership PT Koba Tin 25% Tin mining
Source: Annual Report of PT Timah Tbk in 2016

Mining Concession of PT Timah in Indonesia in PT Perusahaan Gas Negara Tbk is currently the largest gas
2016 transporter company in Indonesia and has subsidiaries
engaged in upstream business (PT Saka Energi Indonesia) and
Mining concessions owned by PT Timah Tbk in Indonesia can
downstream business (PT Gagas Energi Indonesia).
be seen in the Annual Report of PT Timah Tbk in 2016.

Ownership
Changes in Ownership (Acquisition and
Table 44 The composition of shareholders of PT Perusahaan Gas
Divestment) in 2016 Negara Tbk
Based on Annual Report of PT Timah Tbk, PT Timah did not
invest and divest in 2016. Percentage of
Pemegang Saham
Ownership (%)
Corporate Social Responsibility of PT Timah Tbk Government of Indonesia 56,96%
A manifestation of the company’s concern over the Public 43,04%
environment, particularly in the fields of facility and
infrastructure, education, training, religion, sport and other Source: Annual Report of PT Perusahaan Gas Negara Tbk in
social programmes, integrated into partnership and 2016
community development program (PKBL) and Corporate The government has Dwiwarna share which enable the
Social Responsibility (CSR) program. government to have special rights in making strategic
decisions. The shares owned by the government were around
The PKBL realization of PT Timah Tbk in 2016 was as follows: US$ 196 million in 2016.

Table 43 PKBL realization of PT Timah Tbk Retained Earnings and Dividend

2016
Activity Table 45 Retained earnings and dividend payout by PT
(Billion IDR) Perusahaan Gas Negara Tbk
Community Relation 4
Dividend and Retained Earnings 2016
Community Service -
Community Empowerment 1 Dividend paid to shareholders US$ 168 million
Infrastructure Development 6 Dividend paid to the Government US$ 96 million
Environmental Management 0,6 Dividend paid to other shareholders US$ 72 million
TOTAL 12 Appropriated retained earnings US$ 2,6 billion
Unappropriated retained earnings US$ (12) million
Source: Data of EITI for the period of 2016
Source: Annual Report of PT Perusahaan Gas Negara Tbk in 2016
5.6 PT Perusahaan Gas Negara (Persero) Tbk
PT Perusahaan Gas Negara Tbk (PT PGN) changed into the Loan Guarantee from the Government and
limited company based on PP No. 37/1994 which was Guarantee from PT Perusahaan Gas Negara for
accompanied by the addition of business scope. In addition to Other Companies
the gas trading sector, PT PGN also engaged in the field of
transmission, in which PGN functions as a transporter. In 2016, PT Perusahaan Gas Negara Tbk did not receive loan
guarantee from the government, nor did it provide guarantee
Since 2003, PT PGN has become a public company and is for other companies.
listed on the Indonesia Stock Exchange (IDX).
 Contextual Report 2016 79

Subsidiaries The decision to form this holding do not change the

According to the Annual Report in 2016, a subsidiary of PT composition of the Government's A Series shares (Dwiwarna
PGN in the extractive industry was PT Saka Energi Indonesia shares) in the three mining BUMNs.
that engaged in the upstream business with a share ownership
of 99.9%. Based on the PP, the number of government-owned shares
transferred to PT Inalum is as shown in the table below
Revenue from Transportation Service
Table 47 Transfer of Government shares to PT Inalum
PT Perusahaan Gas Negara receives toll fee payment from
Gas Refueling Station (SPBG) of Pertamina and PLN-Jambi The number of
Merang for gas transportation service through pipes owned by government-owned
PGN. In 2016, PT PGN received a toll fee of Rp 2,034 million BUMN Status
shares transferred to
and US $ 7,716 thousand. PT Inalum
The length of the Transmission Pipes owned by PT PT Antam Tbk 15.619.999.999 Non persero
Perusahaan Gas Negara in the territory of shares of B Series
Indonesia in 2016 (65%)
The length of the transmission pipe owned by PT Perusahaan PT Timah Tbk 4.841.053.951 shares Non persero
Gas Negara (Persero) Tbk in the territory of Indonesia in 2016 of B Series (65%)
was 2,248 km. PT Bukit Asam 1.498.087.499 shares Non persero
Tbk of B Series (65,02%)
Changes in Ownership (Acquisition and
Divestment) in 2016 Source: PP No. 47/2017

In November 2016, PT Perusahaan Gas Negara through PT The objectives of the mining BUMN holding establishment
Saka Energi Indonesia invested in the upstream sector by are: i) to take control mineral reserves and resources by
acquiring a 37.8% participating interest in the Sanga Sanga seeking funding to acquire mining companies that already in
block, Kalimantan Timur from BP East Kalimantan ltd. (26.3%) production stage, ii) to increase product downstream through
and Unimar llc. (11.6%). investment cooperation with global mining companies. One
of the target of the mining BUMN Holding in 2018 is to
Corporate Social Responsibility of PT Perusahaan complete the process of divesting 51% of PT Freeport
Gas Negara Tbk Indonesia's shares.
A manifestation of the company’s concern over the
Regarding the establishment of the oil and gas BUMN
environment, particularly in the fields of facility and
holding, on April 11, 2018, a state shares transfer agreement
infrastructure, education, training, religion, sport and other
(Agreement on the Transfer of Right on State Shares of the
social programmes, integrated into partnership and
Republic of Indonesia at PT PGN Tbk in the framework of RI
community development program (PKBL) and Corporate
Equity Participation in PT Pertamina (Persero)) was signed, in
Social Responsibility (CSR) program.
which 56.96% of government B series shares at PGN was
transferred to Pertamina. This is in line with the issuance of
The PKBL realization of PT Perusahaan Gas Negara Tbk in
Government Regulation No. 6/2018 concerning the Addition
2016 was as follows:
of the State Equity Participation of the Republic of Indonesia
Table 46 PKBL realization of PT PGN Tbk to the Share Capital of PT Pertamina (Persero). With the
signing of this Share Transfer Deed, the Oil and Gas BUMN
2016 (Dalam billion Holding was officially established with Pertamina as the
Aktivitas holding company and PGN as a holding member.
Rupiah)
Community Relation 11 The objectives of the oil and gas BUMN holding
Community Service 24 establishment are i) to synergize capital cost due to
infrastructure consolidation, ii) to avoid conflict of gas
Community Empowerment 28
allocation that often occur between Pertamina and PGN, and
Infrastructure Development 59 iii) to realize a price uniformity scheme
Environmental Management 6,5
The process of establishing this Oil and Gas Holding was
TOTAL 129 continued with the integration process of Pertagas which is a
Source: Annual Report of PT Perusahaan Gas Negara Tbk in 2016 subsidiary of Pertamina to PGN.

On June 29, 2018, PT Perusahaan Gas Negara Tbk (PGN)

5.7 Establishment of Holding Companies for Oil and signed a Conditional Sales Purchase Agreement (CSPA) to
Gas and Mining Companies own 51% shares of PT Pertamina Gas (Pertagas) with a
transaction value of Rp16.6 trillion for the purchase of
On November 29, 2017 the Government established a mining 2,591,099 shares owned by Pertamina at Pertagas.
holding consisting of PT Inalum (Persero), PT Aneka Tambang
Tbk, PT Timah Tbk, and PT Bukit Asam Tbk. Three Mining Although the BUMN holding members become non-persero
BUMNs, namely PT Antam Tbk, PT Bukit Asam Tbk, and PT companies, the state still has control over the holding
Timah Tbk held an EGMS and approved changes to the member companies 22, either directly through Dwiwarna shares
Company's Articles of Association related to the change in the or indirectly through PT Inalum (Persero) / PT Pertamina
status of the Companies from Persero to Non-Persero. This (Persero) which is 100% owned by the state.
step is in accordance with PP No. 47/2017 concerning
Addition of State Equity Participation of the Republic of
Indonesia into the Share Capital of PT Inalum (Persero).

22 Ministry of BUMN. 2017. “Siaran Pers: Holding Tambang Sesuai Jadwal”.

http://www.bumn.go.id/berita/1-Siaran-Pers-Holding-Tambang-. Accesed
on 30 November 2017
 80

06
ENVIRONMENTAL AND SOCIAL
RESPONSIBILITIES

Companies engaged in the extractive industry have In the oil and gas sector, such funding is called the
environmental and social responsibilities as regulated in Abandonment and Site Restoration (ASR) Fund, while in the
various laws, government regulations and ministerial mineral and coal sector, it is called the Reclamation Guarantee
regulations, please refer to Section 2.3.3 on Other Laws and Fund as well as Post-mining Guarantee Fund. Additionally,
Regulations Related to Extractive Industry. Related to those extractive-sector companies may implement a programme to
responsibilities, companies working in the extractive industry fulfil the companies’ social and environmental responsibilities,
are required to provide funding for environmental restoration known as the Corporate Social Responsibility (CSR).
and reclamation.
 Contextual Report 2016 81

CSR program and fund as mandated by the Law are to

increase the economic resilience and community welfare.

The types of CSR programs and the minimum amount of fund

required are not regulated in detail in various regulations
related to CSR, please refer to Section 2.3.3 on Other Laws
and Regulations Related to Extractive Industry in the
explanation part of CSR regulations. In general, CSR programs
consist of social responsibility or the empowerment of local
communities around the mining site and environmental
responsibility. The following types of CSR programs are
generally implemented by mining companies:

Table 48 Type of CSR Programmes

Tema Konten

Infrastructure Road construction, water supply

improvement, construction of social
buildings, such as: sport hall,
government hall, mosque/church,
rural electricity facilities.

Economy Small business assistance, micro

capital assistance, seedlings or
livestock assistance.

Education Scholarships, teacher training,

teaching aids, cultural programs.

Health Aid supplies of medicines, surgical

aid, campaigns and health
education, construction of health
centers.

Donation Disaster donations, donations of

religious activities, provision of
revolving funds, corporate loan
facilities for community activities.

6.1.1 Amount of CSR Fund

Companies not performing CSR obligations may be
subject to administrative sanctions (e.g. as regulated by
Article 110 of PP No. 23/2010). However, the amount of
CSR is not regulated by the Government. Therefore,
private companies generally have allocation rules of
funds for CSR. Meanwhile, allocation of CSR fund for
BUMN is clearly regulated, that is maximum 4% of profit
of the previous year.

Tables 49 and 50 are summaries of the amount of CSR

fund reported in the 2016 EITI reporting form. Based on
these data, CSR fund from oil and gas companies were
much smaller than the CSR fund from mineral and coal
companies, which is understandable since in general the
mineral and coal mining area is wider than the oil and gas
mining area and involve more surrounding communities
in operational activities. The largest contributor of CSR
fund in mineral and coal sector was PT Freeport , which
contributes 73% of total reported CSR Fund in mineral
6.1 Social and Environmental Responsibilities and coal sector. The second and third largest
Program of the Company contributors were Newmont Nusa Tenggara and PT
Aneka Tambang, which contribute 5% and 3% of total
The government expects mining companies to contribute in reported CSR Fund in mineral and coal sector,
improving the welfare of local communities. Obligations in respectively.
social responsibility and community development are
expected to achieve this expectation.
 82

Table 49 CSR fund spent by reporting companies of oil and gas sector

In USD

In Million IDR Total

Type of CSR In Million IDR
USD (US$1 = (million IDR)
Rp13,436)
Community Relation 162 882.773 11.861 12.023
Community Service - 168.371 2.262 2.262
Community Empowerment 1.291 7.885.146 105.945 107.236
Infrastructure Development 8.387 3.057.791 41.084 49.471
Environmental Management 480 5.558.625 74.886 75.166

TOTAL 10.320 17.415.706 235.838 246.158

Source: Data of EITI for the period of 2016

Table 50 CSR fund spent by reporting companies of mineral and coal sector

In USD

In Million IDR Total

Type of CSR In Million IDR
USD (US$1 = (million IDR)
Rp13,436)

Utilization of Company Facilities 28.787 339.052 4.556 33.342

and Infrastructure

Community Empowerment in the 63.355 40.221.789 540.420 603.775

form of Increasing the Economy of
Residents of Surrounding Areas

Community Service 62.132 35.870.783 481.960 544.092

Education Improvement for 59.258 5.419.034 72.810 132.068

Residents of Surrounding Areas

Infrastructure Development 149.290 12.719.403 170.898 320.187

TOTAL 362.821 94.570.070 1.270.643 1.633.464

Source: Data of EITI for the period of 2016

Detail of each company's CSR amount included in the Amount of Fund

scope of this report can be seen in the EITI Reconciliation
Report in Table 10/Appendix 5.2 for oil and gas sector ASR fund reserve is made by the contractor every semester by
and Table 11/Appendix 2.30 for mineral and coal sector. depositing fund in USD into a Joint Account. ASR fund reserve
These appendices also show the detail of CSR location can be calculated as follows:
and the type of CSR payment (inkind / cash).

6.2 Oil and Gas Mining: Abandonment and Site

Restoration Fund (ASR Fund)
Upon the expiration of upstream oil and gas production Description:
activities, the remaining production facilities and other Estimated ASR Cost: Estimated ASR cost based on last
supporting facilities as well as damaged environments can be evaluation.
hazardous for other activities and for the surrounding Adjustments: Adjustment values resulting from asset changes
communities. Therefore, the KKS Contractor is required to and estimated ASR cost changes
perform Abandonment and Site Restoration upon the
cessation of production. The ASR Fund will be placed on a joint account within the
managing bank that has been established through an
The KKS Contractor is required to prepare an ASR fund agreement between SKK Migas and KKS Contractor. Every
reserve report of each field within a working area and submit semester, SKK Migas will send ASR fund invoice to KKS
to the Risk Management and Taxation Division. The scope of Contractor based on cost estimation calculation and ASR fund
the report includes, among other things, the ASR activity plan, reserve. The placement of ASR funds shall be done no later
ASR cost estimation calculation and ASR fund reserve each than 30 days after the date of the invoice. Until 2016, ASR
semester. fund collected in bank accounts amounted to US$901 million
with details:
 Contextual Report 2016 83

i)Bank Negara Indonesia amounting to US$322.47 million, the authorised governor or regent/mayor and should be
ii)Bank Rakyat Indonesia amounting to US$285.13 million, and specified in the annual RKAB for production operations.
iii) Bank Mandiri amounting to US$293.16 million. SKK Migas This guarantee may be provided in the form of:
has the authority to manage ASR fund and must report to the a. A deposit into a joint account co-opened by the
government in accordance with Oil and Gas Law. DG of Mineral and Coal, the relevant governor or
regent/mayor and the relevant IUP/IUPK-
Chart 28 ASR Fund Statistic production operation license holder in a public
sector bank.
b. A time deposit into an account co-opened by the
DG of Mineral and Coal, the relevant governor or
Million USD

regent/mayor and the relevant IUP/IUPK-

CAGR 27% production operation license holder in a public
sector bank.
c. A bank guarantee issued by a public sector bank
or national private sector bank in Indonesia.
d. An accounting reserve if the IUP/IUPK-production
operation license holder is listed in the Indonesia
Stock Exchange (with traded shares of more than
40%) and has US$ 50 million in paid-up capital.
344 497 635 775 901 3. The Post-Mining Guarantee must be fully collected within
two years before going to the post-mining stage. The
2012 2013 2014 2015 2016 post-mining guarantee is provided in the form of a time
deposit made into an account co-opened by the DG of
Source: Annual report of SKK Migas in 2016
Mineral and Coal, the authorised governor or
regent/mayor, and the relevant IUP/IUPK-production
operation license holder in a public sector bank. The
6.3 Mineral and Coal Mining: Reclamation and Post amount that should be provided is decided by the DG of
Mining Guarantees Mineral and Coal on behalf of the Minister and the
relevant governor or regent/mayor according to their
Mineral and coal mining companies with IUP and IUPK are
authority.
required to provide two types of guarantees: reclamation
(exploration and production operation) and post-mining
In accordance with Permen of ESDM No. 26/2018, IPR holder
guarantees, pursuant to the Permen of ESDM No.26/2018.
is obliged to apply the rules of good mining practices and
governance of mining businesses. The Governor supervises
1. The provision of the reclamation guarantee in the
the management of the mining business including the
exploration stage is regulated by the DG of Mineral and
implementation of guidance and supervision of activities
Coal on behalf of the minister, governor, or
carried out by IPR holders.
regent/mayor in accordance with their respective
authority. The guarantee should be provided fully and
specified in the work and budget plan (RKAB) for initial Amount of Fund
exploration. After the RKAB has been approved by the
DG of Mineral and Coal, the IUP/IUPK-exploration The following is total placement of reclamation guarantee and
license holder must deposit the guarantee in the form of post-mining fund under the authorization of MoEMR in 2018,
a time deposit no later than 30 days since the RKAB was including placement of fund in USD with an exchange rate of
approved. The time deposit should be made into a joint Rp14,500:
account co-opened by the DG of Mineral and Coal, the
relevant governor or regent/mayor according to their • Reclamation Guarantee amounting to Rp 1.310 Trillion
authority, and the relevant exploration license holder in a • Post-mining fund amounting to Rp 866.195 Billion 23
public sector bank.
2. The reclamation guarantee in the production operation There is no available information regarding the total
stage for the first five years must be provided fully for placement of reclamation guarantee and post-mining fund
five years. However, if the mine’s life span is less than under the authorization of local government.
five years, this reclamation guarantee should be provided
for the life span of the mine. Similar to the reclamation Table 51 shows the amount of reclamation and post-mining
guarantee in the exploration stage, this guarantee is guarantees reported by reporting companies of mineral and
regulated by the DG of Mineral and Coal on behalf of coal sector. The detail of amounts reported by each company
the Minister, can be seen in Appendix 2.30 of 2016 EITI Reconciliation
Report.
Table 51 Summary of reclamation guarantee and post-mining fund from 2016 EITI reporting companies

Reported in IDR Reported in USD TOTAL

Type of Fund In Million IDR

In Million IDR USD (in thousand) (US$ 1 = In Million IDR
Rp13,436)

Reclamation Guarantee 368.534 58.275 782.983 1.151.517

Post-Mining Fund 42.928 25.253 339.299 382.227

TOTAL 411.462 83.528 1.122.282 1.533.744

Source: Data of EITI for the period of 2016

23 DG of Minerba. 2018. Daftar Data untuk Penyusunan Laporan EITI 2016

 84

6.4 People’s Mining 6.4.1 Illegal Mining (PETI)

There are a lot of communities in mining areas whose Illegal mining is generally carried out by people with
economies depend on small-scale mining operations that are simple equipment and unlicensed, not environmentally
carried out by artisanal as well as with the help of machine and safety oriented. However, it does not rule out the
tools. The definition of Artisanal and Small-Scale Mining (ASM) possibility that large mining companies will undertake
is largely a mining activity carried out individually, in groups, illegal mining, such as mining in protected forest areas.
by families or cooperatives in a traditional and minimal or non- This section focuses more on illegal mining discussions
technological manner 24. conducted by the community. Illegal mining (PETI) has
minimal supervision from the government and endanger
Law No. 4/2009 on Mineral and Coal Mining does not the environment and health, endanger the safety of
recognize ASM but regulates the People’s Mining to miners and prone to landslides. In addition, PETI resulted
accommodate the legality of traditional mining undertaken by in reduced state revenues from mineral and coal sector,
the people. People's Mining must be done in the People's mineral resources wastage and creating an unfavorable
Mining Area and get the People's Mining Business License investment climate. There has been no official release
(IPR). from the government which is the result of an adequate
study of how much the state losses from PETI.

Table 52 Regulations related to People's Mining

Criteria for determinig People’s Mining a. holding secondary mineral deposits found in the river and/or between the
Area (WPR) – Law of Mineral and Coal side and the riverbank;
Mining 2009 b. holding primary metal or coal deposits at a maximum depth of 25 (twenty-
five) meter;
c. terrace sendiment, flood plain, and ancient river sendiment;
d. the maximum area of WPR is 25 (twenty-five) hectares;
e. mentioning the type of commodity to be mined ; and/or
f. being an area or place of people’s mining activities carried out for at least
15 (fifteen) years.

Requirements of People’s Mining 1. The area of mining for 1 (one) IPR that can be granted to:
License (IPR) – Law of Mineral and Coal a. an individual shall be a maximum of 1 (one) hectare;
Mining 2009 b. a group of individuals shall be a maximum of 5(five) hectares; and/or
c. a cooperative shalI be a maximum of 10 (ten) hectares.
2. IPR shall be issued for a maximum period of 5 (five) years and can be extended.

Procedures of Granting People’s Mining 1) Administrative requirements

License (IPR), Article 48 of PP No. a. an individual shall include at least:
23/2010 1. a letter of application;
2. a resident identification card;
3. information about mining commodities for which an application
is submitted; and
4. a certificate from the local office of urban administrative
division/office of rural administrative division.
b. a community group shall include at least:
1. a letter of application;
2. information about mining commodities for which an application
is submitted; and
3. a certificate from the local office of urban administrative
division/office of rural administrative division.
c. a local cooperative shall include at least:
1. a letter of application;
2. a taxpayer identification number;
3. a deed of establishment of the cooperative that has been
validated by the competent official;
4. information about mining commodities for which an application
is submitted; and
5. a certificate from the local office of urban administrative
division/office of rural administrative division.
2) Technical requirements shall be a statement that sets forth at least:
a. shafts for IPR not exceeding 25 (twenty-five) meters in depth;
b. use of mechanical pumps, retorting or machinery with total power of not
more than 25 (twenty-five) horsepower for 1 (one) IPR; and
c. no use of heavy equipment and explosives.
3) Financial requirement shall be the previous year’s financial statement and shall
be required only for local cooperatives.
Sumber: berbagai sumber, diolah

24 IIED. 2003. “Artisanal and Small Scale Mining”.

http://pubs.iied.org/pdfs/9268IIED.pdf accessed on 15 November 2017
 Contextual Report 2016 85

Figure 23 Character of illegal miners

Source: http://iesr.or.id/files/Pertambangan%20Ilegal%20di%20Indonesia.pdf

PETI is an act that is categorized as criminal and may be The government is expected to supervise and improve the
punished with imprisonment of 10 (ten) years and a fine of not capacity of mining communities regarding the implementation
more than Rp 10,000,000,000 (ten billion rupiah) (Article 158 of good mining practices. Furthermore, the Government is
of Law No. 4/2009 on Mineral and Coal Mining). expected to accommodate illegal miners by cooperation
between mining companies and people’s mining in certain
To cope with PETI, some researchers and observers of PETI areas or by involving BUMD that can employ miners 26.
agree if PETI is a complex problem that requires an integrated
solution with due consideration to social, economic and legal
conditions. Consistency of law enforcement is necessary but
supervision and guiding approach is preferred25.

25 Redi, Ahmad. 2016. “Dilema Penegakan Hukum Penambang Mineral dan

Batubara Tanpa Izin pada Pertambangan Skala Kecil”.
http://rechtsvinding.bphn.go.id/artikel/ART%207%20JRV%205.3%20WATE
MARK.pdf. Accessed on 15 November 2017
26 Zulkarnain, Iskandar. LIPI. “Pertambangan Ilegal di Indonesia dan
Permasalahannya.
http://iesr.or.id/files/Pertambangan%20Ilegal%20di%20Indonesia.pdf.
Accessed on 15 November 2017
 86

07
MANAGEMENT OF STATE REVENUE
GENERATED FROM EXTRACTIVE INDUSTRY

Based on the Central Government Financial Report (LKPP), State revenue derived from extractive industry is accounted
state revenue from extractive industry is largely derived from for in the central government budget and financial report
tax revenue and non-tax state revenue (PNBP) deposited to accessible on the Ministry of Finance's website:
the state treasury as illustrated in Figure 24. The state treasury www.kemenkeu.go.id/page/laporan-keuangan-pemerintah-
is managed by the Directorate General of Treasury and the pusat. According to the PMK No. 275/PMK.05/2014,
management is regulated by Law No. 1/2004 concerning government financial data is prepared by referring to the
State Treasury and Ministerial Regulations. Financial Statistic Manual of the Government of Indonesia that
is in line with the international standards, such as System of
National Accounts, The Balance of Payments Manual and The
Monetary and Financial Statistics Manual.

Figure 24 State revenue from the extractive industry reported in LKPP

 Contextual Report 2016 87

In 2016, Indonesia has no other revenue (other than the 7.1.2 7National Budgeting Approach
revenue mentioned above) from extractive industry that are
not recorded in the state budget (APBN) and does not have Indonesia’s budgeting system adopts three approaches
national sovereign wealth fund and development fund or state pursuant to Law No.17/2003 concerning State Finances,
investment institution that manage fund derived from namely:
extractive industry companies.
• Unified budget. Unified budgeting is the integration
of all planning and budgeting processes across
7.1 State Financial Planning, Budgeting and Audit ministries/institutions. Budget is classified by
7.1.1 Budget Planning organization, function, program, type of activity, and
type of expenditure. The purpose of unified
Budget planning system in Indonesia starts with the budgeting is to avoid funding duplication.
formulation of long-term development plan, which • Medium-term Expenditure Framework (MTEF). MTEF
subsequently is broken down into medium and short- is policy-based budgeting approach.
term plan. The National Long-Term Development Plan Ministries/Institutions will be required to translate
(RPJPN) 2005-2025 is enacted as Law No.17/2007 and is their RPJMN and Renstra programs into annual Work
broken down into 4 Medium-Term Development Plan and Budget plan. MTEF aims to ensure sustainable
(RPJMN) – each focused on different themes and fiscal discipline, as METF proposed by
priorities. RPJMN 2015-2019 is the third RPJMN under Ministries/Institutions is the plan that projects to one
Presidential Regulation No 2/2015. RPJMN documents subsequent year.
are accessible to the public on website • Performance Based Budgeting (PBB). PBB approach
http://bpkp.go.id/sesma/konten/2254/Buku-I-II-dan-III- takes into account funding and funding output as well
RPJMN-2015-2019.bpkp. as expected outcome, including efficiency in
achieving outcome and output. PBB refers to
The scope of central government planning includes the performance indicators, cost standard, and
following: performance evaluation. The purpose of PBB is:
• National Long-Term Development Plan • To emphasize on performance in the process of
• National Medium-Term Development Plan achieving output and outcome using budget
• Strategic Plan of Ministry/Institution (Renstra of K/L) appropriation (input) and
• Working Plan of the Government pursuant to • To develop budget based on certain objectives
Presidential Regulation targeted in one fiscal year according to
• Working Plan of the Ministry /Institution pursuant to Ministries/Institutions’ strategic plan and/or
the Regulation of Head of K/L responsibilities.
88

Process of State Budgeting to State Budget Figure 25 APBN cycle

(APBN) Audit
There are number of parties involved in the formulation
of APBN, namely Central Government, Indonesia House
of Representatives (DPR), and (recommendations from)
Local Government. DPR approves APBN proposed by
Central Government. The annual APBN cycle is as
follows:

1. First phase: APBN planning and budgeting process.

In this phase, the government, BPS, and Indonesia
Central Bank prepare macro-economic base
assumptions that will be used as reference in
formulating budget plan (fiscal capacity) of Central
Government. Two key elements in this phase are:
activity planning and budgeting.
2. Second phase: APBN consultation. Plan of activities
proposed by Ministries/ Institutions based on
development priority directives from the President is
discussed in trilateral meeting. Attending the
meeting are Ministries/Institutions as Chief
Operating Officer (COO), Minister of Finance as
Chief Financial Officer (CFO), and Minister of
National Development Planning (PPN)/ Bappenas.
The output of this consultation is APBN Bill and
Financial Note – submitted to DPR for further Source: APBN and LKPP, can be accessed via website of the
consultation. APBN Financial Note presented before Ministry of Finance
the DPR as well as APBN and APBN-P are accessible
on website https://www.kemenkeu.go.id/uuapbn . 7.1.3 Outlook of Extractive Industry
3. Third phase: consultation between Central
Government and DPR, taking into consideration The public can access outlook on extractive industry from
recommendations from Regional Representative various sources published by relevant government
Council (DPD). Once Central Government and DPR agencies. The following are some documents that can be
reach an agreement, DPR passes APBN Bill and used as a public reference of targets and strategies along
ratifies the APBN. with the assumptions and policy directions used to
4. Ministries/Institutions and State Treasury execute achieve these goals, such as production estimates and
APBN, referring to Budget Execution Document targeted supporting infrastructure development in the 5
(DIPA). year planning period.
5. Concurrent with the execution of APBN,
Ministries/Institutions and State Treasury develops
Strategic Plan (Renstra) of Ministry of Energy
report and documentation as basis of LKPP, which
consists of Budget Realization Report (LRA), Balance and Mineral Resources for the period of 2015
Sheet, Cash Flow Report (LAK), and Notes to – 2019
Financial Statements (CALK). Financial statements Renstra of MoEMR for the period of 2015 – 2019 has
are made based on Government Accounting purposes:
Standards (SAP).
6. BPK audits LKPP submitted by Ministries/ Institutions 1. To guarantee domestic supply of energy and raw
and State Treasury. After audit process is materials;
completed, the President, at the latest 6 months 2. To optimize state revenue generated from the
after the end of a fiscal year, presents APBN Energy and Mineral Resources sector;
accountability report to DPR. This report will be 3. To realize more targeted energy subsidies and
discussed and ratified by DPR. Audit reports on competitive pricing;
LKPP are accessible on website 4. To increase the investment in the Energy and
http://www.bpk.go.id/lkpp. Mineral Resources sector; and
5. To realize professional management and human
resources as well as increase the capacity of science
and technology and service of geology sector.

Public can access the detail of Renstra in

https://www.esdm.go.id/assets/media/content/Renstra_K
ESDM.pdf
Renstra of DG of Oil and Gas and DG of Mineral and
Coal can be accessed in the following websites:
http://www.migas.esdm.go.id/public/images/uploads/po
sts/renstra-migas-2015-2019.pdf
and
https://www.minerba.esdm.go.id/library/publish/Renstra
%20DJMB%202015-2019.pdf.
 Contextual Report 2016 89

Indonesia Energy Outlook by National Energy The audit standards were designed with special needs or
Council (DEN) interests that are different from those required by an
independent auditor. In some cases, they may even be
One of DEN’s responsibilities is to study Indonesia’s
more extensive than international standards, though in
energy condition for the period of 2013-2050. DEN
other cases the standards may not be as required by
observes Indonesia’s energy demand compared to
international standards. The BPK audit report can be
energy supply from national production or import. This
accessed at http://www.bpk.go.id/ihps.
study will be a source of reference for the government
and other parties to forecast Indonesia’s energy
condition and can be the basis of policy formulation as 7.2 Transfer and Payment to Local Government
well as Indonesia’s energy development. This outlook can State revenues from taxes and natural resources are shared
be accessed in with local government as balance fund, as stipulated by Law
http://www.den.go.id/index.php/publikasi/index/Energy No.33/2004 and PP No. 55/2005 concerning fiscal balance
Outlook. between central and local government.

7.1.4 Audit Process in the Extractive Industry The fund consists of revenue sharing fund (DBH), general
Sector allocation fund and specific allocation fund. Based on its
sources, DBH is categorized into DBH-taxes and DBH-SDA
Oil and Gas Sector (natural resources: forestry, general mining, fishery, oil and gas
SKK Migas and government auditors (BPKP, BPK, and DG and geothermal). DBH’s source of funding is APBN and its
of Taxes) conduct annual audit of KKSs that already in distribution to local government follows percentage stipulated
production stage. The scope of the audit includes oil and by Law No. 33/2004.
gas lifting and cost recovery aspects, including
compliance with accounting policies and other policies in The following section discusses fund allocation of non-tax
accordance with contracts, compliance with laws and revenue from oil & gas and mineral & coal sector.
regulations related to cost recovery and compliance with
regulations related to upstream oil and gas operations. Principle of DBH
The allocation of DBH SDA is based on origin principle
Mineral and Coal Sector (derivative) and realization principle. Both principles must be
Substantively the management and supervision of state satisfied in order for the local government to receive revenue
finances from mineral and coal mining activities mainly sharing generated by extractive industry. Derivative principle
related to the management and supervision of Non-Tax means there must be oil and gas production activities carried
State Revenue (PNPB) of this sector. Audit on the out in that province or Regency/City, or within the region’s
management of state finances can be done by the BPK sea territory (12 kilometers from coastline 27 ). Producing
based on Law No. 15/2006 concerning BPK as well as by province or Regency/ City is entitled to a bigger share of the
the BPKP based on Government Regulation No. 60/2008 revenue. The other principle, realization principle, means that
concerning Government Internal Control System and the revenues are recognized and recorded in State General
Presidential Regulation No.192 / 2014 concerning BPKP. Cash Account.

Audit standards applied by BPK, BPKP and SKK Migas Calculation and Determination of DBH
are different with the international audit standards.
However, it cannot be said that the audit standards According to the PMK No. 50 / PMK.07 / 2017, DBH is
applied by BPK, BPKP and SKK Migas are in no way calculated and determined 4 times in one budget fiscal year.
compatible with international audit standards.

Figure 26 DBH calculation and determination cycle

Source: Directorate General of Fiscal Balance, Ministry of Finance in FGD of EITI 2018 in Batam

27 The 4 km boundary from the coastline is part of the regency/city, and the 4
12 km boundary from the coastline is part of the province so that the
province act as the producer.
 90

According to the PMK No. 50 / PMK.07 / 2017, DBH is Oil and gas DBH scheme follows the scheme stipulated
calculated and determined 4 times in one budget fiscal year. by Law No. 33/2004 and PP No. 55/2005. From oil and
gas PNBP, 15% of oil revenue and 30% of gas revenue
DBH for each region is allocated by planned state revenue in are transferred to local government as oil and gas DBH.
the APBN Law based on certain percentages according to the The PNBP shared to local government is only PNBP from
provisions of the laws and regulations, and stipulated by a blocks operating within 12 miles from the coastline, while
Presidential Regulation concerning the detail of the APBN. PNBP generated by operation located more than 12
Change in DBH allocation in the current year is carried out if miles from the coastline is entirely allocated to central
there is a change in the target of state revenue in the current government. Shared PNBP is further divided to
year APBN-P Law, and stipulated through the Presidential producing regions – province or regency/city– as
Regulation concerning the detail of the APBN-P. illustrated by Figure 27.

The last change in the DBH allocation in the current year is a Oil and Gas DBH for Special Autonomy Region
change in the DBH allocation in accordance with the Pursuant to Special Autonomy Law, there are three
realization of state revenue for 9 months and the prognosis of provinces granted with status as Special Autonomy
state revenue for 3 months. The change in allocation is Region, namely Aceh, Papua and Papua Barat 28 . These
determined through the Minister of Finance Regulation (PMK) provinces are entitled to higher percentage of oil and gas
regarding the prognosis for the realization of DBH in the DBH compared to other regions29.
current year. Realization of state revenue that will be
distributed in the relevant year will be known after LKPP of the The distribution of oil and gas revenue derived from
relevant year has been audited by the BPK. The realization will those special provinces is 30% for central government
become the basis for the Minister of Finance to calculate the and 70% for local government in the form of Oil and Gas
realization of DBH in the year concerned. The amount of DBH DBH. Hence, provinces under special autonomy receive
realization will be compared with the distribution of DBH additional of 55% from oil revenue and the remaining
carried out in the year concerned, the difference will be the 15% is distributed according to scheme in above figure.
overpayment (LB) or underpayment (KB) of DBH allocation. As for gas revenue, provinces under special autonomy
The KB and LB of DBH allocation will be stipulated through receive additional of 40% and the remaining 30%
PMK. distributed in according to scheme in Figure 27. In
7.2.1 DBH Scheme for the Extractive Industry summary, the distribution of oil and gas DBH portion for
Special Autonomy Region is shown in Table 53.
Oil and Gas DBH Scheme
The scheme of DBH calculation for oil and gas mining
sector is as follows:

Figure 27 Scheme of DBH-SDA of oil and gas

*Additional DBH-SDA of oil and gas can be used

according to regional needs and priorities

Source: PP No. 55/2005, UU No.18/2016

28 Currently Oil and Gas SDA is only available in Papua Barat in accordance
with the information from the Head of Sub Directorate of Fiscal Balance in
the EITI Journalist Workshop. Bogor, September 7, 2015.
29 Presentation of Head of Sub Directorate of Fiscal Balance. “Kebijakan DBH
SDA”. EITI Journalist Workshop. Bogor, 7 September 2015.
 Contextual Report 2016 91

Table 53 Scheme of DBH for special autonomy region

% for region Additional Province as producing region Regency/City as producing region

under special share for special Other
Commodity Regency/
Producing Regency/
autonomy autonomy Province Province
City in the Regency/City City in the
arrangement province Province
Province
Oil 70% 55% 5% 10% 3% 6% 6%
Gas 70% 40% 10% 20% 6% 12% 12%
Source: DG of Fiscal Balance of the Ministry of Finance

Specific allocation (earmarked) for certain Chart 29 Realization of migas and minerba DBH in 2014-2016 (in
programs billion IDR)
Specific allocation (earmarked) of oil and gas DBH for
40,997
certain programs in non-special autonomy region

There is no specific DBH allocation. According to the Law

No. 18/2016, DBH-SDA of oil and gas including an
additional DBH of 0.5% can be used according to
regional needs and priorities.
18,229
Specific allocation (earmarked) of oil and gas DBH for 14,966 12,578
13,354
certain programs in special autonomy region 9,082
Article 36 of Law No. 21/2001 required Papua and Papua
Barat Provinces to allocate oil and gas DBH minimum of
30% for education and minimum of 15% for health and
nutrition improvement 2014 2015 2016

Meanwhile, Aceh Province is required to allocate Source: Data of EITI for the period of 2016
minimum of 30% oil and gas DBH for education.

Notes: Including special autonomy regions and

Mineral and Coal DBH Scheme earmarked of 0,5% for oil and gas DBH
Local government share from royalty and landrent is 80%.
Table 54 presents the share for producing regions and Table 55 is a list of the 10 largest DBH receiving areas for
non-producing regions. oil, gas, mineral and coal sectors.

Table 54 Scheme of DBH-SDA of general mining

% Share (%)
Type of DBH of General Mining For Local Producing Other Regency/City in the
Government Province
Regency/City Province
Landrent from Producing 80 16 64 -
Regency/City
Landrent from Producing Province 80 80 - -
Royalty from Producing 80 16 32 32
Regency/City
Royalty from Producing Province 80 26 - 54
Source: DG of Fiscal Balance of the Ministry of Finance

DBH disbursement process is discussed in 2016 EITI The recipient of the largest oil DBH is Riau Province with
Reconciliation Report. DBH amounting to Rp1 trillion. Four regencies in Riau
Province included in top 10 recipients of oil DBH, namely
7.2.2 DBH Realization in 2016 Regencies of Bengkalis, Siak, Rokan Hilir and Kampar.
Top 10 recipients of gas DBH are dominated by
Chart 29 shows the realization of DBH of migas and Kalimantan Timur Province and its regencies/cities,
minerba throughout 2014-2016. The realization of DBH namely: Regencies of Kutai Kertanegara, Penajam Paser,
of oil and gas in 2014-2016 has experienced a significant Cities of Bontang and Samarinda. Seven areas in
decrease due to the decline in oil price in 2015-2016 to Kalimantan Timur are included in the 10 largest recipients
the range of US $ 40 / barrel compared to the oil price in of mineral and coal DBH.
2014 which was around US $ 100 / barrel.
92

Table 55 Ten (10) largest recipients of migas and minerba DBH

Migas Minerba
No
Region Total DBH Region Royalty Landrent Total

1 Kab. Musi Banyuasin 528.707 Prov. Kalimantan Timur 978.457 9.610 988.067

2 Prov. Riau 496.534 Prov. Kalimantan Timur 796.149 7.455 803.604

3 Kab. Bojonegoro 465.166 Kab. Musi Banyuasin 753.882 13.205 767.087

4 Kab. Bengkalis 441.070 Papua Barat 511.620 3.412 515.032

5 Prov. Kalimantan Timur 370.474 Prov. Sumatera Selatan 500.341 2.705 503.046

6 Kab. Kutai Kertanegara 328.600 Prov. Kepulauan Riau 447.580 1.109 448.688

7 Prov. Sumatera Selatan 316.931 Prov. Aceh 412.281 4.098 416.379

8 Prov. Jawa Timur 301.013 Kab. Penajam Paser Utara 366.517 8.857 375.374

9 Kab. Rokan Hilir 292.771 Kota Bontang 327.314 1.389 328.703

10 Kab. Siak 256.133 Kota Samarinda 293.901 2.445 296.346

Source: Data of EITI for the period of 2016

7.3 Payment from Oil and Gas Company and Mineral Table 56 Rate of PDRD
and Coal Company to Local Government
Type of PDRD Rate
7.3.1 Based on Local Regulation (Perda)
Motor Vehicle Private PKB rate for the first vehicle
The Local Government in its authority may impose levies Tax (PKB) ownership amounted to 1% with
on oil and gas companies and mineral and coal maximum of 2%, second ownership
companies. The provision for this arrangement is Law No.
and so on are progressive,
28/2009 concerning Local Tax and Retribution (PDRD).
Law No. 28/2009 replacing Law No. 18/1997 which has amounted to 2% and maximum of
been amended and supplemented by Law no. 34/2000. 10%.
The policy regarding PDRD is regulated by the Local Public and Social PKB rate amounted
Government through Local Regulation (Perda). to minimal 0,5% and maximum 1%.
Heavy and Large Equipment PKB
Law No. 28/2009 regulates the following: (1) the rate amounted to 0,1% and
existence of limitation on types of local taxes and / or maximum 0,2%
retributions that may be collected by local government
(Close List); (2) the granting of greater authority to local Tax on Change BBNKB rate for the first handover
government in the field of taxation in the form of of Motor Vehicle amounted to 20%, second handover
maximum rate increase; (3) the existence of a supervisory
Ownership and so on amounted to 1%.
system on the collection of PDRD which was originally
has a nature of repressive and cancellation became (BBNKB) Heavy and Large Equipment BBNKB
preventive and corrective, that is, the evaluation of Local rate for the first handover amounted
Regulation draft of PDRD conducted by the Government to 0,75%, second handover and so
(Minister of Home Affairs and Minister of Finance) before on amounted to 0,075%
the regulation is enacted; and (4) the existence of
sanctions for the Local Government that stipulates the Motor Vehicle Private PBBKB rate amounted to a
local regulation without performing the evaluation Fuel Tax maximum 10%.
procedure, the sanctions are in the form of the delay or (PBBKB) Public and Social PBBKB rate
withholding of General Allocation Fund and / or Revenue amounted to minimal 50% of Private
Sharing Fund or Restitution Fund.30 PBBKB rate
Payment of PDRD to Local Government from mining Surface Water Maximum 10%
companies are generally in the form of Motor Vehicle Tax
Fuel Tax (PBBKB), Motor Vehicle Tax (PKB) and Tax on
Change of Motor Vehicle Ownership (BBNKB), Building Source : Law No. 28/2009 concerning PDRD
Permit (IMB) Retribution, Surface Water Tax and Hinder
Ordonnantie (HO).
Table 57 is the amount of PDRD reported by migas and
minerba companies in the 2016 EITI reconciliation form.

30 National Law Guidance Agency of the Ministry of Law and Human Right of
Republic of Indonesia. 2013. “Analisis dan Evaluasi tentang Pajak dan
Retribusi Daerah”; Kadar Pamuji. “Kebijakan Pengelolaan Pajak Daerah
dalam Kerangka Penyelenggaraan Otonomi Daerah”. Jurnal Dinamika
Hukum Vol.14 No.3. September 2014
 Contextual Report 2016 93

Table 57 The amount of PDRD reported by reporting companies for the period of 2016

Reported in IDR Reported in USD Total

Type of Company In million IDR

In million IDR USD (US$ 1= In million IDR
Rp13,436)

Migas 3.464 - - 3.464

Minerba 845.281 12.666.209 170.183 1.015.464

TOTAL 848.745 12.666.209 170.183 1.018.928

Source: Data of EITI for the period of 2016

7.3.2 Commitment between Company and Local While at the level of Local Government, this initiative
Government (Pemda) already exists in the Regency of Bojonegoro and the
Regency of Musi Banyuasin 35 . Both regencies are rich in
In addition to the PDRD, the company may pay certain oil and gas potential, Cepu Block operates in Bojonegoro
payment directly to Pemda based on the commitment of and Ramba / Rimau Block operates in Musi Banyuasin.
the mineral and coal company's management with the
local government. This payment is a form of participation
REVISION DRAFT OF THE OIL AND GAS LAW
of mineral and coal companies in sustainable
- CHAPTER VIIA PETROLEUM FUND, Article
development and contribution of mineral and coal
37A: "(1) The Management Unit shall
companies in local development. The amount of direct
undertake and manage the Petroleum Fund in
payment to local government based on commitment /
a transparent and accountable manner. (2) The
agreement of both parties reported by reporting
Petroleum Fund as referred to in paragraph (1)
company can be seen in Appendix 2.30 of 2016 EITI
is intended for activities related to the
Reconciliation Report.
replacement of Oil and Gas reserves,
renewable energy development, and for the
7.4 Current Issue of Extractive Revenue Management benefit of future generations. (3) The
Petroleum Fund as referred to in paragraph (1)
7.4.1 Petroleum Fund
shall originate from a certain amount of total
Petroleum Fund is the Sovereign Wealth Fund which is commercial production which is set aside
set aside. The fund is derived from oil and gas activity exclusively outside the Central Government’s
revenue and the utilization of the fund is regulated by and contractor’s shares.”
Government Regulation31. Various countries that rich in oil
and gas resources have practiced this petroleum fund The Regency of Bojonegoro has already initiated to
collection. The allocation and mechanism for the establish the Petroleum Fund first. Meanwhile, the
collection of the petroleum fund vary across countries, for Regency of Musi Banyuasin is still undertaking a study.
example Canada which established the Alberta Fund
beginning with setting aside CAD1.5 million, then The draft of Local Regulation (Raperda) of the
collecting 15% (originally 30%) of royalty revenue and Bojonegoro Petroleum Fund has been prepared and has
Norway which established the Government Pension been consulted to the related stakeholders, such as the
Fund-Global which is part of funding derived from all Ministry of Home Affairs and Bappenas. The funding
taxes on oil and gas activities and dividends from Statoil source is planned to be derived from 40% of revenue of
(Norwegian Oil and Gas BUMN)32. oil and gas DBH and mining sector DBH of PBB as well as
all Participating Interest received by the region. Revenue
The utilization of petroleum funds also varies greatly from the placement of the petroleum fund portfolio can
depending on the specific needs and objectives of only be used to improve human resources in education,
government development and may change according to health and socio-culture. However, this plan is suspended
the latest circumstances 33 . In general, petroleum funds while awaiting clarity on the amount of profit from the
are used to stabilize fluctuating commodity prices, saving equity participation of the Cepu Block which is still in the
for future generations when natural resources are BPK audit process. The Raperda of Petroleum Fund is
depleted, and financing strategic development goals34 planned to be binding for 50 years, but this plan has not
been included in the Long Term Development Plan.
Initiative of Petroleum Fund in Indonesia
Indonesia does not yet have petroleum fund both at the
national and regional level, but several initiatives have
emerged. At the central level, the initiative is still in the
early stage, for example derived from the revision draft of
the Oil and Gas Law prepared by DPR.

31 Migasreview.com. 2015. ”Mengenal petreleoum fund”. 35 Sovereign wealth fund which is set aside in Musi Banyuasin Regency is
http://www.migasreview.com/post/1425436202/mengenal-petroleum planned to not specifically for oil and gas but also other natural resources
fund.html accessed on 1 November 2017 including rubber.
32 Poelzer, Greg. 2015. “Global Lesson from Norway Energy Based Economy.
http://www.macdonaldlaurier.ca/files/pdf/MLICommentaryPoelzer02-15-V7
WebReady.pdf accessed on 1 November 2017
33 IMF. 2013. “Soveriegn Wealth Fund: Aspect of Governance Structure and
Investment management”.
https://www.imf.org/external/pubs/ft/wp/2013/wp13231.pdf accessed on
November 2017
34 Op.cit
94

Success Factors
The establishment of Petroleum Fund requires careful
consideration as implementation may be
counterproductive e.g raising inflation, misuse of funds
and unsuccessful investments caused by unwise
investment decisions. Some of the factors below
according to the UNDP and IMF study are essential to
the success of the Petroleum Fund:

• Institution and Manager of Petroleum Fund

Regardless of whether the institution of the
Petroleum Fund is established through an existing
institution or with the establishment of an
independent institution, the operations of the
petroleum fund must be independent and having its
own account. In addition, the role of senior
government officials should be minimal. This
independence is to ensure the Petroleum Fund to
operate focus on its founding objectives and reduce
political influence. Government Pension Fund-Global
from Norway is operated by the Central Bank based
on the mandate granted by the Ministry of Finance.
Bojonegoro Petroleum Fund is planned to be
managed by the Regional Public Service Agency
(BLUD) and has its own account.
• Reporting and Transparency
Reporting and Transparency are important to
increase public trust, improve discipline from
Petroleum Fund operator, and reduce the risk of
corruption and mismanagement. The Norwegian
Central Bank as manager of Petroleum Fund issues
quarterly and annual reports, including performance
report of investment returns, all reports are
published. The Raperda of Petroleum Fund has
mandated the disclosure of public information. In
addition, the Trustee of Bojonegoro Petroleum Fund
will deliver reports on the results of supervision to the
public through DPRD.
• Investment Strategy
The investment strategy is highly dependent on the
type of petroleum fund and mandate given.
Generally in the early stage of formation, petroleum
fund is usually invested in liquid and low risk
investment products. Norway's Government Pension
Fund-Global (GPFG) focuses on diversified
investment and is invested overseas. Currently, the
GPFG's investment policy is 60% equity (GPFG owns
shares in 7000 companies with maximum allowable
ownership of 5%) and 40% fixed income, while the
Bojonegoro Petroleum Fund will be invested in
deposit and Bank Indonesia Certificate (SBI).

There are many other factors that need to be considered

by the Government in the establishment of the
Petroleum Fund apart from the above three factors.
 Contextual Report 2016 95

08
RECOMMENDATION

The Implementation Team expects the EITI Report to include relationship between the beneficial owner and the corporation
recommendation to improve transparency and governance and the number of share ownership. However, in the process,
level in the extractive industry. The following recommendation the person in charge of the reporting company is still having
is jointly agreed in accordance with finding during the difficulties in reporting the beneficial owner. Here are some
preparation of the 2016 EITI Contextual Report. reasons we received during the reporting process:

1. Beneficial Ownership. • The process of obtaining information on beneficial owners

requires special expertise in determining the level of
Background ownership of the company
Along with the enactment of Presidential Regulation • Authorities in the company do not have access to parent
No.13/2018 concerning the Principles of Recognizing Benefit company documents
Owners of Corporations in the Context of Prevention and • In several companies, no shareholder has 25% or more of
Eradication of Money Laundering and Terrorism Crimes in shares and the authorities cannot determine the beneficial
which Corporation is required to recognize Beneficial Owner. owner by using a qualitative definition
The 2016 EITI reporting form includes the beneficial owner's
declaration form. The information requested is in accordance Therefore, the reporting company mostly can only report
with Perpres No. 13/2018, which includes full name, date and direct shareholder of the company and most of them are
place of birth, nationality, identity number, residential address, corporations instead of individual owner.
NPWP, address of country of origin,
 96

Recommendation
• The Directorate General of Oil and Gas and the
Directorate General of Mineral and Coal need to formulate
technical guidelines on how to implement Presidential
Regulation No. 13/2018 for companies that have obtained
licenses.
• The time provided to identify the beneficial owner in the
EITI reporting period is too short. The beneficial owner
declaration form should be sent long before the EITI
reporting reconciliation period.

2. Contract Disclosure

Background
Requirement 2.4 of 2016 EITI Standard demands for the
disclosure of the contract content regarding exploration and
exploitation in the extractive industry. In 2011, Central
Information Commission (KIP) through the decree No.
197/VI/KIP-PS-M-A/2011 decided that a copy of the minerba
sector contract requested by plaintiff is an open information as
a whole. Based on the information received from PPID of
ESDM (via http://eiti.ekon.go.id/rapat-koordinasi-keterbukaan-
informasi-kontrak-pertambangan/ and interview), public can
submit a request letter for disclosing a copy of contract of the
minerba upstream sector contractor. This is done to comply
with the decision of the KIP above.

The EITI Secretariat has also made correspondence and

follow-up to PPID of ESDM to at least disclose contracts that
have been decided to be an open information according to
KIP decision. However, these contracts still cannot be
disclosed because PPID still have to coordinate with other
related parties. Furthermore, according to DG of Minerba,
these contacts cannot be disclosed yet due to the civil aspect
in the contract.

Recommendation
EITI Implementation Team to request PPID of ESDM to
disclose documents of contracts and licenses in accordance
with the KIP’s decree No. 197/VI/KIP-PS-M-A/2011 and report
PPID of ESDM to the Minister of Energy and Mineral
Resources as a member of Steering Team of EITI Indonesia as
well as the supervisor of PPID of MoEMR.

3. Further Studies Regarding Strategic Issues

Related to the Performance of the Extractive
Industry Background
Background
The purpose of the EITI Report is to describe the
implementation of transparency in the extractive industry. This
report is not intended to provide study in detail regarding
strategic issues related to the performance of the extractive
industry. Hence, this report has limitation on providing in-
depth description and analysis regarding strategic issues, such
as issues related to the indicators of outcome and impact.

Recommendation
Since the mandate of the EITI report is to describe the
implementation of information transparency in the extractive
industry, there is a limitation to provide deep study regarding
strategic issues in the extractive industry. Hence, it is
recommended to expand the scope of EITI report and
conduct separate study to explain issues that are considered
as strategic issues related to the performance of the extractive
industry. For example, regarding the performance of local
government in utilizing revenue generated from the extractive
industry to reduce the gap of revenue distribution and
poverty, and special study regarding the completeness of
production report compared to the domestic use and export
in the minerba mining sector.
 Contextual Report 2016 97

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mcmoran-indonesia/freeport-at-loggerheads-with-indonesia-over-divestment-letter-idUSKCN1C42HJ

SKK Migas. Laporan Tahunan SKK Migas. Diakses dari: http://skkmigas.go.id/publikasi/laporan-tahunan

Tribunnews.com. RUU Minerba Telah Disetujui. Diakses dari http://www.tribunnews.com/nasional/2018/04/10/ruu-minerba-telah-

disetujui

USGS. 2017. Mineral Commodity Summaries 2017. Diakses dari: https://minerals.usgs.gov/minerals/pubs/mcs/2017/mcs2017.pdf

Warta Minerba. 2013. Lingkup Wilayah Pertambangan. Diakses dari: https://www.minerba.esdm.go.id/library/content/file/28935-

Publikasi/008f75e938deed453b91c2a3caa236a42013-11-08-20-03-45.pdf

Zulkarnain, Iskandar. Pertambangan Ilegal di Indonesia dan Permasalahannya. Diakses dari:

http://iesr.or.id/files/Pertambangan%20Ilegal%20di%20Indonesia.pdf
100

LIST OF TERMS
Barrel is measurement unit for liquid volume that generally Firm commitment is contractor work and budget plan
use in petroleum industry; 1 barrel is averagely 159 liter. pursuant to PSC in first 3 year exploration period.

Barrel Oil per Day - BOPD is total oil per day produced by Free carry or carried interest is the profit proportion received
well, eld, or an oil company. by the partner regardless of whether the partner contributes
to the funding or not.
Beneficial Ownership is the owner who actually receives
benefits from the ownership of the assets and not the owner Lifting is volume of oil/gas sold at delivery point (custody
of the assets that are registered by law. transfer point).

Business Entity (BE) is every legal entity that operates and is LNG (Liquefied Natural Gas) is natural gas (predominantly
incorporated based on the Indonesian law and domiciled methane, CH4 ) that has been liquefied in low temperature
within the territory of the unitary state of the Republic of and maintain liquid for ease of storage or transport.
Indonesia.
Mineral Resource is a concentration or occurrence of material
Cadastre system is a spatial information system of property of intrinsic economic interest in or on the earth’s crust in such
ownership or a comprehensive land that is usually managed form, quality and quantity that there are reasonable prospects
by the government. Regarding EITI Standard 2016 for eventual economic extraction. Mineral resource with
requirements 2.3, implementing countries are required to certain geological condence could change to reserves after
publish cadastral information systems. Required information is: mining feasibility study and meet mining criteria.
i) the owner of the license, ii) coordinates, iii) the date of
application, the date of issuance of the license, and the Natural Gas (Gas) is a product of the natural process in the
duration of the license; iv) commodities produced for licenses form of hydrocarbon in a pressure condition and at an
already in production. atmosphere temperature that in the form of gas, which is
obtained from an oil and gas mining process.
Condensate is 1) gas hydrocarbon in reservoir pressure and
temperature but 2) Liquid at normal pressure and Open Area is a certain region within the Indonesian mining
termperature 3) a liquid product consisting of mix of light jurisdiction that has not yet allocated as working area.
hydrocarbon produced from gas recycle process with
expansion and cooling. Permanent Establishment (BUT) is a business entity
established and incorporated outside of Indonesia which is
Conservation Forest is forest area with typical characteristics, conducting activities in the territory of Indonesia.
with main function to conserve bio-diversity and ecosystem
thereof. Planned on Development (POD) is field development in
working area that must be approved by the Minister of EMR
Consession is any grant of right, permit for land from based on SKK Migas’s consideration and regional government
government to company, person or other entities. consultation.
Crude Oil (Oil) is unrefined petroleum product composed of
hydrocarbon deposits and other organic minerals that Probable Reserves are those unproved reserves which analysis
maintain liquid after processing. of geological and engineering data suggests are more likely
than not to be recoverable.
Data of EITI for the period of 2016 is data collected by the
Independent Administrator of the reporting enterprise for the Production Forest is forest area with main function to yield
reconciliation process in accordance with the scope set by the forest produces.
Implementation Team.
Protected Forest is forest area with main function to protect
Dwiwarna Share is a special share (a golden share) that has life buffer system to arrange water management, prevent
privileges comparing to other ordinary shares. Privilege rights flood, erosion, prevent brine water intrusion, and maintain
primary in directors appointment. In Indonesia capital market, land fertility.
this share owned by Government for 1 (one) share.
Proved Reserves are those quantities of oil which, by analysis
Earmarking in public financial management is allocation of of geological and engineering data, can be estimated with
state revenue for public program or other public services. reasonable certainty to be commercially recoverable, from a
given date forward, from known reservoirs and under current
Exploitation is a series of activities aimed at producing oil and economic conditions, operating methods, and government
gas from the working area stipulated, consisting of drilling and regulations.
completion of wells, the building of transport, storage and
processing facilities to separate and refine oil and gas in the Public Information is information that is produced, stored,
eld as well as other activities supporting the exploitation. managed, sent and/or received by a Public Agency relating to
the organizer and the organizing of the state and/or the
Exploration is activities aimed at obtaining information on organizer and the organizing of other Public Agencies
geological condition to find and obtain the estimated reserves pursuant to this law and other information pertaining to the
of petroleum and natural gas in the working area stipulated. interest of the public.

Extractive Industry is any processes that involve the extraction Renewable Energy is energy from a source that is not
of raw materials from the earth that includes minerals, coal, oil depleted when used.
and gas.
 Contextual Report 2016 101

Reserves are quantities of oil/minerals which are anticipated to

be commercially recovered from known accumulations from a
given date forward.

Scoping study of EY is 2012-2013 EITI scoping study prepared

by Ernst & Young as a preliminary study to determine scope
for EITI 2012 -2013 report.

State Reserve Area - Wilayah Pertambangan Negara (WPN)

shall be part of a mining area that is reserved for national
strategic purposes.

Working Area is a certain region within the Indonesian mining

jurisdiction used for the exploration and exploitation.
102

APPENDIX
APPENDIX 1: Matrix of Contextual Report and 2016 EITI Standard

Chapter
Title of Chapter/Sub-chapter 2016 EITI Standard
Index
1 INTRODUCTION
2 THE GOVERNANCE OF EXTRACTIVE INDUSTRY
2.1 The Overview of Upstream and Downstream Activities
2.1.1 Oil and Gas Sector
2.1.2 Mineral and Coal Sector
2.2 The Mandate of the 1945 Constitution of the Republic of Indonesia 2.1
2.3 Legal Hierarchy of Extractive Industry 2.1
2.3.1 Legal Framework of Oil and Gas (Migas) Mining 2.1

2.3.2 Legal Framework in Mineral and Coal (Minerba) Mining 2.1

2.3.3 Other Laws and Regulations Related to Extractive Industry 2.1, 2.3, 2.4, 2.5
2.4 Fiscal Policy on Oil & Gas and Mineral & Coal
2.4.1 Fiscal Policy on Oil and Gas Sector 2.1 . 5.1
2.4.2 Fiscal Policy on Mineral and Coal Sector 2.1 . 5.1
2.5 Duties and Functions of Relevant Government Agencies in the Extractive Industry 2.1
2.6 Improving Governance Related to Extractive Industry
2.6.1 Delegation of Indonesia’s Integrated One Stop Service (PTSP) 2.1
2.6.2 Re-Organizing IUP through Clean and Clear Certificate 2.1
2.6.3 Transparency of Beneficial Ownership - Implementation of Presidential 2.5
Regulation No. 13/2018
2.6.4 Regulation regarding Gross Split Scheme 2.1
2.6.5 Current Status of the Revision of Oil & Gas Law and Mining & Coal Law 2.1
2.6.6 The Debate and Progress of Regulation on Increasing Mineral Value Added 2.1
2.6.7 Implementation of Share Divestment Regulations 2.1
2.6.8 Contract Shifting to IUP 2.1
2.6.9 Draft of 6th Amendment of PP No. 23/2010 and Draft of Government 2.1
Regulation concerning Coal Taxation
2.6.10 Oil Fuel 2.1
2.6.11 Imposition of PPN on LNG Products 2.1
3 LICENSE AND CONTRACT
3.1 Oil and Gas Mining Sector
3.1.1 Applicable Contract in Oil and Gas Sector 2.2
3.1.2 Establishment of Working Area (WK) 2.2
3.1.3 Tender Procedure of Working Area 2.2
3.1.4 WK Offering in 2016 2.2
3.1.5 The Rule of One Working Area for One Company 2.2
3.1.6 Transfer of Participating Interest (PI) 2.2
3.1.7 WK with Contract That Expires 2.2
3.2 Mineral and Coal Mining Sector
3.2.1 Applicable Licenses in Mineral and Coal Mining Sector 2.2
3.2.2 Establishment of Mining Area 2.2
3.2.3 The Establishment of Mining Area and IUP in 2016 2.2
3.2.4 The Establishment of Mining Business License Area (WIUP) 2.2
3.2.5 Tender Procedure of Mining Business License Area 2.2
3.2.6 WIUP Tender and the Issuance of IUP in 2016 2.2
3.2.7 The Rule of One IUP for One Company 2.2
4 CONTRIBUTION OF EXTRACTIVE INDUSTRY IN INDONESIA
4.1 Distribution and Potency of Extractive Industry in Indonesia
4.1.1 Oil and Gas Sector 6.3
4.1.2 Coal Mining Sector 6.3
 Contextual Report 2016 103

Chapter
Title of Chapter/Sub-chapter 2016 EITI Standard
Index
4.1.3 Mineral Mining Sector 6.3
4.2 Contribution of Oil and Gas GDP and Mining GDP in Indonesia 6.3
4.3 State Revenue form Oil and Gas Sector and Mineral and Coal Sector 4.7, 6.3
4.3.1 Oil Sector 3.2, 4.7
4.3.2 Gas Sector 3.2, 4.7
4.3.3 Coal Sector 3.2, 4.7
4.3.4 Main Minerals Production 3.2
4.4 Contribution of Oil and Gas Export and Mineral and Coal Export

4.4.1 Oil & Gas and Mineral & Coal Sector 3.3. 6.3
4.4.2 Export of Oil Sector by Main Provinces 3.3. 6.3
4.4.3 Export of Gas Sector by Main Provinces 3.3. 6.3
4.4.4 Export of Coal Sector by Main Provinces 3.3. 6.3
4.5 Significant Exploration Activities 3.1
4.6 Contribution of Extractive Industry to National Employment 6.3.
4.7 Contribution of Extractive Industry in the Region (Several Regional Examples)
5 STATE-OWNED ENTERPRISES 4.5
5.1 Relationship between BUMN and the Government
5.1.1 Authority 2.6
5.1.2 Financial 2.6
5.2 PT Pertamina (Persero) 2.6, 4.4, 6.1 , 6.2
5.3 PT Aneka Tambang Tbk 2.6, 6.2
5.4 PT. Bukit Asam Tbk 2.6, 4.4, 6.2
5.5 PT Timah Tbk 2.6, 6.2
5.6 PT Perusahaan Gas Negara Tbk 2.6, 4.4, 6.2
5.7 Establishment of Holding Companies for Oil and Gas and Mining Companies
6 ENVIRONMENTAL AND SOCIAL RESPONSIBILITIES
6.1 Social and Environmental Responsibilities Program of the Company 6.1
6.2 Oil and Gas Mining: Abandonment and Site Restoration Fund (ASR Fund) 6.1
6.3 Mineral and Coal Mining: Reclamation and Post-Mining Guarantees 6.1
6.4 People’s Mining 2.1
6.4.1 Illegal Mining (PETI)
7 MANAGEMENT OF STATE REVENUE GENERATED FROM EXTRACTIVE 5.1
INDUSTRY
7.1 State Financial Planning, Budgeting and Audit
7.1.1 Budget Planning 5.3
7.1.2 National Budgeting Approach 5.3
7.1.3 Outlook of Extractive Industry 5.3
7.1.4 Audit Process in the Extractive Industry Sector 4.9
7.2 Transfer and Payment to Local Government 5.2
7.2.1 DBH Scheme for the Extractive Industry 5.2. 5.3
7.2.2 DBH Realization in 2016 5.2
7.3 Payment from Oil and Gas Company and Mineral and Coal Company to Local
Government
7.3.1 Based on Local Regulation (Perda) 4.6. 5.2
7.3.2 Commitment between Company and Local Government (Pemda) 4.6
7.4 Current Issue of Extractive Revenue Management
7.4.1 Petroleum Fund 5.1
8 RECOMMENDATION
104

APPENDIX 2: List of Smelters That Have Been Built and Are Still in Progress

Smelter Input Smelter Product

No Commodity IUP Company Construction Regency/City Province Capacity
Company (TPY) Type Capacity (TPY)
1 Nickel PT Antam Tbk. PT Antam Tbk. Pomalaa Sulawesi 1.450.000 FeNi 90.000
Tenggara
2 Nickel PT Fajar Bhakti Lintas PT Fajar Bhakti Gebe Maluku Utara 1.065.000 NPI (10-16% Ni) 120.000
Nusantara Lintas
Nusantara
3 Nickel Bintang Delapan PT Sulawesi Morowali Sulawesi 1.600.000 NPI (10-15% Ni) 300.000
Mineral Mining Tengah
Investment
Bintang Delapan
Energi
4 Nickel PT Gebe Sentra Nikel PT Gebe Gresik Jawa Timur 641.026 NiOH (99%Ni) 10.000
Industry Nickel
5 Nickel PT Trimegah Bangun PT Megah Halmahera Maluku Utara 2.079.732 FeNi 198.158
Persada Surya Pertiwi Selatan
PT Gene Permai
Sentosa
PT Kemakmuran Pertiwi
Tambang
6 Nickel PT Surya Saga Utama PT Surya Saga Bombana Sulawesi Tahap I: FeNi Luppen Tahap I:
Utama Tenggara 700.000
57.044
Tahap II: Tahap II
2.800.000 228.176
7 Nickel Virtue Dragon Virtue Dragon Konawe Sulawesi Tahap I: FeNi Tahap I:
Tenggara
1.000.000 200.000
Tahap II: Tahap II:
2.000.000 400.000
8 Nickel PT Mulia Pacific COR Industri Morowali Sulawesi 855.556 NPI 92.400
Resources Indonesia Utara Tengah
PT Itamatra Nusantara
PT Bumi Konawe
Abadi (Konawe Utara)
9 Bauxite PT Harita Prima Abadi PT Well Harvest Ketapang Kalimantan 3.000.000 SGA 1.000.000
Mineral Mining Barat
PT Karya Utama
Tambangjaya
PT Labai Pertiwi
Tambang
PT Sandai Inti
PT Cita Mineral
Investindo
10 Bauxite PT Antam Tbk PT Indonesia - Kalimantan 1.000.000 CGA 300.000
Chemical Barat
Alumina
11 Iron Ore PT Sebuku Iron Lateritic PT Sebuku Iron Kotabaru Kalimantan 6.300.000 Sponge Iron 2.677.500
Ores (PT SILO) Lateritic Ores Selatan
(PT SILO)
12 Iron Sand PT Sumber Suryadaya PT Sumber Baja Sukabumi Jawa Barat 65.847 Cold Bricket Iron 36.367
Prima Prima
13 Manganese PT Indotama Ferro PT Indotama Purwakarta Jawa Barat 54.000 SiMn n/a
Alloy Ferro Alloy
14 Manganese PT Imasco Pasific PT Premier Pasuruan Jawa Timur 23.974 kons Mangan Oksida 16.186
Minerals Bumidaya
Industri
 Contextual Report 2016 105

Smelter Input Smelter Product

No Commodity IUP Company Construction Regency/City Province Capacity
Company (TPY) Type Capacity (TPY)
15 Copper PT Batutu Kharisma PT Batutu Maluku Barat Maluku 1.400.000 Katoda Tembaga 25.000
Permai Tembaga Raya Daya
16 Nickel PT Vale Indonesia PT Vale Sorowako Sulawesi 8.000.000 Ni Matte 80.000
Indonesia Tengah
17 Nickel PT Indoferro PT Indoferro Cilegon Banten 800.000 NPI 200.000
18 Nickel PT Century Metalindo PT Century Serang Banten 641.026 FeNi 50.000
Metalindo
19 Nickel Indonesia Guang Indonesia Morowali Sulawesi 7.500.000 NPI n/a
Ching Nikel and Guang Ching Tengah
Stainless Steel Nikel and
Stainless Steel
20 Nickel Titan Mineral Utama Titan Mineral Bantaeng Sulawesi 530.000 NPI n/a
Selatan
21 Nickel PT Bintang Timur Steel PT Bintang Serang Banten 292.000 NPI (>10% Ni) 120 ton/hari
Timur Steel
22 Iron Ore PT Delta Prima Steel PT Delta Prima Tanah Laut Kalimantan 220.000 Steel n/a
Steel Selatan
23 Iron Ore PT Meratus Jaya Iron PT Meratus Batu Licin Kalimantan 656.250 Sponge Iron, n/a
Steel Jaya Iron Steel Selatan Slab, Billet
24 Copper PT Smelting PT Smelting Gresik Jawa Timur 1.000.000 Katoda Tembaga 300.000

PT Smelting PT Amman Gresik 1.000.000 Lumpur Anoda No info

Mineral Nusat
Tenggara

Source: DG of Minerba
106

APPENDIX 3: List of Contracts (KK and PKP2B) That Have Been Amended and Shift to IUPK

PKP2B Amendment
Amendment Signing Date: 5 August 2015
PKP2B Generation I ++
1 PT Indominco Mandiri
PKP2B Generation III
1 PT Mandiri Intiperkasa 6 PT Gunungbaya Pratamacoal
2 PT Trubbindo Coal Mining 7 PT Indexim Coalindo
3 PT Antang Gunung Meratus 8 PT Jorong Barutama Greston
4 PT Bahari Cakrawala Sebuku 9 PT Kartika Selabumi Mining
5 PT Borneo Indobara

Amendment Signing Date: 23 December 2015

PKP2B Generation III
1 PD Baratama 7 PT Ekasatya Yanatama (telah diterminasi)
2 PT Astaka Dodol 8 PT Karya Bumi Baratama
3 PT Banjar Intan Mandiri 9 PT Selo Argodedali
4 PT Bara Pramulya Abadi 10 PT Selo Argokencana Sakti
5 PT Batualam Selaras 11 PT Sumber Kurnia Buana
6 PT Baturona Adimulya 12 PT Tanjung Alam Jaya

Amendment Signing Date: 12 April 2017

PKP2B Generation I +
1 PT Mulya Harapan Utama 2 PT Tanito Harum
PKP2B Generation II
1 PT Marunda Graha Mineral
PKP2B Generation III +
1 PT Mahakam Sumber Jaya
PKP2B Generation III
1 PT Asmin Bara Baronang 7 PT Bumi Laksana Perkasa
2 PT Asmin Bara Jaan 8 PT Delma Mining Corporation
3 PT Bangun Banua Persada Kalimantan 9 PT Kadya Caraka Mulia
4 PT Batubara Selaras Sapta 10 PT Pesona Khatulistiwa Nusantara
5 PT Baramutiara Prima 11 PT Suprabari Mapanindo Mineral
6 PT Bharito Ekatama

Amendment Signing Date: 14 November 2017

PKP2B Generation I
1 PT Arutmin Indonesia 3 PT Kaltim Prima Coal
2 PT Berau Coal 4 PT Kideco Jaya Agung
PKP2B Generation II
1 PT Barasentosa Lestari
PKP2B Generation III
1 PT Intitirta Primasakti 5 PT Maruwai Coal
2 PT Juloi Coal 6 PT Pari Coal
3 PT Kalteng Coal 7 PT Ratah Coal
4 PT Lahai Coal 8 PT Sumber Barito Coal
Amendment Signing Date: 17 January 2018
PKP2B Generation I
1 PT Adaro Indonesia 2 PT Kendilo Coal Indonesia
 Contextual Report 2016 107

PKP2B Generation III

1 PT Batubara Duaribu Abadi 9 PT Pendopo Energi Batubara
2 PT Firman Ketaun Perkasa 10 PT Perkasa Inakakerta
3 PT Insani Bara Perkasa 11 PT Santan Batubara
4 PT Interex Sacra Raya 12 PT Sarwa Sembada Karya Bumi
5 PT Kalimantan Energi Lestari 13 PT Singlurus Pratama
6 PT Lanna Harita Indonesia 14 PT Tambang Abadi
7 PT Mantimin Coal Mining 15 PT Teguh Sinar Abadi
8 PT Multi Tambang Jaya Utama 16 PT Wahana Baratama Mining
KK Amendment
No Company Stage Status
1 PT Vale Indonesia Tbk Production Operation PMA
2 PT Tambang Tondano Nusajaya Production Operation PMA
3 PT Meares Soputan Mining Production Operation PMA
4 PT Karimun Granite Production Operation PMA
5 PT Iriana Mutiara Idenburg Feasibility Study/Exploration PMA
6 PT Iriana Mutiara Mining Exploration PMA
7 PT Gorontalo Sejahtera Mining Construction/Production Operation PMDN
8 PT Tambang Mas Sangihe Exploration PMA
9 PT Paragon Perdana Mining Production Operation PMA
10 PT Galuh Cempaka Production Operation PMA
11 PT Gag Nikel Construction/Production Operation PMA
12 PT Sorikmas Mining Construction/Production Operation PMA
13 PT Woyla Aceh Mineral Exploration PMA
14 PT J Resources Bolaang Mongondow Production Operation PMDN
15 PT Citra Palu Mineral Production Operation PMA
16 PT Gorontalo Mineral Feasibility Study/Exploration PMA
17 PT Dairi Prima Mineral Construction/Production Operation PMA
18 PT Pasifik Masao Mineral Feasibility Study/Exploration PMA
19 PT Ensbury Kalteng Mining Production Operation PMA
20 PT Kasongan Bumi Kencana Production Operation PMA
21 PT Pelsart Tambang Kencana Feasibility Study/Exploration PMA
22 PT Indo Kencana Production Operation PMA
23 PT Natarang Mining Production Operation PMA
24 PT Kalimantan Surya Kencana Feasibility Study/Exploration PMA
25 PT Agincourt Resources Production Operation PMA
26 PT Mindoro Tiris Emas Feasibility Study/Exploration PMA
27 PT Nusa Halmahera Minerals Production Operation PMA
28 PT Weda Bay Nickel Construction/Production Operation PMA
29 PT Masmindo Dwi Area Construction/Production Operation PMA
KK that shift to IUPK
1 PT Amman Mineral Nusa Tenggara (dahulu 2 PT Freeport Indonesia
Newmont Nusa Tenggara)
KK that has not yet Signed the Amendment
1 PT Sumbawa Timur Mining 2 PT Kumamba Mining

Source: DG of Minerba
108

APPENDIX 4: Summary of Conventional Oil and Gas Working Area Offering Results in 2016

Company Participation Document

No Block Bid Document Participation Tender
Administrative Technical Financial Performance OE & Split
Purchase Document Winner
Direct Offer
1 Ampuh - - - - - - - -
2 Bukit Barat BU/BUT 1 - - - - - - -
BU/BUT 2 - - - - - - -
3 Batu Gajah BU/BUT 3 - - - - - - -
Dua BU/BUT 4 BU/BUT 4 - Incomplete - - - -
4 Ebuny BU/BUT 5 - - - - - - -
BU/BUT 6 BU/BUT 6 - Complete Do not meet Adequate Good Do not meet
the the
requirement requirement
5 Kasongan BU/BUT 7 - - - - - - -
Sampit
6 Onin BU/BUT 8 Konsorsium 1 - Complete Meet the Adequate Never been an Do not meet
BU/BUT 9 requirement operator the
requirement
BU/BUT 10
BU/BUT 11 - - - - - - -
7 West BU/BUT 12 Konsorsium 2 - Complete Meet the Adequate Never been an Meet the
Kaimana requirement operator requirement
BU/BUT 13
BU/BUT 14
Tender Reguler
1 Kasuri II BU/BUT 15 BU/BUT 15 - Complete Do not meet Very There is no Do not meet
the Adequate record yet the
requirement requirement
2 Manakara BU/BUT 16 BU/BUT 16 - Complete Meet the Very Good Do not meet
Mamuju requirement Adequate the
requirement
3 North BU/BUT 17 - - - - - - -
Arguni
4 Oti BU/BUT 18 - - - - - - -
Azipag Ltd. Azipag Ltd. Azipag Ltd.* Complete Meet the Very There is no Meet the
requirement Adequate record yet requirement
5 South CP - - - - - - - -
6 South East - - - - - - - -
Mandar
7 Suremana I - - - - - - - -

Source: DG of Migas

Notes:
(-) none
(*) The winner pulled out of the offer, KKS has not been signed because winner must use PSC Gross Split. This tender used a Cost Recovery PSC
contract draft. The tender winner pulled out & was not subject to liability in accordance with the MoEMR’s Decision Letter No. 0030.K / 13 /
DJM.E / 2018 dated January 29, 2018.
EITI INDONESIA REPORT 2016
CONTEXTUAL REPORT

EITI Indonesia Secretariat

Kementerian Koordinator Bidang Perekonomian, lt.4

Jl. Medan Merdeka Barat No.7, Jakarta 10110 - Indonesia
Telp: +62 21 3483 2642
Fax: +62 21 3483 2658
Email: [email protected]