Minerals Report - International Seabed Authority

of its continental shelf through bilateral agreements with its neighbours. The
Government of Indonesia controls all scientific research, exploration,
construction of installations and structures on the continental shelf. Mining of
oil and natural gas in Indonesia including in all islands, in the seabed of
archipelagic waters, the territorial sea, and the continental shelf can be done
only through a state company.
He gave a brief overview of Pertamina State Oil Company and its
activities. Pertamina, he informed participants, has formulated model terms
of production sharing contracts/agreements that have been widely used. The
contracts clearly state that all mineral oil and gas existing within the statutory
mining territory of Indonesia are national riches controlled by the state.
Pertamina has an exclusive authority to mine, while the contractor could
assist Pertamina in accelerating the exploration and development of other
resources within the contract area. The term of the contract is for 30 years and
at the end of the first six years, the contractor shall have the option to request
a four-year extension. The contract shall terminate if after the first six years or
the extension thereto, no petroleum in commercial quantities is discovered. In
the event of a petroleum discovery, Dr. Djalal told participants that
development is in that portion of the contract area. On or before the end of
the initial three years, the contractor is required to relinquish 25% of its initial
contract area. Similarly, on or before six years, a further 25% of the contract
area has to be relinquished. On or before the tenth year, the contractor is
required to relinquish further areas so that the remaining area is not be more
than 20% of the original contract area, or any other specific area subject to
negotiation, whichever is less. The contractor is required to maintain a
reasonable exploration effort and if during two consecutive years, does not
submit exploration programmes, Pertamina may require the contractor either
to submit an exploration programme, or relinquish such part of the contract
area.
Dr. Djalal also explained certain other procedural requirements. He
pointed out that the mining legislation in Indonesia treats oil and gas
somewhat differently from hard minerals. While the exploration and
exploitation of oil and gas are largely based on the production sharing system,
in respect of minerals, it is based on a licensing system in which the licensed
mining companies are obliged to pay mining fees, taxes, and royalties to the
INTERNATIONAL SEABED AUTHORITY 64