Policy Brief Monitoring of Public Information Transparency for Downstream Oil and Gas Activities in Bojonegoro and Blora

Lack of Information Transparency on the Cepu Downstream Oil & Gas Block Creates Uncertain Local Oil & Gas Revenue Flows

Study results on the accessibility of 9 types of

information from 13 public bodies related to Cepu

Block’s downstream oil mining activities revealed that

63.5% of information requests were rejected with

varying responses. Most of the information was not

available despite being under the authority of the

relevant public body, and a large amount of the

information is kept by national public agencies. Local

state bodies made no attempt to secure this information

assuming that they may be confidential, as the

required information are not under their direct

authority.

Furthermore, 36.6% of responses to information

requests were silent rejections, where public bodies

did not provide with any form of reply. Only 1.3%

from all information requests were responded to. This

is inconsistent with existing standards meant to ensure

the realization of the right to information.

This high rejection rate is an indication of the low level

of transparency in Cepu Block’s oil and gas activities.

Pursuant to Law No. 22/2001, Law No. 33/2004,

Government Regulation No. 35/2004 and other

provisions, oil and gas activities should hold certain

information and documents that

concerns the interest of the public

such as the Cooperation Agreement

(CA), Lifting, Joint Operating

Agreement (JOA), Work Plan and

Budget (WP and B), Plan of

Development (POD), tax and non-

tax revenue, revenue sharing, Participating Interest

(PI), as well as national and local budgets.

In reference to the abovementioned laws, no less than

13 national, provincial and district public bodies are

involved in oil and gas mining activities in Cepu Block.

Hence, the availability of pertinent information on

Cepu Block can affect the flow of oil and gas funds;

information which the public has the right to partial or

complete accessibility to.

Lack of information transparency will impede the

implementation of development programs in various

sectors from the national to regional levels. This is

profoundly detrimental to regions which will

inexorably compromise public interests.

Cepu Block and Freedom of Information

Cepu Block is one of the oil and gas blocks concentrating on downstream exploration and exploitation with tremendous reserve potential1. Cepu Block’s operating area covers the districts of Blora (Central Java) and Bojonegoro (East Java) and is projected to contribute significantly to regional revenue needed for the development and well-being of the local people. The local government however, currently finds it difficult to predict the amount of revenue sharing and participating interest received from the exploration

of Cepu Block. This situation is due to the inaccuracy of information on production target achievement and projected world oil price. It is also attributed to substantial revisions made to the DMO Fee and Cost Recovery during production. As a consequence, a series of

development plans for 2009 were thrown into disarray.

On the other hand, the enactment of Law No. 14/2008 on Freedom of Information which will only enter into force on 10 April 2010 has brought certain challenges to the fore, among others the preparedness of public bodies in providing timely open information on a periodic basis and accessible at all times. State agencies

1 Based on survey and research carried out by HPG (Humpuss Patra Gas) in 1995, Cepu

Block’s potential can reach to a total of 10.96 billion barrels of oil and 62.64 TCF (Trillion Cubic

Feet) of gas. If oil price (Cepu Block) reaches an average of US$ 60/barrel and gas for US$ 3/

mmbtu, gross revenue from both natural resources will amount to US$ 196.8 billion (oil) + US$ 56.40

billion (gas) = US$ 253.2 billion or roughly Rp. 2.400 trillion (Marwan Batubara, et. al.)

Policy Brief

Accessibility Test on Public

Information

This high rejection rate is an

indication of the low level of

transparency in Cepu Block’s oil

and gas activities.

Policy Brief Monitoring of Public Information Transparency for Downstream Oil and Gas Activities in Bojonegoro and Blora

however, continue to treat certain information under their authority as confidential.

On the other hand, a system that supports the appointment of an Information and Documentation Administrator must wait for the formulation of implementation regulations which can only be issued after the law becomes effective. Under such circumstances, the purpose of issuing the Freedom of Information Act which should protect every Indonesian citizen’s right to information, needs to be tested.

Accessibility Test on Public Information

During the preparatory stage of Law No. 14/2008, PATTIRO Sekolah Rakyat with support from Tifa Foundation has initiated a test on the accessibility of public information for the Cepu downstream oil and gas block. This experiment involved the public, NGOs and the media. It focused on the accessibility of key information and documents related to revenue generated from downstream oil and gas activities by using the right to information access pursuant to Law No. 14/2008 on Freedom of Information as its parameter.

The purpose of the accessibility test is to understand the extent to which public information held by state agencies with regard to Cepu Block is transparent. The current situation on public information transparency is assessed based on a set of variables: type of information, information requester and public body.

Methodology of Accessibility Test

The accessibility test uses Law No. 14/2008 as its parameter, through the submission of information requests (information, data and document) to the relevant public body involved in oil and gas activities as designated by Indonesian law, by enclosing the appropriate reasons. Monitoring is then carried out for 10 (ten) working days while waiting for the response/outcome, and can be extended to a maximum of 17 (seventeen) working days in order to obtain the final response/reply to the information request.

The accessibility test is performed on several possible variable combinations:

- Type of Information:

Different types of information from the same public agency as required by different requesters. This is meant to identify the types of information that a certain public body can successfully deliver, and to determine the reasons if it fails to provide such information.

- Requester:

Different information requesters for the same type of information to the same public body. This is intended to observe on whether public agencies act consistently or in a discriminatory manner toward requests for the same information from different requesters.

- Public Body:

Different public bodies for the same information type as required by different requesters. This is aimed at examining the response of various public agencies toward the same of type of information.

Research Result and Analysis

Response toward Information Request

Response toward various types of information request for 13 public bodies at the central and local levels is as follows:

From the diagram below, it is evident that most types of requested information (37.5 %) are not available and the request passed on to other state agencies. This is common practice among local public bodies that generally do not hold the information required by the requester.

Several public bodies consider the requested information as important but are not in possession of such information as the central government has not handed them over. These public bodies have made no attempt to get hold of the information as they might not be authorized to obtain the information.

6.9% of public agencies did not have the information requested nor did they make a referral or recommendation to another state body that may hold or is authorized to release the information. 36.6% of all information requests were responded with silent rejections where no reason was offered for refusing to comply with the request, and some even without any acknowledgement altogether. Another 17.7% from all information requests were rejected and reasons were provided.

The main reason cited by public agencies was the unavailability of the

information requested and that it is not under their authority.

Public Agencies’ Response to

Information Requests

From a total of 475 information

requests, only 1.3 % or 6 information requests were fulfilled. These are revenue sharing information requests submitted to the Blora Planning and Development Agency.

The following chart illustrates the response toward different types of information requests:

Response toward Different Types of Information Requests s

0 0 0 06

0 0 0 0

32

23 2318

24

18

9 9

18

21

21 21

1

0

20

0 0

0

8

8 8

8 0

0

0 1

0

26

22 22

2818

22

15

2

23

0

10

20

30

40

50

60

70

80

90

100

CAPOD

WP & BLiftin

g

Rev Sharing PI

Tax

Nat. Bud. 2

009

Reg. Bud. 2

009

Complied Silent Rejection Rejection with reason Inf ormation unav ailable & no ref errals/recommendation Inf ormasi Tdk Dimiliki & Dialihkan/Direkomendasikan

Policy Brief Monitoring of Public Information Transparency for Downstream Oil and Gas Activities in Bojonegoro and Blora

Composition of type of information

requested

17%

15%

16%12%

10%

13%

5%3%

9%

CA POD WP&B

Lifting Revenue Sharing Participating Interest

Downstream oil& gas taxes National Budget 2009 Regional Budget 2009

Request for information on oil and gas cooperation agreements (CA): the majority (37%) were responded with silent rejections, followed by 30% which were not fulfilled due to the unavailability of information, then 24% rejections with reason. The remaining 9% were not supplied with the required information nor was there any referral/recommendation made to other relevant public body.

Request for information on oil and gas plan of development: the majority (31%) were responded with silent rejections, followed by 30% unfulfilled request for lack of information but a referral was provided, then 28% were rejected with reason. The remaining 11% failed to obtain the required information and did not receive any referral/recommendation to another public agency.

Request for information on oil and gas Work Program and Budget (WP&B): the majority (31%) were responded with silent rejections, followed by 30% unfulfilled responses due to the unavailability of information but referred to another public agency, then 29% also without the required information but were referred/recommended to another public body. The remaining 28% were rejected with reason.

Request for information on oil and gas lifting: the majority (51%) were not fulfilled for lack of information and were not handed over a referral/recommended to another public agency, followed by 33% silent rejections and 14% were not provided with the information required and no referrals were given, while the remaining 2% were refused with reason.

Request for information on downstream oil and gas taxes: the majority (63%) was not fulfilled for lack of information and no referrals/recommendations were made to another public agency, and 37% were responded with silent rejections.

Request for information on oil and gas Participating Interest (PI): most (37 %) were not fulfilled for lack of information and without any referrals/recommendations to another public body; 33% were rejected with reason and the remaining 33% were silent rejections.

Request for information on national and local budgets: most were responded with silent rejections, some were not fulfilled for lack of information and the rest were due to unavailability of information with no reasons offered. Both types of information are crucial for tracing the flow of funds related to downstream oil and gas ventures at the national and local levels.

Critical Points on Information Transparency for Downstream Oil and Gas Industry Based on

Law No. 14/2008

The term freedom of information requires further redefining to imply “all open information held by a public body and accessible to every person, other than

those exempted”. Exempt public information is strict

and limited in nature. A test on the consequences of disclosing confidential information is necessary to ensure that public information serves the greater interest of the people if released or kept confidential.

For exempt public information, pursuant to article 17 of the Freedom of Information Act, it is stipulated that “an information and documentation administrator in every public body bears the obligation to conduct a test

on untoward consequences as mentioned in Article 17, with meticulousness and circumspection before declaring certain public information exempted from being accessible by the public.

The consequence test covers 3 (three) stages: legal review, compatibility test and public interest test. These phases allow for the identification of exempted information by weighing public interest against

possible consequences of disclosing classified information.

Open information based on Law No. 14/2008

15

• Who owns the information?

• How to provide the information?

• How to access information?

• When must it be available?

1. Permit2. Environ. impact analysis3. Cooperation contract4. Lifting5. Cost recovery structure6. Participating interest7. Check Point8. Revenue and sharing

Downstream information

BUMD

Finance Ministry

LH

ESDM, BKPM, etc.

Finance Ministry

Finance Ministry???

BP Migas

Policy Brief Monitoring of Public Information Transparency for Downstream Oil and Gas Activities in Bojonegoro and Blora

Open information related to downstream oil and gas activities include permits, environmental impact analysis, cooperation contracts, lifting, cost recovery, participating interest, check point, and revenue sharing.

From all seven types of information, only check points have yet to be regulated by Indonesian legislation. Check point is necessary to determine the amount of lifting, market price and revenue sharing. This will significantly affect the flow of oil and gas funds, from the central to local levels. The second critical point lies in the cost recovery structure. The cost recovery of Mobile Exxon Cepu Limited (MCL) at present is the highest among other contractors, almost fourfold more than the market price.

In regard to downstream oil and gas activities, the central government would be the one to benefit the most. Without any participating interest, the central government will secure prodigious gains. The problem today concerning the management of downstream oil and gas mining lies in the availability of information on cost recovery. Companies normally reap profit from their cost recovery structure. For local governments, the regional budget should not be included in

investments except for the issuing of bonds.

Local governments and communities must work in concert to ensure access to information held by the central government. In the near future, it is hoped that regions can formulate their own cost recovery structure and educate the public on the impact and risks of natural resource exploration and exploitation.

RECOMMENDATION 1. Public Bodies related to downstream oil and gas

activities (national/local) : • Disclose information /data / document to the

public as a form of realizing the right to information

• Complete data and documents that are currently not in possession, but which should have been under their authority;

• Establish an information and documentation administrator to deliver first-rate service to the public;

• Consistency in dealing with every information requester.

2. Information Commission: • Establish a proper information service standard

for public agencies related to downstream oil and gas activities, pursuant to the Law on Freedom of Information.

3. Local Government (regional-owned enterprise or BUMD):

• Active involvement in overseeing the operations of Cepu Block (as shareholders)

• Educate and provide up-to-date information to the public

4. Public: • Become accustomed to requesting/accessing

information from public agencies; • Active participation in

controlling/monitoring downstream oil and gas policies;

• File complaints on information-related dispute to the local public agency and Information Commission.

Sekolah Rakyat was founded on 3 June 2002, and is initially the autonomous division

of PATTIRO or Regional Study and Information Center based in Jakarta, which was

entrusted with the specific task of building the capacity of facilitators and community

leaders from Pattiro networks in 9 cities in Java. In later developments, Sekolah Rakyat

evolved into an independent entity named Persyarikatan Sekolah Rakyat.

Its vision is to help shape a discerning, responsible, mature, solution-driven and

productive society who will work together towards building a just public order. Its

mission is to build capacity (skill, knowledge, attitude and value) and awareness on

rights and obligations as citizens by working together with civil society and forging

networks among civil society organizations.

Secretariat :

sekorakyat@telkom.net / sekorakyat@gmail.com / www.sekorakyat.co.cc

LAWS RELATED TO THE TRANSPARENCY OF DOWNSTREAM OIL AND GAS ACTIVITIES LAW Fourth Amendment to the 1945 Constitution Law No. 22/ 2001 on Natural Oil and Gas Law No. 14/ 2008 on the Freedom of Public Information GOVERNMENT REGULATION 1. Indonesian Government Regulation No. 34/2005; amendment to Government Regulation No. 35/ 2004 on

Downstream Natural Oil and Gas Business Activities 2. Indonesian Government Regulation No. 35/2004; Downstream Natural Oil and Gas Business Activities 3. Indonesian Government Regulation No. 42/2002; Implementing Body for Downstream Natural Oil and Gas

Business Activities 4. Indonesian Government Regulation No. 17/1974; Supervision of the Implementation of Natural Oil and Gas

Offshore Exploration and Exploitation MINISTERIAL DECREE

1. Energy and Mineral Resource Ministerial Decree No. 2602 K/23/MEM/2006; Establishing Oil and Gas Work Areas, Cooperation Contract and Terms and Condition, and the Work Area Tender Mechanism in Round I of Oil and Gas Work Area Tenders in 2006

2. Energy and Mineral Resource Ministerial Decree No 040/2006; Procedure for Establishing and Tendering Oil and Gas Work Areas

3. Energy and Mineral Resource Ministerial Decree No 1088; K/20/Mem/2003 4. Guideline for the Implementation of Downstream and Upstream Oil and Gas Development, Supervision,

Regulation and Control MINISTERIAL REGULATION 1. Energy and Mineral Resource Ministerial Regulation No. 01/ 2008; Guideline for Oil Mining in Old Wells 2. Energy and Mineral Resource Ministerial Regulation No.02/2008; Implementation of the Obligation to Meet

Domestic Oil and Gas Needs by Contractors under a Cooperation Contract 3. Energy and Mineral Resource Ministerial Regulation No. 03/2008; Guideline and Procedure for the Return

of Operating Areas Not Utilized by Contractors under a Cooperation Contract in Order to Increase Oil and Gas Production

4. Finance Ministerial Regulation No. 177/PMK.011/2007; Exemption of Import Duty on Goods Used for Downstream Oil and Gas, and Geothermal Activities

5. Finance Ministerial Regulation No. 178/PMK.011/2007; Value Added Tax Borne by the Government for the Importation of Goods Used for Downstream Oil and Gas and Geothermal Exploration

6. Finance Ministerial Regulation No. 179/PMK.011/2007; Establishing the Import Tariff of Drilling Platforms, or Floating or Underwater Production

7. Energy and Mineral Resource Ministerial Regulation No.028/2006; Guideline and Procedure for the Implementation of a General Survey in Downstream Oil and Gas Business Activities

8. Energy and Mineral Resource Ministerial Regulation No.033/2006; Coalbed Methane Gas Mining 9. Energy and Mineral Resource Ministerial Regulation No. 037/2006; Application Procedure for the

Importation and Settlement of Goods Used for the Operations of Downstream Oil and Gas Activities 10. Energy and Mineral Resource Ministerial Regulation No. 008/2005; Incentives for the Development of

Marginal Oil Fields 11. Mining and Energy Ministerial Regulation No. 02.P/075/Mpe/1992; Guideline for the Implementation of

the Supervision of Oil and Gas Exploration and Exploitation

SOP necessary to maintain quality of information service

Article 12The public agency must annually announce on its information service delivery which should include :a. Number of incoming information requests;b. Time required by the public agency to fulfill each

information request;c. Number of information request s fulfilled and rejected;

and/ord. Reason for rejecting an information request

Implementation of service and reporting

SOP

Immediately appoint an information and documentation administrator and establish a service unit (centralized or decentralized)

Design an information service plan and identify budgetary needs

Identify and classify information, in the absence of documents ensure that the document format and title is determined.

Conduct a consequence test on exempt information Determine the technicalities for information storage

and delivery including possible media channels for each type of periodic information, readily and immediately available.

Article 8It is the obligation of the public agency to ensure that the filing and documentation of public information is maintained according to existing laws and regulations (see Law on National Archives)

CHECK LIST

Policy Brief Monitoring of Public Information Transparency for Downstream Oil and Gas Activities in Bojonegoro and Blora