PI 10% Share Distribution Methods of Oil & Gas Block for Province and Regency Area

Abstract

The PI 10% share distribution of the oil and gas block often creates conflicts between oil & gas producing provinces/ regencies. PERMEN No. 37/2016, the government tries to regulate the share distribution mechanism between the province and regency of the oil and gas producing areas. Nevertheless, the existence of this regulation does not necessarily satisfy the local governments. The local governments that have successfully achieved agreements for their share distribution of PI 10% include Cepu Block, ONWJ Block, and Mahakam Block. This paper will present the PI 10% share distribution method of two successful blocks in PI share distribution, namely A Block and B Block. Before the government assigned PERMEN No 37/2016, the distribution of share proportion was based on the agreement between provinces/regencies producing area, such as using the DBH system method as conducted in A Block. Meanwhile, the calculation of PI share distribution in the B Block used two methods; the PERMEN No.37/2016 method (only used two parameters; reservoir closure area and the producing reserves as well as POD fields) was applied to share proportion distribution between DKI Jakarta and West Java Provinces, and a method that the West Java Province agreed and their Regencies Governments; the weighting method.  The technique considered some parameters related to oil and gas producing activity such as block acreage, a reserve of producing field, prospect, lead, and the existing production facilities such as pipeline, well, platform, etc. The DBH method still has a potential conflict between local governments due to only considering the reservoir closure area and the reserves. The weighting method could be applied as an alternative method. In this method, the share proportion distribution of PI 10% is not limited to the regency area that has the producing/development fields. The non-producing regencies within the oil and gas block that have oil and gas potential resources (prospect and lead) or passed by oil and gas producing facilities (wells, pipelines, platforms, etc.) also have the right to obtain the share of PI 10%; the oil and gas activities have a direct impact in their areas. Hopefully, by using this alternative method, the conflict between local governments can be resolved.