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[ENGLISH VERSION] UNDANG-UNDANG NOMOR 22 TAHUN 2001 TENTANG MINYAK DAN GAS BUMI

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[ENGLISH VERSION] UNDANG-UNDANG NOMOR 22 TAHUN 2001 TENTANG MINYAK DAN GAS BUMI Powered By Docstoc
					Oil and Gas Regulations                                                                 Page 1




                                                                                    Indonesian

Type:           LAW (UU)

By:             THE PRESIDENT OF THE REPUBLIC OF INDONESIA

Number:         22 YEAR 2001 (22/2001)

Date:           NOVEMBER 23, 2001 (JAKARTA)

Title:          OIL AND NATURAL GAS


                       WITH THE BLESSING OF GOD THE ALMIGHTY

                    THE PRESIDENT OF THE REPUBLIC OF INDONESIA,

Considering:
a.    whereas the national development should be directed to the realization of the people's
      prosperity by conducting total reforms in all aspects of national and state life based on
      Pancasila and the 1945 Constitution;

b.       whereas oil and natural gas are non-renewable strategic resources which are
         controlled by the state and are vital commodities which affect the livelihood of the
         majority of the people and play an important role in national economy, their
         management should allow to give the people maximum benefit and welfare;

c.       whereas oil and natural gas enterprises have an important role in giving real added
         value to improved and continuous national economic growth;

d.       whereas Law Number 44 Prp. Year 1960 concerning Oil and Natural Gas Mining, Law
         Number 15 Year 1962 concerning the Enactment of Government Regulation in Lieu of
         Law Number 2 Year 1962 concerning The Obligations of Oil Companies to Meet
         Domestic Needs, and Law Number 8 Year 1971 concerning the State Oil and Natural
         Gas Mining Company (Perusahaan Pertambangan Minyak dan Gas Bumi Negara) are
         no longer compatible to the development in the oil and natural gas mining enterprises;

e.       whereas with due consideration to the national and international developments, the
         laws and regulations on oil and natural gas mining need amendments which can
         create an independent, reliable, transparent, competitive, efficient, and
         environmentally oriented oil and natural gas enterprises and supportive of the
         development of the national potential and role as well;

f.       whereas based on the considerations as referred to in letters a, b, c, d and e above,
         and to provide a legal basis for reform and restructuring measures in the operation of
         oil and gas enterprises, it is necessary to establish a Law concerning Oil and Natural
         Gas;

In view of:
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1.     Article 5 paragraph (1), Article 20 paragraphs (1), (2), (4) and (5), and Article 33
       paragraphs (2)and (3) of the 1945 Constitution;

2.     The Stipulation of the People's Consultative Assembly of the Republic of Indonesia
       Number XV/MPR/1998 concerning the Implementation of Regional Autonomy;
       Regulation, Division and Utilization of National Resources in a Just Manner; as well as
       Financial Balance of the Central Government and Regional Government in the context
       of the Unitary of the State of the Republic of Indonesia.


                                      On the Approval
                 of the House of Representatives of the Republic of Indonesia

                                       HAS DECIDED

To stipulate:   LAW CONCERNING OIL AND NATURAL GAS


                                       CHAPTER I
                                   GENERAL PROVISIONS

                                           Article 1
In this Law, what is meant by:

1.     Crude Oil shall be hydrocarbons produced by natural process in atmospheric
       pressure and temperature in the form of liquid or solid phase including asphalt, wax
       mineral or ozokerite, and bitumen produced by mining process, excluding coal or
       other hydrocarbon deposits in a solid form produced by activities which are not
       relating to the operation of Oil and Natural Gas enterprises;

2.     Natural Gas shall be hydrocarbons produced by natural process in atmospheric
       pressure and temperature in the form of a gas phase produced by Oil and Natural
       Gas mining process;

3.     Oil and Natural Gas shall mean Crude Oil and Natural Gas;

4.     Fuel shall be the fuel originating and/or processed from Crude Oil;

5.     Mining Authority shall be the authority given by the State to the Government to
       undertake Exploration and Exploitation activities;

6.     General Survey shall be field activities covering data gathering, analysis and
       presentation relating to the information on geological condition to estimate the location
       and potential of Oil and Natural Gas resources outside A Work Area;

7.     Upstream Business Activities shall be business activities focusing on Exploration and
       Exploitation activities;

8.     Exploration shall be activities with the objective to obtain information on geological
       condition in order to locate and obtain estimated Oil and Natural Gas reserves in a
       designated Work Area;
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9.     Exploitation shall be a series of activities with the objective to produce Oil and Natural
       Gas in a designated Work Area, consisting of drilling and well completion,
       construction of facilities for transportation, storage, and field processing for separation
       and refining of Oil and Natural Gas and other supporting activities;

10.    Downstream Business Activities shall be business activities focusing on Processing,
       Transportation, Storage, and/or Trading;

11.    Processing shall be activities aimed at refining, fractionating, and enhancing added
       value of Crude Oil and/or Natural Gas, excluding field processing;

12.    Transportation shall be activities aimed at transporting Crude Oil, Natural Gas and/or
       their processed products from a Work Area or from collection and Processing sites,
       including transportation of Natural Gas through transmission and distribution
       pipelines;

13.    Storage shall be activities aimed at receiving, collecting, storing and releasing Crude
       Oil and/or Natural Gas;

14.    Trading shall be activities aimed at purchasing, selling, exporting and importing Crude
       Oil and/or their processed products, including Natural Gas Trading through pipelines;

15.    Indonesia's Mining Territory shall be the territory of the Indonesia's land, waters and
       continental shelf in their entirety;

16.    Work Area shall be a certain area within the Indonesia's Mining Territory where
       Exploration and Exploitation shall be carried out;

17.    Business Entity shall be a corporation in the form of a legal entity running a
       permanent and sustained business, and established under the prevailing laws and
       regulations and operating and domiciled within the territory of Unitary the State of the
       Republic of Indonesia;

18.    Permanent Establishment shall be a business entity incorporated and having a legal
       entity's status from outside the territory of the Republic of Indonesia which conducts
       its activities in the territory of the Republic of Indonesia and which shall be obligated to
       comply with the prevailing laws and regulations in the territory of the Republic of
       Indonesia;

19.    Co-operation Contract shall be Production Sharing Contract or other forms of
       co-operation contracts in Exploration and Exploitation activities which are more
       beneficial to the State and the results of which are used for maximum prosperity of
       the people;

20.    Business License shall be a license granted to a Business Entity to conduct
       Processing, Transportation, Storage and/or Trading in order to make gain and/or
       profit;




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21.    Central Government, hereinafter referred to as the Government, shall be the
       apparatus of the Unitary State of the Republic of Indonesia consisting of the President
       and the Ministers;

22.    Regional Government shall be the Head of the Region and the Autonomous Region's
       apparatus as the Regional Executive Body;

23.    Implementing Body shall be a body established to control the Upstream Business
       Activities in the field of Oil and Natural Gas;

24.    Regulatory Body shall be a body established to regulate and control the supply and
       distribution of Fuel and Natural Gas as well as the transportation of Natural Gas
       through pipelines in Downstream Business Activities;

25.    Minister shall be the Minister whose jurisdiction covers the operation of Oil and Natural
       Gas enterprises.


                                       CHAPTER II
                               PRINCIPLES AND OBJECTIVES

                                           Article 2

The implementation of Oil and Natural Gas enterprises provided for in this Law shall be
based on the principles of people's economy, integrity, benefits, justice, balance, equality,
collective prosperity and welfare of people, security, safety and legal certainty and be
environmentally-oriented.

                                           Article 3

The implementation of Oil and Natural Gas enterprises shall aim at:

a.     ensuring effective implementation and control of Exploration and Exploitation business
       activities efficiently, effectively as well as having high and sustained competitiveness
       over the state-owned Oil and Natural Gas which are strategic and non-renewable
       through an open and transparent mechanism;

b.     ensuring effective implementation and control of Processing, Transportation, Storage,
       and Trading in an accountable manner through a fair, sound and transparent
       business competition mechanism;

c.     ensuring efficient and effective supply of Oil and Natural Gas as a source of energy
       and raw material for domestic needs;

d.     supporting and developing national capability for improved competitiveness at the
       national, regional and international levels;

e.     increasing the state revenues to provide maximum contributions to the national
       economy, as well as developing and strengthening Indonesia's industry and trading
       positions;

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f.     creating employment opportunities, improving the welfare and prosperity of the
       people, and maintaining environmental sustainability.


                                    CHAPTER III
                              CONTROL AND ENTERPRISES

                                            Article 4

(1)    Oil and Natural Gas as strategic and non-renewable natural resources contained in
       the Indonesian Mining Territory are national assets which are controlled by the state.

(2)    The control by the state as referred to in paragraph (1), shall be undertaken by the
       Government as the holder of the Mining Authority.

(3)    The Government as the holder of the Mining Authority shall establish an Implementing
       Body as referred to in Article 1 number 23.

                                            Article 5

Oil and Natural Gas business activities shall consist of:

       (1)     Upstream Business Activities which include:
               a.     Exploration;
               b.     Exploitation.

       (2)     Downstream Business Activities which include:
               a.    Processing;
               b.    Transportation;
               c.    Storage;
               d.    Trading.

                                            Article 6

(1)    The Upstream Business Activities as referred to in Article 5 number 1 shall be
       conducted and controlled through a Co-operation Contract as referred to in Article 1
       number 19.

(2)    The Co-operation Contract as referred to in paragraph (1) shall at least include the
       following conditions:

       a.      ownership of the natural resources remains with the Government until the
               point of delivery;
       b.      the management of operations shall be under the control of the Implementing
               Body;
       c.      all capital and risks shall be borne by the Business Entity or Permanent
               Establishment.

                                            Article 7



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(1)    The Downstream Business Activities as referred to in Article 5 number 2 shall be
       conducted with the Business License as referred to in Article 1 number 20.

(2)    The Downstream Business Activities as referred to in Article 5 number 2 shall be
       conducted through a fair, sound and transparent business competition mechanism.

                                            Article 8

(1)    The Government shall give priority to the utilization of Natural Gas for domestic needs
       and have duty to provide strategic reserves of Crude Oil to support domestic Fuel
       supply which shall be further regulated in a Government Regulation.

(2)    The Government shall be obligated to ensure the supply and constant distribution of
       Fuel as a vital commodity which affects the livelihood of people throughout the
       territory the Republic of Indonesia

(3)    The undertaking of Natural Gas Transportation business activities through pipelines
       which affect public interests shall be regulated so its utilization is open to all users.

(4)    The Government shall be responsible for the regulation and supervision of business
       activities as referred to in paragraphs (2) and (3), the implementation of which shall
       be performed by the Regulatory Body.

                                            Article 9

(1)    The Upstream and Downstream Business Activities as referred to in Article 5
       numbers 1 and 2 may be carried out by:

       a.     state-owned business entity;
       b.     regional government-owned company;
       c.     co-operative;small-scale business;
       d.     private business entity;

(2)   A Permanent Establishment may only carry out Upstream Business Activities.

                                           Article 10

(1)    A Business Entity or Permanent Establishment carrying out Upstream Business
       Activities may not carry out Downstream Business Activities.

(2)    A Business Entity carrying out Downstream Business Activities may not carry out
       Upstream Business Activities.


                                    CHAPTER IV
                             UPSTREAM BUSINESS ACTIVITIES

                                           Article 11



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(1)    Upstream Business Activities as referred to in Article 5 number 1 shall be carried out
       by a Business Entity or Permanent Establishment based on a Co-operation Contract
       with the Implementing Body.

(2)    Any Co-operation Contract which has been signed should be reported in writing to the
       House of Representatives of the Republic of Indonesia.

(3)    The Co-operation Contract as referred to in paragraph (1) shall at least contain basic
       provisions concerning:

       a.     state revenues;
       b.     Work Area and its relinquishment;
       c.     financing obligation;
       d.     transfer of title to the Oil and Natural Gas produced;
       e.     term of contract and its extension conditions;
       f.     settlement of disputes;
       g.     obligation to supply Crude Oil and/or Natural Gas for domestic needs;
       h.     termination of contract;
       i.     post-mining operations obligations;
       j.     occupational health and safety;
       k.     environmental management;
       l.     assignment of rights and obligations;
       m.     necessary reporting;
       n.     field development plan;
       o.     utilization of domestic good and services;
       p.                                                                    n
              development of neighboring community and commitment o the rights of
              customary community;
       q.     priority to utilize Indonesian manpower.

                                          Article 12

(1)    Work Area which shall be offered to a Business Entity or Permanent Establishment
       shall be determined by the Minister on consultation with the Regional Government.

(2)    Tender of a Work Area as referred to in paragraph (1) shall be conducted by the
       Minister.

(3)    The Minister shall determine the Business Entity or Permanent Establishment
       authorized to carry out Exploration and Exploitation in the Work Area as referred to in
       paragraph (2).

                                          Article 13

(1)    Only one Work Area shall be given to a Business Entity or a Permanent
       Establishment.

(2)    In the event that a Business Entity or Permanent Establishment operates several
       Work Areas, a separate legal entity for each Work Area should be formed.

                                          Article 14

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(1)    The duration of a Co-operation Contract as referred to in Article 11 paragraph (1)shall
       be a maximum of 30 (thirty) years.

(2)    A Business Entity or Permanent Establishment may apply for extended duration of a
       Co-operation Contract as referred to in paragraph (1) for a maximum of 20 (twenty)
       years.

                                          Article 15

(1)    The Co-operation Contract as referred to in Article 14 paragraph (1) shall consist of
       Exploration and Exploitation periods.

(2)    The Exploration period as referred to in paragraph (1) shall be conducted for 6 (six)
       years and may only be extended once, being for a maximum of 4 (four) years.

                                          Article 16

The Business Entity or Permanent Establishment should relinquish parts of its Work Area in
stages or in whole to the Minister.

                                          Article 17

In the event that a Business Entity or Permanent Establishment which has obtained an
approval of the development of the first field in a Work Area does not perform its activities
within 5 (five) years after the Exploration period expires, the Business Entity or Permanent
Establishment shall be obligated to relinquish the entire Work Area to the Minister.

                                          Article 18

Guidelines, procedures and conditions concerning the Co-operation Contract, determination
and offer of a Work Area, amendment and extension of a Co-operation Contract, and
relinquishment of a Work Area as referred to in Articles 11, 12, 13, 14, 15, 16 and 17 shall be
further regulated in a Government Regulation.

                                          Article 19

(1)    To support the preparation of a Work Area as referred to in Article 12 paragraph (1), a
       General Survey shall be carried out by or with the permission of the Government.

(2)    The procedures and conditions on the undertaking of a General Survey as referred to
       in paragraph (1) shall be further regulated by a Government Regulation.

                                          Article 20

(1)    Data obtained from a General Survey and/or Exploration and Exploitation shall
       become the property of the State controlled by the Government.

(2)    Data obtained by a Business Entity or Permanent Establishment from its Work Area
       may be used by said Business Entity or Permanent Establishment during the duration
       of the Co-operation Contract.

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(3)    At expiration of the Co-operation Contract, the Business Entity or Permanent
       Establishment should surrender all the data obtained during the period of the
       Co-operation Contract to the Minister.

(4)    Confidentiality of data obtained by a Business Entity or Permanent Establishment
       from its Work Area shall be valid for a specified period.

(5)    The Government shall regulate, manage and use data as referred to in paragraphs (1)
       and (2) for the purpose of planning and preparing the opening of a Work Area

(6)    The implementation of the provisions concerning the ownership, term, use,
       confidentiality, management, and utilization of data as referred to in paragraphs (1),
       (2), (3), (4) and (5), shall be further regulated in Government Regulation.

                                         Article 21

(1)    The plan to develop the first field to be operated in a Work Area should earn approval
       of the Minister based on the consideration from the Implementing Body and on
       consultation with the Provincial Government concerned.

(2)    In developing and operating an Oil and Natural Gas field, the Business Entity or
       Permanent Establishment concerned shall be obligated to make optimization and
       implement it according to good engineering standards.

(3)    Provisions concerning field development, production of Oil and Natural Gas reserves,
       and provisions concerning the engineering standards as referred to in paragraphs (1)
       and (2) shall be further regulated by a Government Regulation.

                                         Article 22

(1)    A Business Entity or Permanent Establishment shall be obligated to deliver a
       maximum of 25% (twenty-five percent) of its entitled Crude Oil and/or Natural Gas
       production to meet domestic needs.

(2)    The implementation of the provision as referred to in paragraph (1) shall be further
       regulated in a Government Regulation.


                                   CHAPTER V
                          DOWNSTREAM BUSINESS ACTIVITIES

                                         Article 23

(1)    Downstream Business Activities as referred to in Article 5 number 2 can be
       implemented by a Business Entity after obtaining a Business License from the
       Government.

(2)    A Business License required for Crude Oil business and/or Natural Gas business
       activities as referred to in paragraph (1) shall be distinguished as follows:

       a.     Processing Business License;
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       b.     Transportation Business License;
       c.     Storage Business License;
       d.     Trading Business License.

(3)    Every Business Entity may be granted more than 1 (one) Business Licenses to the
       extent that it does not contravene applicable laws and regulations.

                                           Article 24

(1)    A Business License as referred to in Article 23 shall contain at least the following:

       a.     name of operator;
       b.     type of business approved;
       c.     obligations in business undertaking;
       d.     technical requirements.

(2)    Any Business License which has been granted as referred to in paragraph (1) shall
       only be used in accordance with its intended purpose.

                                           Article 25

(1)    The Government may issue a written remind, suspend activities, freeze activities, or
       revoke the Business License as referred to in Article 23 on the following grounds:

       a.     violation against any of the conditions set out in the Business License;
       b.     recurrence of violations against the conditions set out in the Business
              License;
       c.     failure to meet the conditions as established on the basis of this Law.

(2)    Prior to the revocation of a Business License as referred to in paragraph (1), the
       Government shall first give the Business Entity an opportunity for a certain period to
       redress the violations which have been conducted or to fulfill the given requirements.

                                           Article 26

For activities of field Processing, Transportation, Storage, and Selling its own products as a
follow-up to the Exploration and Exploitation conducted by a Business Entity or Permanent
Establishment, a separate Business License as referred to in Article 23 is shall not be
required.

                                           Article 27

(1)    The Minister shall determine a national Natural Gas transmission and distribution
       network master plan.

(2)    A Business Entity holding a Natural Gas Transportation Business License through a
       pipeline network shall only be granted a certain section of Transportation pipeline.

(3)    A Business Entity holding a Trading Business License of Natural Gas through a
       pipeline network shall only be granted a certain Trading area.

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                                           Article 28

(1)    Fuel and certain processed products which are put on the domestic market to meet
       public needs should comply with the standard and quality requirements set out by the
       Government.

(2)    Fuel and Natural Gas prices shall be left to the mechanism of a fair and healthy
       competition.

(3)    The implementation of pricing policy as referred to in paragraph (2) shall not prejudice
       social responsibility of the Government to certain community groups.

                                           Article 29

(1)    In a region experiencing Fuel shortage, and in remote areas, Transportation and
       Storage facilities, including support facilities, may be used jointly with other parties.

(2)    The implementation of the utilization of facilities as referred to in paragraph (1) shall
       be regulated by the Regulatory Body by considering technical and economic aspects.

                                           Article 30

Provisions concerning Processing, Transportation, Storage and Trading businesses as
referred to in Articles 23, 24, 25, 26, 27, 28 and 29 shall be further regulated by a Government
Regulation.


                                       CHAPTER VI
                                     STATE REVENUES

                                           Article 31

(1)    A Business Entity or Permanent Establishment carrying out Upstream Business
       Activities as referred to in Article 11 paragraph (1) shall be obligated to pay the state
       revenues in the form of tax and non-tax state revenues.

(2)    The state tax revenues as referred to in paragraph (1) shall consist of:

       a.      taxes;
       b.      import duties, and other levies on import and excise;
       c.      regional taxes and retributions.

(3)    The State Non-tax Revenues as referred to in paragraph (1) shall consist of:

       a.      government entitlement;
       b.      state levies in the form of dead rent and Exploration and Exploitation royalties;
       c.      bonuses.

(4)    The Co-operation Contract shall provide that the obligation to pay taxes as referred to
       in paragraph (2) letter a shall be made in accordance with:

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       a.     the provisions of the prevailing laws and regulations on taxation at the time the
              Co-operation Contract is signed;or
       b.     the provisions of the prevailing laws and regulations on taxation.

(5)    The provisions concerning the method of computing the state entitlement, state
       levies, and bonuses as referred to in paragraph (3), and the method of depositing
       them shall be further regulated in a Government Regulation.

(6)    The State Non-tax Revenues as referred to in paragraph (3) shall constitute the
       Central Government and Regional Government revenues, the distribution of which
       shall be stipulated in accordance with the prevailing laws and regulations.

                                           Article 32

A Business Entity carrying out Downstream Business Activities as referred to in Article 23
shall pay taxes, import duties, and other levies on import, excises, regional taxes and
retributions, and other obligations pursuant to the prevailing laws and regulations.


                                CHAPTER VII
      RELATIONSHIP OF OIL AND NATURAL GAS ENTERPRISES TO LAND TITLE

                                           Article 33

(1)    The operation of Oil and Natural Gas enterprises as referred to in Article 5 shall be
       carried out within the Indonesian Mining Territory.

(2)    The right to a Work Area shall not include the right to the land surface.

(3)    The operation of Oil and Natural Gas enterprises may not be carried out at:

       a.     cemeteries, sacred places, public places, public facilities and infrastructures,
              nature preserve, culture preserve, and customary community land;
       b.     the state defense fields and buildings and the surrounding areas;
       c.     historical buildings and symbols of the state;
       d.     buildings, dwelling houses or factories and the surrounding areas,

       except on permission of the Government authorities, or on approval of the
       communities and individuals concerned.

(4)    A Business Entity or Permanent Establishment which plans to carry out activities may
       relocate the buildings, public places, public facilities and infrastructures as referred to
       in paragraph (3) letters a and b, after receiving a prior permit from the authorities
       concerned.

                                           Article 34

(1)    In the event that a Business Entity or Permanent Establishment plans to use plots of
       titled land or state land in its Work Area, the Business Entity or Permanent
       Establishment concerned should first settle with the title holder or user of the state
       land pursuant to the prevailing laws and regulations.
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(2)    The settlement as referred to in paragraph (1) shall be conducted through deliberation
       to meet consensus by sale and purchase, exchange, proper compensation,
       recognition or other form of compensation to the title holder or user of the state land.

                                          Article 35

The holder of title to the land shall be obligated to permit a Business Entity or Permanent
Establishment to carry out Exploration and Exploitation on such land, if:

a.     prior to commencing the activity, a Co-operation Contract or its valid copy should be
       shown and the title holder should be informed of the purpose and location of the
       activity to be conducted;

b.     the settlement or guarantee of settlement approved by the holder of title to the land or
       user of the state land as referred to in Article 34 has been made.

                                          Article 36

(1)    In the event that a Business Entity or Permanent Establishment is granted a Work
       Area, the pertinent land to be used directly for the operation of Oil and Natural Gas
       enterprises and its safety perimeters shall be granted the right of use pursuant to the
       prevailing laws and regulations, and the Business Entity or Permanent Establishment
       shall be obligated to protect and maintain the land.

(2)    In the event that the granting of a Work Area as referred to in paragraph (1)covers a
       vast state land, then portions of the area which are not used for the operation of Oil
       and Natural Gas enterprises may be granted to another party by the Minister whose
       jurisdiction covers agrarian or land affairs, by giving priority to local people, on
       recommendation of the Minister.

                                           Article 37

Provisions concerning the procedures for settling the use of titled land or state land as
referred to in Article 35 shall be further regulated in a Government Regulation.


                                   CHAPTER VIII
                           DEVELOPMENT AND SUPERVISION

                                         Part One
                                        Development

                                          Article 38

Development of the operation of Oil and Natural Gas enterprises shall be conducted by the
Government.

                                          Article 39

(1)    The development as referred to in Article 38 shall include:
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       a.     managing governmental affairs in the field of Oil and Natural Gas business
              activities.

       b.     establishing policies on Oil and Natural Gas business activities based on the
              reserves and potential of Oil and Natural Gas resources, production capability,
              domestic needs for Fuel and Natural Gas, technology acquisition,
              environmental aspects and environmental conservation, national capabilities
              and development policy.

(2)    The implementation of development as referred to in paragraph (1) shall be performed
       in anaccurate, transparent and fair manner in the undertaking of Oil and Natural Gas
       business activities.

                                            Article 40

(1)    A Business Entity or Permanent Establishment shall ensure that the standards and
       quality in application are in accordance with the prevailing laws and regulations and
       apply good engineering standards.

(2)    A Business Entity or Permanent Establishment shall ensure occupational safety and
       health as well as environmental management and comply with the applicable laws
       and regulations relating to Oil and Natural Gas business activities.

(3)    Environmental management as referred to in paragraph (2) shall mean an obligation
       to prevent and control pollution and rehabilitate the environment in the event of
       damage, including post mining operation obligation.

(4)    A Business Entity or Permanent Establishment carrying out Oil and Natural Gas
       business activities as referred to in Article 5 shall give priority to use local manpower,
       domestic goods, services, as well as engineering and design capabilities in a
       transparent and competitive manner.

(5)    A Business Entity or Permanent Establishment carrying out Oil and Natural Gas
       business activities as referred to in Article 5 shall also accept the responsibility for the
       development of the surrounding environment and neighboring communities.

(6)    Provisions concerning occupational safety and health and environmental
       management as referred to in paragraphs (1) and (2) shall be further regulated in a
       Government Regulation.

                                           Part Two
                                          Supervision

                                            Article 41

(1)    Responsibility for supervising the work and implementation of Oil and Natural Gas
       business activities with regard to adherence to the prevailing laws and regulations
       shall be held by the Department whose jurisdiction covers Oil and Natural Gas
       business activities and other related departments.

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(2)    Supervision over the implementation of Upstream Business Activities based on
       Co-operation Contracts shall be conducted by the Implementing Body.

(3)    Supervision over the implementation of Downstream Business Activities based on
       Business License shall be conducted by the Regulatory Body.

                                           Article 42

Supervision as referred to in Article 41 paragraph (1) shall cover:

a.     conservation of Oil and Natural Gas resources and reserves;
b.     management of Oil and Natural Gas data;
c.     application of good engineering standards;
d.     types and quality of processed Oil and Natural Gas products;
e.     allocation and distribution of Fuel and raw materials;
f.     occupational safety and health;
g.     environmental management;
h.     use of domestic goods, services, technology and engineering and design capabilities;
i.     utilization of expatriate manpower;
j.     national manpower development;
k.     environmental and Local community development;
l.     acquisition, development and application of Oil and Natural Gas technology;
m.     other Oil and Natural Gas related activities to the extent they affect public interest.

                                           Article 43

Further provisions on development and supervision as referred to in Articles 38, 39, 41 and
42 shall be further regulated in a Government Regulation.


                                   CHAPTER IX
                     IMPLEMENTING BODY AND REGULATORY BODY

                                           Article 44

(1)    Supervision over the implementation of a Co-operation Contract on Upstream
       Business Activities as referred to in Article 5 number 1 shall be performed by an
       Implementing Body as referred to in Article 4 paragraph (3).

(2)    The function of the Implementing Body as referred to in paragraph (1) shall be to
       supervise Upstream Business Activities to ensure that the exploitation of Oil and
       Natural Gas which belongs to the state gives maximum benefit and revenues to the
       state for maximum prosperity of the people.

(3)    The duties of the Implementing Body as referred to in paragraph (1) shall be to:

       a.      provide consideration to the Minister on its policy for the preparation and offer
               of a Work Area and Co-operation Contract;
       b.      sign a Co-operation Contract;
       c.      assess and submit the development plan for the first field to be operated in a
               Work Area to the Minister for approval;
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       d.     approve of field development plans other than that as referred to in letter c;
       e.     approve of work programs and budget;
       f.     monitor and report to the Minister on the implementation of the Co-operation
              Contact;
       g.     appoint the seller of Crude Oil and/or Natural Gas which becomes the
              Government's entitlement that can give maximum benefits to the state.

                                        Article 45

(1)   The Implementing Body as referred to in Article 4 paragraph (1) shall be a
      state-owned legal entity.

(2)   The Implementing Body shall consist of management board, expert, technical, and
      administrative staff.

(3)   The head of the Implementing Body shall be installed and discharged by the President
      on consultation with the House of Representatives of the Republic of Indonesia and, in
      performing his/her duties, shall be responsible to the President.

                                        Article 46

(1)   Supervision over the implementation of Fuel supply and distribution, and Natural Gas
      transportation through pipelines shall be performed by the Regulatory Body as
      referred to in Article 8 paragraph (4).

(2)   The function of the Regulatory Body as referred to in paragraph (1) shall be to ensure
      the supply and distribution of Fuel and Natural Gas stipulated by the Government
      throughout the territory of the Unitary State of the Republic of Indonesia and to
      promote domestic beneficial use of Natural Gas

(3)   The duties of the Regulatory Body as referred to in paragraph (1) shall cover the
      regulation and stipulation of:

       a.     fuel supply and distribution;
       b.     national Fuel reserves;
       c.     beneficial use of Fuel Transportation and Storage facilities;
       d.     tariff of Natural Gas Transportation through pipelines;
       e.     Natural Gas prices for households and small scale customers;
       f.     Natural Gas transmission and distribution undertaking.

(4)    The duties of the Regulatory Body as referred to in paragraph (1) shall also include
       field supervision as referred to paragraph (3).

                                        Article 47

(1)    The structure of the Regulatory Body as referred to in Article 8 paragraph (4) shall
       consist of a committee and sections.

(2)    The committee as referred to in paragraph (1) shall consist of 1 (one) chairman
       concurrently a member and 8 (eight) members all of whom are professionals.

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(3)    The Chairman and members of the Committee of the Regulatory Body as referred to
       in paragraph (1) shall be installed and discharged by the President on approval of the
       House of Representatives of the Republic of Indonesia.

(4)    The Regulatory Body as referred to in Article 8 paragraph (4) shall be responsible to
       the President.

(5)    The Regulatory Body as referred to in Article 8 paragraph (4) shall be established by a
       Presidential Decree.

                                          Article 48

(1)    The operational budget of the Implementing Body as referred to in Article 45 shall be
       based on remuneration (fee) from the Government in accordance with the prevailing
       laws and regulations.

(2)    The operational budget of the Regulatory Body as referred to in Article 46 shall be
                                      nd
       based on the State Revenue a Expenditure Budget and contributions from the
       Business Entities regulated by it in accordance with the prevailing laws and
       regulations.

                                          Article 49

Provisions concerning the organizational structure, status, function, duties, personnel,
authority and responsibilities, and work mechanism of the Implementing Body and the
Regulatory Body as referred to in Articles 41, 42, 43, 44, 45, 46, 47 and 48 shall be further
regulated in a Government Regulation.


                                        CHAPTER X
                                      INVESTIGATION

                                          Article 50

(1)    In addition to the Investigating Officers from the Republic of Indonesia Police, certain
       Civil Servants within the department whose scopes of duties and responsibilities
       encompass Oil and Natural Gas business activities shall be given special authority as
       Investigators as referred to in Law Number 8 Year 1981 concerning Criminal
       Procedural Law to investigate criminal acts in Oil and Natural Gas business activities.

(2)    The Civil Servant Investigators as referred to in paragraph (1) shall have the authority
       to:

       a.     investigate reports or information received for their correctness with regard to
              a criminal act in the Oil and Natural Gas business activities;
       b.     investigate persons or entities suspected of committing a crime in the Oil and
              Natural Gas business activities;
       c.     summon persons for hearing and examination as witnesses or suspects in
              criminal acts in Oil and Natural Gas business activities;
       d.     search places and/or facilities suspected of being used to commit a crime in
              Oil and Natural Gas business activities;
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       e.     investigate the facilities and infrastructure of Oil and Natural Gas business
              activities and stop the use of equipment suspected of being used to commit a
              crime;
       f.     seal off and/or confiscate equipment of Oil and Natural Gas business activities
              used to commit a crime as evidence;
       g.     bring in experts required in relation to the investigation of a criminal case in Oil
              and Natural Gas business activities; and
       h.     cease investigation of a criminal case in Oil and Natural Gas business
              activities.

(3)    The Civil Servant Investigator as referred to in paragraph (1) shall notify the Police of
       the Republic of Indonesia of the commencement of a criminal case investigation in
       accordance with the prevailing laws and regulations.

(4)    The Investigator as referred to in paragraph (1) shall be obligated to cease
       investigation in the event that the cases as referred to in paragraph (2) letter a are not
       corroborated and/or the case is not of criminalact.

(5)    The authority as referred to in paragraph (2) shall be exercised pursuant to the
       prevailing laws and regulations.


                                       CHAPTER XI
                                   CRIMINAL PROVISIONS


                                           Article 51

(1)    Whoever unlawfully carries out a General Survey as referred to in Article 19
       paragraph (1) shall be punished with a maximum of 1 (one) year's imprisonment or
       Rp. 10,000,000,000 (ten billion Rupiah) fine.

(2)    Whoever unlawfully dispatches or delivers or turns over data as referred to in Article
       20 in any form shall be punished with a maximum of 1 (one) year's imprisonment or
       Rp. 10,000,000,000 (ten billion Rupiah) fine.

                                           Article 52

Whoever carries out Exploration and Exploitation activities without a Co-operation Contract
as referred to in Article 11 paragraph (1) shall be punished with a maximum of 6 (six) years'
imprisonment or a maximum of Rp. 60,000,000,000 (sixty billion Rupiah) fine.

                                           Article 53

Whoever carries out:

a.     Processing activities as referred to in Article 23 without a Processing Business
       License shall be punished with a maximum of 5 (five) years' imprisonment and a
       maximum of Rp. 50,000,000,000 (fifty billion Rupiah) fine;


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b.     Transportation activities as referred to in Article 23 without a Transportation Business
       License shall be punished with a maximum of 4 (four) years' imprisonment and a
       maximum of Rp. 40,000,000,000 (forty billion Rupiah) fine;

c.     Storage activities as referred to in Article 23 without a Storage Business License shall
       be punished with a maximum of 3 (three) years' imprisonment and a maximum of Rp.
       30,000,000,000 (thirty billion Rupiah) fine;

d.     Trading activities as referred to in Article 23 without a Trading Business License shall
       be punished with a maximum of 3 (three) years' imprisonment and a maximum of Rp.
       30,000,000,000 (thirty billion Rupiah) fine.

                                           Article 54

Whoever imitates or forges Fuel and Natural Gas and other processed products as referred
to in Article 28 paragraph (1) shall be punished with a maximum of 6 (six) years'
imprisonment and a maximum of Rp. 60,000,000,000 (sixty billion Rupiah) fine.

                                           Article 55

Whoever abuses the Transportation and/or Trading of Government-subsidized Fuel shall be
punished with a maximum of 6 (six) years' imprisonment and a maximum of Rp.
60,000,000,000 (sixty billion Rupiah) fine.

                                           Article 56

(1)    In the event that any of the crimes as referred to in this Section is committed by or on
       behalf of a Business Entity or Permanent Establishment, the pertinent criminal charge
       and penalty may be imposed on the Business Entity or Permanent Establishment
       and/or its management.

(2)    In the event that the crime is committed by a Business Entity or Permanent
       Establishment, the pertinent penalty imposed on the Business Entity or Permanent
       Establishment shall be a fine with the provision that one third of the amount shall be
       added to the maximum fine.

                                           Article 57

(1)    The criminal acts as referred to in Article 51 constitute misdemeanors.

(2)    The criminal acts as referred to in Articles 52, 53, 54 and 55 constitute felonies.

                                           Article 58

In addition to criminal provisions as referred to this Section, additional penalty shall be the
revocation of the rights granted or confiscation of goods used for or obtained from the
criminal acts committed in Oil and Natural Gas business activities


                                      CHAPTER XII
                                TRANSITIONAL PROVISIONS
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                                           Article 59

At the time this Law enters into force:
a.       At the latest 1 (one) year, the Implementing Body shall be established.
b.       At the latest 2 (two) years, the Regulatory Body shall be established

                                           Article 60

At the time this Law enters into force:
a.       at the latest 2 (two) years, Pertamina shall be converted into a "Persero" by a
         Government Regulation;

b.     to the extent the Persero as intended in letter a has not been established, Pertamina
       which was established based on Law Number 8 Year 1971 (Statute Book Year 1971
       Number 76, Supplement to State Gazette Number 2971) shall be obligated to
       undertake the operation of Oil and Natural Gas enterprises, as well as to regulate and
       manage its assets, employees and other important matters as required;

c.     at the time a new "Persero" is established, Pertamina's obligations as intended in
       letter b shall be transferred to said "Persero".

                                           Article 61

At the time this Law enters into force:

a.     Pertamina shall continue performing the tasks and functions of developing and
       supervising Exploration and Exploitation contractors, including the Production Sharing
       Contractors until the Implementing Body is established; and

b.     at the time a "Persero" is established substituting Pertamina, said state-owned
       business entity shall be obligated to enter into a Co-operation Contract with the
       Implementing Body to continue Exploration and Exploitation in ex Mining Authority Area
       of Pertamina and shall be considered as having obtained the required Business
       License as meant in Article 24 for the Processing, Transportation, Storage, and
       Trading businesses.

                                           Article 62

At the time this Law enters into force, Pertamina shall continue performing the duties of
supplying and serving Fuel for domestic needs for a maximum period of 4 (four) years.

                                           Article 63

At the time this Law enters into force:

a.     upon the establishment of the Implementing Body, all rights, obligations, and
       consequences arising from a Production Sharing Contract between Pertamina and
       other parties shall be transferred to the Implementing Body;


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b.     upon the establishment of the Implementing Body, other contracts relating to those as
       referred to in letter a between Pertamina and other parties shall be transferred to the
       Implementing Body;

c.     all contracts as referred to in letters a and b shall remain valid until the expiration of
       the contracts concerned;

d.     rights, obligations and consequences arising from contracts, agreements or
       commitments other than those as referred to in letters a and b shall continue to be
       performed by Pertamina until a "Persero" is established to which they shall be
       transferred;

e.     the implementation of discussions or negotiations between Pertamina and other
       parties in the context of co-operation in the field of Exploration and Exploitation shall
       be transferred to the Minister.

                                           Article 64

At the time this Law enters into force:

a.     a state-owned business entity other than Pertamina which is engaged in Oil and
       Natural Gas enterprises shall be considered as having obtained a Business License
       as referred to in Article 23;

b.     construction work which is being carried out by a state-owned business entity as
       referred to in letter a shall be continued by said state-owned business entity;

c.     the state-owned business entity as referred to in letter a shall, at the latest 1 (one)
       year, set up a Business Entity whose business activities shall be in accordance with
       the provisions of this Law;

d.     a contract or agreement between a state-owned business entity as referred to in letter
       a and other parties shall remain in effect until the expiration of the contract or
       agreement.

                                        CHAPTER XIII
                                     OTHER PROVISIONS

                                           Article 65

Business activities of Oil and Natural Gas other than those as referred to in Article 1 numbers
1 and 2, to the extent they have not been or are not regulated in other laws, shall be subject to
this Law.

                                      CHAPTER XIV
                                   CLOSING PROVISIONS

                                           Article 66

(1)    With the entering into force of this Law, the following laws are hereby declared null
       and void:
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         a.     Law Number 44 Prp Year 1960 concerning Oil and Natural Gas Mining (State
                Gazette Year 1960 Number 133, Supplement to State Gazette Number 2070);

         b.     Law Number 15 Year 1962 concerning the Enactment of Government
                Regulation in lieu of Law Number 2 Year 1962 concerning Obligations of Oil
                Companies to Meet Domestic Needs (State Gazette Year 1962 Number 80,
                Supplement to State Gazette Number 2505);

         c.     Law Number 8 Year 1971 concerning the State Oil and Natural Gas Mining
                Company (State Gazette Year 1971 Number 76, Supplement to State Gazette
                Number 2971) and its amendments, the latest being by Law Number 10 Year
                1974 (State Gazette Year 1974 Number 3045).

(2)      All enforcement regulations of Law Number 44 Prp Year 1960 on Oil and Natural Gas
         Mining (State Gazette Year 1960 Number 133, Supplement to State Gazette Number
         2070) and Law Number 8 Year 1971 concerning the State Oil and Natural Gas Mining
         Company (State Gazette Year 1971 Number 76, Supplement to State Gazette
         Number 2971) shall remain valid to the extent they are not contrary to or have not yet
         been replaced by new regulations on the basis of this Law.

                                           Article 67

This Law shall enter into force as of the date of its promulgation.

For public cognizance, the promulgation of this Law shall be placed in the State Gazette of
the Republic of Indonesia.


Signed in Jakarta
On November 23, 2001
The President of the Republic of Indonesia

Signed

Megawati Soekarnoputri


Promulgated in Jakarta

On November 23, 2001

State Secretary of the Republic of Indonesia

Signed

Bambang Kesowo

State Gazette of the Republic of Indonesia Year 2001 Number 136



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                                     ELUCIDATION
                                         OF
                          LAW OF THE REPUBLIC OF INDONESIA
                                NUMBER 22 YEAR 2001
                                    CONCERNING
                                OIL AND NATURAL GAS

I.     GENERAL

Article 33 paragraphs (2)and (3)of the 1945 Constitution provides that branches of production
which are important for the State and affect the livelihood of the majority of the people shall be
controlled by the State. Likewise, land and waters and natural resources contained therein
shall be controlled by the State and made use of for maximum prosperity and welfare of the
people. Considering that Oil and Natural Gas are non-renewable strategic natural resources
which are controlled by the State and vital commodities playing important roles in supplying
raw materials for industries and fulfilling domestic energy requirements and as a significant
contributor of foreign reserves for the State, their management needs to be optimized so that
they can be made use of for maximum prosperity and welfare of the people.

In fulfilling the provision of the 1945 Constitution, after four decades from the enactment of
Law Number 44 Prp Year 1960 concerning Oil and Natural Gas Mining and Law Number 8
Year 1971 concerning State Oil and Natural Gas Company, constraints are confronting their
implementation because the substance of the two Laws are no longer compatible to both
present situation and future needs.

In dealing with the future needs and global challenges, oil and natural gas business sector is
called on to provide greater support to ensure the continuity of national development and the
enhancement of the people's prosperity and welfare.

Based on the foregoing, it is deemed necessary to make a law on Oil and Natural Gas
providing a legal basis for reforms and restructuring of the undertaking of Oil and Natural Gas
enterprises.

The making of this Law has the following purposes:

1.     To implement and control Oil and Natural Gas as strategic and vital natural and
       development resources;

2.     To support and enhance the national competitiveness capability;

3.     To increase the state revenues and provide maximum contribution to the national
       economy, to develop and strengthen Indonesian industry and trade;

4.     To create employment opportunity, remedy the environment, and improve the
       people's welfare and prosperity.

This Law contains basic provisions on Oil and Natural Gas as strategic natural resources
contained within the Indonesian Mining Territory and constitute national wealth controlled by
the State, the organization of which is exercised by the Government as the holder of Mining
Authority in the Upstream Business Activities. Downstream Business Activities shall be
carried out upon obtaining a Business License from the Government.
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In order that functions of the Government as a regulator, facilitator and supervisor run more
efficiently, an Implementing Body shall be set up for the Upstream Business Activities, and a
Regulatory Body shall be set up for the Downstream Business Activities.

II.    Article by Article

Article 1
        Self-explanatory

Article 2
        Self-explanatory

Article 3
        Self-explanatory

Article 4
        Paragraph (1)
               Based on the ambit of Article 33 paragraph (3) of the 1945 Constitution, Oil
               and Natural Gas as strategic natural resources contained within the
               Indonesian Mining Territory are national assets controlled by the State.The
               control by the State is meant to enable their beneficial utilization for maximum
               prosperity of all Indonesian people. Therefore, individual persons, communities
               or business actors, though in possession of the right to a piece of land by its
               surface, has no right to control or take possession of Oil and Natural Gas
               contained therein.

       Paragraph (2)
              Self-explanatory

       Paragraph (3)
              Self-explanatory

Article 5
        Paragraph (1)
               Self-explanatory

       Paragraphs (2)
             In this provision, the meaning of Trading shall include Natural Gas Trading
             through both transmission pipelines and distribution pipelines.

Article 6
        Paragraph (1)
               In addition to the requirement to comply with prevailing laws and regulations, a
               Business Entity or Permanent Establishment shall also be required to comply
               with certain obligations in running its business.

       Paragraph (2)
              The form of Co-operation Contract in this provision shall be Production
              Sharing Contract or other forms of Exploration and Exploitation contract which
              are more advantageous to the state.
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              Further, in this provision, what is meant by:

              1.      Point of delivery shall be the point of sale of Oil and Natural Gas.
              2.      Control of operational management shall be the granting of approval of
                      the work plan and budget, field development plan and the supervision of
                      the realization of such plan.
              3.      Capital and risk entirely borne by the Business Entity and Permanent
                      Establishment shall be that, in this Co-operation Contract, the
                      Government through the Implementing Body based on this Law shall
                      not be allowed to make investment and bear financial risk in the
                      implementation of the Co-operation Contract.

Article 7
        Paragraph (1)
               Self-explanatory

       Paragraph (2)
              The implementation through a fair, sound and transparent competition
              mechanism shall not mean that the Government may put aside its social
              responsibility.

Article 8
        Paragraph (1)
               Government Regulation to implement this provision shall cover main
               substances, among other things, priority of Natural Gas utilization, quantity,
               type and location of the Crude Oil strategic reserves.

       Paragraph (2)
              The Government shall be obligated to ensure that domestic Fuel requirements
              throughout the country, including remote areas, are met and that adequate
              quantity of national stock for a certain period of time is always maintained.

       Paragraph (3)
              Since Natural Gas pipeline network constitutes a facility which is monopolistic
              by its nature, its beneficial utilization needs to be regulated and supervised to
              ensure equal service treatment for all users.

              Further, public interest in this provision shall mean interests of the producers,
              consumers and other society related to Natural Gas Transportation activities.

       Paragraph (4)
              Self-explanatory

Article 9
        Paragraph (1)
               This provision is meant to give the broadest opportunity to large, medium and
               small scale Business Entities to undertake Upstream and Downstream
               Business Activities with the operational scale based on financial and technical
               capability of the Business Entity.

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       Paragraph (2)
              Upstream Business Activities confronting high risk are carried out by many
              international companies with an extensive international network. In order to
              create a conducive investment climate aimed at encouraging capital
              investment, including foreign capital investment, an opportunity shall be
              provided by an exemption from the need to establish a Business Entity.

Article 10
         Paragraph (1)
                Since Upstream Business Activities are activities extracting non-renewable
                resources which constitute state assets, the state should obtain from such
                activities as maximum benefit as possible for prosperity of the people.

               Downstream Business Activities are activities of a business nature in general
               in which production and losses which can possibly arise cannot be charged
               (consolidated) to Upstream Business Activities costs. That Upstream
               Business Activity and Downstream Business Activity costs may not be
               consolidated is meant to ensure that the distribution of revenues by the
               Central Government and the Regional Government as referred to in Article 31
               paragraph (6) shall be made clear.

               In the event that a Business Entity carries out both Upstream and
               Downstream Business Activities at the same time, then separate legal entities
               should be set up, such as by way of a Holding Company.

       Paragraph (2)
              Self-explanatory

Article 11
         Paragraph (1)
                The Government shall set forth these obligations in the provisions of the
                Co-operation Contract, as such the Government shall be able to control
                Upstream Business Activities through such provisions and the prevailing laws
                and regulations as referred to in Article 6 paragraph (1).

       Paragraph (2)
              Every Co-operation Contract that has been mutually agreed and signed by
              both parties shall have its copy delivered to the Indonesian House of
              Representative Commission in charge of Oil and Natural Gas.

       Paragraph (3)
              This provision is intended to give legal certainty to the parties to the
              Co-operation Contract.

Article 12
         Paragraph (1)
                Consultation with the Regional Government shall be conducted in order to
                provide explanation and obtain information regarding the plan to offer a certain
                area which is deemed to host potential for Oil and Natural Gas resources as a
                Work Area.

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               The consultation with the Regional Government shall be conducted by the
               Governor in charge of the implementation of the Regional Government in
               accordance with the provisions of Law regarding Regional Government.

       Paragraph (2)
              In the realization, the Minister shall maintain a coordination with the
              Implementing Body.

       Paragraph (3)
              In the realization, the Minister shall maintain a coordination with the
              Implementing Body.

Article 13
         Paragraph (1)
                Self-explanatory

       Paragraph (2)
              This provision is meant to avoid consolidated charging and/or refund of
              Exploration and Exploitation costs from a Work Area to another.

               This provision is also meant to avoid ambiguity in the distribution of revenues
               by the Central Government and each Regional Government related to the
               Work Area concerned.

Article 14
        Self-explanatory

Article 15
         Paragraphs (1)
                Self-explanatory

       Paragraph (2)
              If during Exploration period a Business Entity or Permanent Establishment
              fails to locate economically mineable Crude Oil and/or Natural Gas reserves, it
              shall be obligated to relinquish its Work Area entirely.

Article 16
        This provision is meant to allow part(s) and/or all of the Work Area which is (are) not
         utilized to be offered to another party as a new Work Area.

       In this way, the Government may gain optimum results from beneficial utilization of
       natural resources from an area.

Article 17
        Self-explanatory

Article 18
        The Government Regulations as the enforcement regulations for this provision shall
         contain basic provisions on the terms and conditions of the Co-operation Contract,
         the terms and procedures for determining and offering a Work Area, extensions of
         Co-operation Contract, determination and relinquishment of a Work Area.
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Article 19
         Paragraph (1)
                Self-explanatory

       Paragraph (2)
              Government Regulations concerning General Survey shall contain basic
              provisions on the operator of General Survey, types of activities, schedule of
              operation, operating procedure, and survey data management.

Article 20
         Paragraph (1)
                Self-explanatory

       Paragraph (2)
              Self-explanatory

       Paragraph (3)
              Self-explanatory

       Paragraph (4)
              Data or information on subsurface condition obtained from investment made
              by a Business Entity or Permanent Establishment may not be disclosed
              directly to the public in order to protect its investment interests.

               The data may be declassified after a certain period of time and any interested
               parties may use such data. Data confidentiality period shall depend on its type
               and classification.

       Paragraph (5)
              Self-explanatory

       Paragraph (6)
              Government Regulations as the enforcement regulations of this provision shall
              contain basic provisions on the authority and responsibilities of the
              Government, types of data, data classification and confidentiality period, data
              administration and maintenance, as well as utilization period and surrender of
              data.

Article 21
         Paragraph (1)
                The approval of the Minister in this provision shall be required since
                development of the first field in a Work Area shall determine whether the
                Business Entity or Permanent Establishment shall relinquish or continue
                operating the Work Area.

               Approval for further field development within the Work Area shall be granted by
               the Implementing Body.




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              Consultation with the Regional Government as referred to in this provision is
              required in order that the proposed field development plan can be
              co-coordinated with the Provincial Government, especially those related to the
              spatial management plan and the projected regional revenue from Oil and
              Natural Gas in the region in accordance with the prevailing laws and
              regulations.

       Paragraph (2)
              This provision is meant to allow the Business Entity or Permanent
              Establishment, in exploiting Oil and Natural Gas resources, to take into
              consideration Oil and Natural Gas resources optimization and conservation
              and to perform in accordance with good engineering standards.

       Paragraph (3)
              Government Regulations as the enforcement regulations for this provision
              shall contain basic provisions on the types of field development and plan,
              engineering standards, obligatory reporting, and procedures for giving approval
              of field development plan.

Article 22
         Paragraph (1)
                This provision is meant to ensure the supply of Crude Oil and/or Natural Gas
                produced from the Indonesian Mining Territory for domestic Fuel needs. The
                delivery of a maximum 25% (twenty-five percent) of its entitlement from the
                production of Oil and/or Natural Gas in this provision shall mean that if a
                certain Work Area produces Oil and Natural Gas, the Business Entity or the
                Permanent Establishment shall be obligated to deliver a maximum of 25%
                (twenty-five percent) of its entitlement from the produced Crude Oil and a
                maximum of 25% (twenty-five percent) of its entitlement from the produced
                Natural Gas.

       Paragraph (2)
              Government Regulations as referred to in this provision shall contain basic
              provisions on the condition of domestic needs, implementing mechanism and
              provisions on pricing as well as the policy on granting incentives related to the
              implementation of the obligation of the Business Entity or the Permanent
              Establishment to deliver a portion of its Crude Oil and/or Natural Gas from its
              production.

Article 23
         Paragraph (1)
                A Business License is a license issued to a Business Entity by the
                Government in accordance with its respective authority, to carry out
                Processing, Transportation, Storage and/or Trading activities subject to its
                meeting the necessary requirements.

              In matters involving the interest of the Region, the Government shall issue a
              Business License only after the Business Entity concerned has e      arned a
              recommendation from the Regional Government.

       Paragraph (2)
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               This provision is meant to more effectively supervise and control a Business
               Entity engaging in Processing, Transportation, Storage and/or Trading
               activities.

               The Government shall be required to either grant or decline a request for
               Business License submitted by a Business Entity within a period of time as
               stipulated in the applicable laws and regulations.

       Paragraph (3)
              Self-explanatory

Article 24
        Self-explanatory

Article 25
         Paragraph (1)
               Self-explanatory

       Paragraph (2)
              In consideration of, among other things, that the Downstream Business
              Activities involve commodities which affect the livelihood of the people and big
              investments, the Government and/or the Regional Government may, in
              accordance with their respective authorities, give an opportunity to the
              Business Entity to redress the violations committed before its Business
              License is revoked.Aside from for a violation committed, a Business License
              may also be revoked at the request of the holder of the Business License
              itself.

Article 26
        Since the facilities built for the purpose of field processing, transportation, storage and
         marketing of Oil and Natural Gas in the context of continuing Exploration and
         Exploitation are not meant for making gain and/or profits from the activities
         themselves, no Business License is required.

       This provision does not apply if the facilities owned by the Business Entity or
       Permanent Establishment are used jointly with a third party by charging fees or rents
       so as to make gain and/or profits, in which case the Business Entity or Permanent
       Establishment shall require a Business License.

Article 27
         Paragraph (1)
                The master plan determined by the Government shall be used as an
                investment reference for the development and construction of Natural Gas
                transmission and distribution networks for interested Business Entities.

       Paragraph (2)
              This provision is meant to promote fair competition and to enhance efficiency
              in utilizing facilities and services quality.

               The division of a Transportation business section shall take into consideration
               technical, economical, safety and security aspects.
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        Paragraph (3)
               This provision is meant to promote fair competition and to enhance efficiency
               in utilizing facilities and services quality.

                The division of a Trading area shall take into consideration technical,
                economical, safety and security aspects.

Article 28
         Paragraph (1)
                This provision is intended to protect consumers, public health and the
                environment.

        Paragraph (2)
               Self-explanatory

        Paragraph (3)
               The Government may grant special assistance, as a substitute for subsidy, to
               certain consumers for using a certain type of Fuel. The Government shall
               stipulate Natural Gas pricing policy for household needs and small scale
               customers as well as for other particular usages.

Article 29
         Paragraph (1)
                This provision is meant to provide an opportunity for a joint utilization by a third
                party of the facilities owned by a Business Entity based on a joint agreement in
                the effort to maximize the use of the facilities and its efficient operation in order
                to minimize distribution costs, especially in the event of Fuel shortage in a
                region and in a relatively remote area.

        Paragraph (2)
               Self-explanatory

Article 30
        Government Regulations as enforcement regulations for this provision shall contain
         provisions on the types of business activities, procedures for lodging a request for
         Business License and implementation, standards and quality, obligations of Business
         Entity, classification of infractions, reminding procedures, suspension, Business
         License deferment and revocation, and Regional Government authority relating to
         business licensing.

Article 31
         Paragraph (1)
                Since the provision in this Article is based on the understanding that Upstream
                Business Activities covering Exploration and Exploitation are activities
                extracting non-renewable resources which constitute the state's assets, aside
                from the obligation to pay taxes, import duties and other obligations, the
                Business Entity or Permanent Establishment is also obligated to deliver the
                state non-tax revenues such as the state entitlement, state levies and
                bonuses.

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       Paragraph (2)
              Letter a
                      Self-explanatory

              Letter b
                      Self-explanatory

              Letter c
                      Besides paying regional taxes, a Business Entity or Permanent
                      Establishment shall be obligated to pay regional levies.

       Paragraph (3)
              Letter a
                     The state's entitlement means the portion of production which is
                      delivered by the Business Entity or Permanent Establishment to the
                      State as the owner of the Oil and Natural Gas resources.

              Letter b
                     This provision is based on the understanding that the Business Entity
                      or Permanent Establishment is obligated to pay dead rent according to
                      the size of the Work Area in compensation for the "opportunity" to carry
                      out Exploration and Exploitation activities thereon.

                     An Exploration and Exploitation royalty is imposed on the Business
                     Entity or Permanent Establishment in compensation for extracting
                     non-renewable Oil and Natural Gas resources.

                     The state levy as revenue for the Central Government is the state
                     non-tax revenue (PNBP) as stipulated in the applicable laws and
                     regulations.

              Letter c
                      What is meant by bonuses in this provision shall be bonuses for data,
                      signature and production based on the attainment of a certain level of
                      cumulative production.

       Paragraph (4)
              The provision in this Article is meant to enable the Business Entity or
              Permanent Establishment to choose alternative tax regulations to be applied in
              the Co-operation Contract.This enables the Business Entity or Permanent
              Establishment to choose the tax regulations in accordance with their scale of
              business, since the long-term nature of the Exploration and Exploitation
              business requires a big investment and is of high risk.

       Paragraph (5)
              Government Regulations as enforcement regulations for this provision shall
              contain basic provisions on the computation of the State's entitlement based
              on the percentage of net production;and State levies consisting of dead rent
              per measurement unit of the Work Area, Exploration and Exploitation royalty
              per production volume unit, bonuses and regulations on certain terms in a
              Co-operation Contract.
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       Paragraph (6)
              What is meant by "the distribution of which is stipulated in accordance with the
              prevailing laws and regulations" in this provision is that it shall be in
              accordance with the provisions of the Law on Financial Balance between the
              Central Government and the Regional Government.

Article 32
        Since the Downstream Business Activities covering Processing, Transportation,
         Storage and Trading are not business activities directly related to the extraction of
         non-renewable resources, the obligation to pay taxes, import duties and other
         obligations to the State shall be those imposed on industrial and/or trading business in
         general.

Article 33
         Paragraph (1)
                Self-explanatory

       Paragraph (2)
              Self-explanatory

       Paragraph (3)
              In principle, all operations of Oil and Natural Gas enterprises conducted in a
              location shall require a permit from the relevant Government agency.
              However, in certain places, prior permission from the local community and or
              individual shall be required before a permit from the Government agency may
              be granted.

               Letter a
                      Public places and public facilities and infrastructures referred to in this
                       provision shall mean all facilities which are provided by the Government
                       for public interests and which have social function, such as streets,
                       markets, cemeteries, parks and places of worship.

               Letter b
                       Self-explanatory

               Letter c
                       Self-explanatory

               Letter d
                       Self-explanatory

       Paragraph (4)
              Since public places, public infrastructures and facilities, and defense grounds
              and buildings are facilities built by the Government for public or defense
              purposes, a permit from the relevant Government agency shall be required, by
              taking into consideration recommendations from the community.




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               Especially for cemeteries, sacred places and customary community's land,
               prior approval from the local community shall be required before a permit from
               the authorized Government agency may be issued.

Article 34
         Paragraph (1)
                Self-explanatory

       Paragraph (2)
              What is meant by recognition in this provision is recognition of the customary
              right of the customary law community in an area so that its settlement shall be
              made through deliberation to reach consensus based on the customary law
              concerned.

Article 35
        Self-explanatory

Article 36
        Paragraph (1)
               Since the right to a Work Area does not include the right to its surface, a
               Business Entity or Permanent Establishment does not naturally have the right
               to use the plots of land in the Work Area. If the Business Entity desires to use
               said plots of land, the right to use shall be processed in accordance with the
               applicable laws and regulations.

       Paragraph (2)
              Self-explanatory

Article 37
        Government Regulation as enforcement regulation for this provision shall include,
         among other things, the basic provisions on procedures for the settlement and
         negotiation, rights and obligations of the parties, guidelines on the amount of
         compensation and technical provisions on the pattern of settlement pertaining to land
         use.

Article 38
        The development carried out by the Government in the Oil and Natural Gas business
         activities shall be based on the control by the State over natural resources and
         branches of production which are essential for the livelihood of people.

Article 39
        Paragraph (1)
              Letter a




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                      What is meant by the undertaking of Governmental affairs in this
                      provision shall include, among other things, dissemination of
                      information, education and training, technology research and
                      development, improvement of product added value, standardization,
                      accreditation, development of industries/supporting business entities,
                      development of small/medium-scale business, use of domestic goods
                      and services, maintenance of occupational safety and health,
                      environmental conservation, creation of conducive investment climate,
                      and maintenance of safety and public order.

              Letter b
                      Self-explanatory

       Paragraph (2)
              Self-explanatory

Article 40
         Paragraph (1)
                Self-explanatory

       Paragraph (2)
              Self-explanatory

       Paragraph (3)
              Self-explanatory


       Paragraph (4)
              This provision is meant to support and enhance national competitiveness
              capability.

       Paragraph (5)
              What is meant by "also accept responsibility for the development of the local
              community" in this provision is participation of the Business Entity or
              Permanent Establishment in developing and making use of the potential and
              capability of the local community by, among other things, employing local
              manpower in certain quantity and quality, and improving local community
              settlements, so as to create a harmonious relationship between the Business
              Entity or Permanent Establishment and the surrounding communities.

       Paragraph (6)
              Government Regulations as enforcement regulations for this provision shall
              contain provisions on the obligations of a Business Entity or Permanent
              Establishment pertaining to:

              (a)     In the field of occupational safety and health, including safety and health
                      of workers, conditions and requirements of work place and
                      environment, installation and equipment standards;




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                  (b)   In the field of environmental management, including prevention and
                        control of environmental pollution, and rehabilitation of environmental
                        damage during and post Co-operation Contract period.

Article 41
        Self-explanatory

Article 42
         Letter a
                 Self-explanatory

       Letter b
               Self-explanatory

       Letter c
               Self-explanatory

       Letter d
               Self-explanatory

       Letter e
               Self-explanatory

       Letter f
                  Self-explanatory

       Letter g
               Self-explanatory

       Letter h
               In the implementation, the utilization shall still consider the economic value of
               each project or activity concerned.

       Letter i
                  In the use of expatriate manpower, attention should be given to the applicable
                  procedures and requirements according to the needs.

       Letter j
                  Self-explanatory

       Letter k
               Self-explanatory

       Letter l
                  Self-explanatory

       Letter m
               Self-explanatory

Article 43

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       Government Regulations as enforcement regulations for this provision shall contain,
       among other things, the provisions as referred to in the elucidation of Article 39
       paragraph (1) letter a.

Article 44
        Self-explanatory

Article 45
         Paragraph (1)
                State-owned legal entity in this provision shall have a status as a civil law
                subject and shall be a non-profit oriented institution and managed
                professionally.

       Paragraph (2)
              Elements of the management board as referred to in this provision shall be the
              chairman, vice chairman and deputies. Experts shall be functional personnel
              having expertise in their fields.

       Paragraph (3)
              Consultation as referred to in this provision is to conduct aptitude and proper
              test for candidate chairmen of the Implementing Body by the Indonesian
              House of Representatives, in this case by the Commission in charge of the Oil
              and Natural Gas sector.

Article 46
         Paragraph (1)
                This provision is meant to protect consumer interests in terms of the
                continuity of the supply and distribution of Fuel throughout Indonesia.

               Supervision of the Transportation of Natural Gas through pipeline shall be
               conducted to optimize and prevent monopoly in the utilization of pipeline
               transmission, distribution and Storage facilities by a certain Business Entity.

       Paragraph (2)
              The Government shall be responsible for fuel supply and service as well for
              avoiding Fuel shortage throughout Indonesia.

       Paragraph (3)
              The utilization of Fuel Transportation and Storage facilities as referred to in
              this provision is specifically aimed to certain areas or remote areas where
              market mechanism has not yet functioned, therefore, the existing
              Transportation and Storage facilities need to be organized so that they can be
              used enabling to achieve optimum condition and lowest price.

               Household is every consumer utilizing Natural Gas for household needs.

               Natural Gas Transmission and distribution business shall be regulated by the
               Regulatory Body related to the business aspects of such Natural Gas
               transmission and distribution activities.

       Paragraph (4)
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               Self-explanatory

Article 47
         Paragraph (1)
                Self-explanatory

       Paragraph (2)
              What is meant by professionals in this provision shall be people with
              expertise, experience and knowledge required, among other things, in the oil,
              environment, law, economy and social sectors as well as having high integrity
              in performing their duties and responsibilities.

       Paragraph (3)
                                                                         a
              The Regulatory Body shall be independent and since its t sk and function
              affect public interest, its appointment and discharge needs approval of the
              House of Representative of the Republic of Indonesia.

       Paragraph (4)
              Since the task and function of the Regulatory Body is directly related to the
              commodities which are essentially required by the public, they have a great
              effect on the national economy, may cause extensive serious impact on the
              public, and are of cross-sectoral in its regulations, the Regulatory Body shall,
              therefore, be responsible to the President.

       Paragraph (5)
              Self-explanatory

Article 48
         Paragraph (1)
                Any state revenue derived from the Business Entity or Permanent
                Establishment engaging in the Upstream Business Activities shall be directly
                deposited to the state treasury. In carrying out the control of the Co-operation
                Contract with the Business Entity or the Permanent Establishment, the
                Implementing Body receives remuneration (fee) as management fee from the
                Government for the activities conducted.

       Paragraph (2)
              The operating costs of the Regulatory Body charged to the State Revenues
              and Expenditures Budget (APBN) shall be considered as the initial capital of
              the Regulatory Body. Afterwards, the operating costs of the Regulatory Body
              shall be charged to the Business Entities regulated by it.

Article 49
        Self-explanatory

Article 50
        Self-explanatory

Article 51
        Self-explanatory

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Article 52
        Self-explanatory

Article 53
        Self-explanatory

Article 54
        Self-explanatory

Article 55
        Abuse as referred to in this provision shall mean the activities aimed to obtain profit for
         individuals or business entities in a manner disadvantaging the people's and the
         state's interests such as activities of mixing Fuel, deviating Fuel allocation,
         transporting and selling Fuel overseas.

Article 56
        Self-explanatory

Article 57
        Self-explanatory

Article 58
        Self-explanatory

Article 59
        Self-explanatory

Article 60
         Letter a
                 The form of corporation as referred to in this provision shall be the form of a
                 company as referred to in the Law on state-owned enterprises.

       Letter b
               Self-explanatory

       Letter c
               Self-explanatory

Article 61
         Letter a
                 Self-explanatory.

       Letter b
               What is meant by Co-operation Contract in this provision shall be a contract
               which contains the obligation to make payment to the State the amount of
               which shall be in accordance with the provisions applicable to Pertamina's
               Mining Authority Area all this time by including the details as set forth in
               Section V.

Article 62
        Self-explanatory.
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Article 63
         Letter a
                 To implement this provision, amendments shall be made to the Co-operation
                 Contract relating to the contracting parties without changing the terms and
                 conditions of the contract.

       Letter b
               Self-explanatory.

       Letter c
               Self-explanatory.

       Letter d
               What is meant by contract, agreement or commitment in this provision shall
               be, among other things, liquefied natural gas sales contract.

       Letter e
               Self-explanatory.

Article 64
         Letter a
                 State-owned enterprises other than Pertamina which are engaged in Oil and
                 Natural Gas business activities are, among other thins, PT Perusahaan Gas
                 Negara (Persero) which was established by Government Regulation Number
                 37 Year 1994.

       Letter b
               Self-explanatory

       Letter c
               Self-explanatory

       Letter d
               Self-explanatory

Article 65
         Oil or natural gas as referred to in this provision shall mean oil and natural gas
         produced from artificial process (not natural process).

Article 66
         Self-explanatory

Article 67
         Self-explanatory


      SUPPLEMENT TO THE STATE GAZETTE OF THE REPUBLIC OF INDONESIA
                              NUMBER 4152

                                       -------------------
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Oil and Gas Regulations                                                Page 41



                                          Note

SOURCE:       LOOSE LEAF OF THE STATE SECRETARY YEAR 2001




                     Penelitian Hukum Indonesia - Copyright (c) 2007

				
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Description: UNDANG-UNDANG NOMOR 22 TAHUN 2001 TENTANG MINYAK DAN GAS BUMI