Indonesia is a resource-rich country both in hydrocarbons and mining, according to the 2016 EITI report. However, oil production has substantially declined in the last two decades from its peak of 1,624 thousand barrels a day in 1995 down to 804 thousand barrels of oil per day in 2017, according to regulator SKK Migas.
Due to this decline in production and a rapid increase in domestic consumption, Indonesia is now a net importer of oil. Bank of Indonesia reports that as of December 2018, oil and gas exports value amounted to USD 1.3 billion while imports amounted to USD 3 billion.
The mining sector, however, has been expanding rapidly in the last decade. According to the World Bank, total mineral export value more than tripled from USD 3 billion to USD11.2 billion between 2001 and 2013, driven by historically high commodity prices and increasing production (World Bank, March 2014). As of 2016, the contribution of the mining sector (including coal) stands at USD 18 billion, according to the EITI Report (2016) with coal and copper as the largest contributors.
Public debates about the extractive sector have centered on environmental impacts of mining, cost recovery in oil and gas production-sharing contracts (PSCs), crude oil trading, subnational transfers and social expenditures.
The need to improve governance of the extractive sector is highlighted by issues around overlapping licenses, gaps in tax administration and in systems for corporate registration which have led to losses of potential revenues.
The EITI is improving inter-ministerial policy coordination, serving as a platform for discussions between industry and government as well as building trust with civil society.
Indonesia has committed to implement the G20 high-level principles on beneficial ownership transparency, with the objective of improving national regulations to establish comprehensive legislation on beneficial ownership (BO), enhance compliance with BO disclosure and integrate databases. In 2018, the government strengthened its commitment to full disclosure of company ownership through the issuance of Presidential Regulation 13/2018 and Ministry of Energy and Mineral Resources Decree 1796 K / 30 / MEM / 2018. Under these regulations, companies are required to report their beneficial owners to the Ministry of Law, through the company register and in connection with their license application procedures. Beneficial ownership disclosure is also part of the 2018 National Strategy to Prevent Corruption. BO transparency is stated as being a key aspect of the country's Open Government Partnership objectives.
Currently, the Ministry of Law maintains a portal where company information including their legal ownership, can be accessed.
The EITI Indonesia started discussing BO already in 2016, when the Multi-Stakeholder Group (MSG) published a three-year EITI BO roadmap , which sets out steps to beneficial ownership disclosures by 1 January 2020. The roadmap aimed to develop a framework for beneficial ownership reporting in Indonesia, harmonize laws, and mainstream beneficial ownership data by creating a BO public registry. In October 2017, the Indonesian government hosted an EITI Global Conference on beneficial ownership where high-level and technical officials from government participated to share best practices on beneficial ownership reforms.
Beneficial ownership reform is high in the government agenda and there is strong inter-ministry cooperation to advance this reform. Each ministry is responsible for outreach activities to increase awareness on beneficial ownership requirements. The EITI, under the Coordinating Ministry of Economic Affairs, leads outreach activities with extractive companies and has piloted data collection for the 2018 EITI Report. To implement the Presidential Decree, the Ministry of Law and Human Rights revised their Legal Entity Administration System to include beneficial ownership information. Ministerial decrees are being drafted to institutionalise these changes. However, the register has certain restrictions on public access of this information and a challenge is thus how to allow for beneficial ownership information to be made publicly accessible.
Indonesia continues to maintain a key position in the global extractive industry. It is a leading producer of coal (the world’s 5th largest producer in 2018), tin (2nd), oil (23rd) and natural gas (12th). It also ranked as the world’s 5th largest LNG producer. In 2016, around 30% (92 million barrels) of oil production and lifting in the country came from the Rokan Block, managed by Chevron Pacific Indonesia. On the other hand, the largest contributor to gas production and lifting is the Mahakam block managed by Indonesia Petroleum Ltd. and Total E&P Indonesia. Of Indonesia’s 60 sedimentary basins with potential oil and gas reserves, 15 are producing oil and gas.
The 2016 EITI Indonesia Report shows an increase in oil production by 6% in 2016 after experiencing a decline in production during the period of 2013-2015. Meanwhile, gas production and lifting declined in the same year due to a decrease in natural production and the end of export contracts.
Indonesia has rich deposits of oil, natural gas, gold, coal, tin, silver, copper, bauxite, zinc, nickel and iron. The easternmost province of Papua holds close to 80% of national gold, copper and silver reserves. Nearly all tin reserves are located in Bangka and Belitung, while West Kalimantan holds significant reserves of iron and bauxite. The island of Sumatra and Java are endowed with significant oil reserves. On the other hand, the largest gas reserves are in Natuna and the rest are spread out in eastern Indonesia.
|Oil||7390||million stock tank barrels||Indonesia ranks as the world's 27th largest in terms of crude oil reserves|
|Gas||150||trillion standard cubic feet||Indonesia ranks at the world's 14th largest in terms of natural gas reserves|
|Gold||4248||metric tons||Indonesia ranks as the world's 5th largest in terms of gold reserves|
|Lead||1.6||metric tons||Indonesia ranks as the world's 2nd in terms of lead reserves|
|Nickel||577||million metric tons|
|Bauxite||180||million metric tons|
|Copper||4161||million metric tons|
|Coal||31.4||billion metric tons||Indonesia ranks as the world's 10th largest in terms of coal reserves.|
EITI disclosures from the 2016 EITI Report show that Indonesia received USD 11.3 billion from extractive industry, a 31% decrease from the previous year (USD 16.5 billion in 2015). This represents approximately 10% (15% in 2015) of the total state revenue in Indonesia. Revenue from the extractive industry in 2016 decreased by 61% from 2012. This decline in recent years has largely been influenced by declining commodity prices. In 2016, roughly 70% of these revenues came from the oil and gas sector, with the rest from mineral and coal. Revenues were mainly collected through corporate income tax, the state’s share of oil and gas production and royalties.
In Indonesia, commodity trading occurs through Pertamina, the sole SOE in Indonesia’s oil and gas sector. Other contractors are likewise authorised under their Production Sharing Contracts (PSCs) with SKK Migas, the oil and gas regulator, to sell commodities on behalf of the government. On 1 January 2015, Pertamina started conducting its import and sales (export) activity of crude oil and refined products through the Integrated Supply Chain (ISC). The procurement and sales are done either through direct negotiation or closed tender to business partners that are registered with Pertamina. ISC is also in charge of selling crude oil from Pertamina’s upstream entitlements.
EITI Reports published by the EITI in Indonesia regularly contain information on the volumes sold by government and the revenues it received from the sale of its petroleum. However, these reports do not fully disclose other relevant details of these transactions. In view of the relevance of commodity trading in Indonesia’s oil and gas sector, Indonesia has agreed to publish a report on commodity trading and to participate in the EITI’s targeted effort on commodity trading transparency.
The commodity trading report published in January 2018 covers 1,909 oil sale transactions reported by SKK Migas. The report found that the trade transactions in Indonesia where there is higher corruption risk pertain to crude oil imports including Gas, LNG and petroleum exports as well as domestic sales and imports, which are dynamically priced. Unfortunately, data regarding these transactions is not currently publicly available. The report thus recommended its inclusion in the scope of future reports, especially import figures, given that what was covered in the current report is less than 20% of the extent of commodity trading of Indonesian SOEs. Discussions on the findings of the report can also be found in the EITI website.
Following the completion of the pilot, members of the MSG have expressed considerable interest in producing a follow-up report based on the findings of the commodity trading pilot. Currently, Indonesia EITI MSG is finalizing the Terms of Reference for the second commodity trading report.
Local government in Indonesia has 15% and 30% share of petroleum and natural gas revenues, respectively. In accordance with the Law No. 33/2004, allocation of extractive industry revenues between the central and the local government is structured around the Revenue Sharing Fund (DBH) scheme. The DBH is earmarked for specific uses. A different DBH scheme applies for Special Autonomous Regions such as Aceh, Papua and West Papua Provinces.
The mining sector, in particular, has an important role in the regions’ economy, especially in mine producing areas. Although the mining sector accounts for only about 7.6% of national GDP (at current price), the mining sector can contribute 20-43% of the Gross Regional Domestic Product (GRDP). This role is enhanced by the movements of the followers' sectors (e.g. construction, trade and services) and the emergence of supporting businesses (food and clothing suppliers) in the regional economy. The 2016 EITI Report shows the significance of the contribution of the mining sector to producing regions’ ( such as Kalimantan Timur) workforce absorption and regional export compared to the national average.
Recommendations from past EITI Reports relate to improving reconciliation procedures, conducting more outreach to increase participation of agencies and companies, and establishing (internal) databases. Past recommendations have also included implementing adequate technical procedures which clearly illustrate how local governments can access data to be able to project the amount of revenue-sharing funds for oil and gas, and to implement full contract disclosure.
The country is looking towards mainstreaming in order to improving the EITI reporting requirements and address some of the recommendations. Mainstreaming is included as an objective in the MSG's 2020 draft workplan, and the MSG is currently consulting on how to act on recommendations for contract transparency and access to local government payments. As for the mining database, cadastre information is now made publicly available with the launch of the Minerba One Map portal. This is a significant step towards more systematic data disclosure.
The Minerba One Map portal offers a public-user interface for key data on the sector. The portal, referred to as the Geoportal, integrates information on all land-use and seismic activity. The oil and gas regulator, SKK Migas’ annual reports, published on its website, provides annual updates on investment in exploration and significant activities in the oil and gas sector. Moreover, SKK Migas operates a dashboard including data on production and government regulations.
The EITI encourages multi-stakeholder groups to explore innovative approaches to make the EITI more relevant and useful.
- A commodity trading report has been published in January 2018 to: i) understand how the Indonesian Crude Price is determined, how prices are regulated, and to provide recommendations to government policies related to domestic oil pricing; ii) understand Pertamina-Integrated Supply Chain’s (ISC) tendering processes and how applications from traders are evaluated; and iii) to understand the entire value chain from production to trading and evaluate policy gaps.
- The EITI worked towards making beneficial ownership transparency a national commitment under the Open Government Partnership.
- The EITI is part of Indonesia's broader anti-corruption framework.
The MSG published their 2020 work plan in November 2019. Based on the work plan, the main objectives of EITI implementation in Indonesia is to increase transparency in the management of extractive industries and to improve extractive industry governance in the country.
The government of Indonesia committed to implementing EITI in December 2005 and was admitted as an EITI Candidate in October 2010. An EITI Implementation Team, which is also the MSG, is in charge of implementing EITI activities and is composed of 20 members, with ten representatives from the national government, four from industry three, and three each from local government and civil society. Mr Sampe Purba, Natural Resource Economics Advisor to the Minister of Energy and Mineral Resources, currently serves as Chair of MSG. Under the EITI Presidential Regulation, EITI implementation in Indonesia should also be monitored by a Steering Committee. However, this body is currently not active. The EITI Indonesia National Coordinating Secretariat is currently hosted at the Ministry of Energy and Mineral Resources (ESDM).
Name of Chairman of MSG: Mr Sampe Purba, Natural Resource Economics Advisor to the Minister of Energy and Mineral Resources
Name of National Coordinator: Mr Agus Cahyono Adi, Head of Energy & Mineral Data and Technology Information Center
- Ministry of Energy and Mineral Resources (MoEMR/ESDM)
- Ministry of Finance
- Special Unit for Upstream Oil and Gas Business Activities (SKK Migas)
- Ministry of Home Affairs
- Indonesia's National Government Internal Auditor (BPKP)
- Board decision in full
- Documentation: Validation Report and initial assessment
- News item on the Validation result
- Country statuses explained
Indonesia's next Validation will commence on 1 April 2023.
This is the EITI Indonesia draft 2020 work plan.
On 24 December 2019, the Board agreed that Indonesia has made meaningful progress overall in implementing the 2016 EITI Standard.
Timeline of Validation and related materials
1 September 2018: Validation commenced7-16 November 2018: Country visit
Initial data collection and stakeholder consultations
17 April 2019 - Report on Initial data collection and stakeholder consultation [English
This EITI Report covers Indonesia's extractive sector in 2016. It was published in December 2018 and is available in English and Indonesian.
This is the EITI Indonesia 2017 Annual Progress Report (in accordance with Requirements 7.4 and 8.4).
This is the EITI Indonesia 2018 work plan (in accordance with Requirement 1.5).
Indonesia’s first commodity trading report is a set of 1,909 transaction records supplied by the upstream regulator SKK Migas. All the data in these records were previously available on the SKK Migas’s website. The recorded value of the transactions, covering shipments of 115 million barrels of crude oil and condensates, is $4.74 billion. Most or all of the transactions included are valued under the Indonesian Crude Price (ICP), an official selling system governing oil and condensates produced in Indonesia and intended for domestic consumption there. Exports of Liquefied Natural Gas,
Mr Agus Cahyono Adi