New Provisions on Participating Interest 10% for Upstream Oil and Gas Business

The Ministry of Energy and Mineral Resources (“Ministry”) has issued Regulation No. 37 of 2016 on Provisions for Offering 10% Participation Interest in Oil-and-Gas Working Areas(“Regulation 37/2016”).
 
In essence, Regulation 37/2016 sets out detailed procedures for upstream oil-and-gas companies (“Contractors”) who are looking to offer mandatory 10% participation interest (“PI”) in their working areas to either Regionally Owned Companies (“BUMD”) or State-Owned Companies (“BUMN”). Additionally, Regulation 37/2016 also sets out criteria for BUMD which are entitled to the 10% PI.
 
PI 10% for BUMD
 
As a general rule, Contractors are required to offer PI covering 10% of their working areas to BUMD upon securing approval for any Plan of Development (PoD) from the government. Through this mandatory PI offer, BUMD will get to participate in the management of the working area in question. The 10% PI is to be offered by different types of BUMD, dependent upon the location of the working area in question, as detailed in the table below:[1]