entral Java is establishing a holding company for region-owned oil and gas companies in the hope of improving their performance and thus, boosting locally generated income.
The province’s Regional Legislative Council (DPRD) greenlighted on Monday a plan to set up oil and gas holding company PT Jateng Petro Energi. Lawmakers will follow up the move by issuing a regional government regulation on establishing such a holding. They did not specify a deadline.
“With this regulation, we will have more running room. The effect is higher locally generated income, because all will be better managed,” said Central Java Governor Ganjar Pranowo, who is credited with proposing such a holding.
Thus far, the holding is slated to absorb Semarang-based companies PT Sarana Patra Hulu Cepu (SPHC) and PT Sarana Pembangunan Jawa Tengah (SPJT). The former helps run a small part of the Cepu oil and gas block operated by America’s ExxonMobil. The latter, through subsidiary Sarana GSS Trembul, helps run the Trembul Block operated by Indonesia’s state-owned oil company Pertamina.
Regional administrations are looking for ways to generate more income from their natural resources in financing local projects. The prevailing method has been to lobby for a larger share of the central government’s natural resource earnings, but Central Java’s plan represents a change of course to a more market-oriented approach.
Under Government Regulation No. 55/2005 on equalizing funds, provincial administrations are entitled to 15.5 percent of oil revenue and 30.5 percent of gas revenue received by the central government.
Golkar Party politician Padmasari Mestikajati, a member of the special committee assessing the feasibility of Jateng Petro Energi, said establishing such a holding would “improve the management of Central Java’s oil and gas companies as a source of regional revenue.”
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