Establish Transparency Mechanisms In Extractive Industries (1)

Bojonegoro Regency is known as one of Indonesia’s oil and gas rich region. This area has rich and potential oil and gas reserves. Based on the surveys, within the next few years, this district will support 20% of the national oil needs, or equivalent to 200.000 barrel per day (cepu block 160.000 and sukowati block 40.000). Thus, Bojonegoro as producing regions will receive a substantial income and this could reach hundreds of billions,up to trillions (rupiah).

Since decentralization is implemented in Indonesia in 2001, many early indications show how areas with rich oil and gas, has resource curse experience in its various forms, such as: widespread corruption,bureaucracy is enlarged while development spending remains low, bad public services, dominance of lighthouse projects but not pro-poor, and deep conflicts.

Of course this is a challenge, especially because of the lack of local government capacity, lack of management plans for district development in the long-term framework. And as we know, oil and gas revenues have a short-term, volatile and non renewable. That is, it takes strategy and special efforts for the region rich in oil and gas to build the new capital in addition to oil and gas sector. Revenue from oil and gas must be transformed into sustainable development. And this must be done in a participatory process, to ensure the involvement of all stakeholders.

For this context (Bojonegoro), oil and gas potential is certainly encouraging to increase revenue for district development and public welfare. However, revenues from this sector will be full of problems, such as: volatile revenues, leakage of funds, corruption (and this has happened), inappropriate use, etc. The benefits from oil and gas revenues, will be optimal if the revenues management was conducted in a transparent and participatory way.

For example Transparency in Revenue Sharing : Profit Sharing good between the Contractor and Local Government (Participating Interest), as well as revenues from the Central Government to Local Governments (DBH), should depart from the calculation mechanism with a valid data base, and transparent for all stakeholders. This is simply to avoid misperception, miscalculation, or conflicts that impact on development.
In addition to revenue transparency, is also required for other types of information : environmental and CSR issues. Handling of environmental impact, it is important to ensure that extractive industries are run in accordance with the standards of health, safety and good environment (Health, Safety, and Environment/ HSE Standard) is tight.

Environmental impact informations that may arise in each phase of  oil and Gas Upstream operations (pre-construction, construction, drilling, production operations, post-surgery) should also be socialized to communities surrounding the mine, used for avoid things that are beyond the control of the company. Included is a standard handling of emergencies and disasters of extractive industry activities.

In addition to environmental issues, CSR is the kind of information that should be on transparency’s. The aims are to maximize control and benefits to the communities surrounding the mine. Classical problems that may arise related to this fund, such as: not meet local needs, uncoordinated CSR with local government program, unsustainable and only enjoyed by certain groups. [continued/pen]

*Penulis; Joko Purwanto, Bojonegoro Institute activists