Publications

Petroleum funds in many countries are used as a mechanism to secure the benefits of the current oil and gas industry for future generations. Income from oil and gas goes to a Petroleum Fund before being recognized as a source of income in the state annual budget. However, in Indonesia, a Petroleum Fund has not been applied as yet and is being proposed in the revised oil and gas law. This paper gives an overview on the implementation of the petroleum fund mechanism in Norway, Timor-Leste and Nigeria and proposes its implementation in Indonesia. Norway treats revenues from oil and gas industry as an investment in the Government Pension Fund Global, and uses a maximum 4% of the fund as revenue in the annual state budget. Timor-Leste invests revenues from oil and gas into the Petroleum Fund and uses only 3% of the total petroleum fund to finance the stated annual budget. Nigeria keeps the difference between the actual price of oil and gas with an assumption price in the state budget in the "Oil Stabilization Fund". If oil and gas prices are lower than the assumption prices, the variance that has occurred will be financed from those special funds. Before evaluating a Petroleum Fund mechanism that works for Indonesia, this paper sets a limitation based on Indonesia’s stated annual budget characteristics. The current proportion of oil and gas revenues of about 20% of revenue, the structural primary balance of the annual state budget and a safe ratio of debt to GDP which is about 3%. By using the above limitations and viewing the mechanism of other countries, this paper concludes that the Nigeria and Timor-Leste mechanism cannot be applied in Indonesia. The method used in Norway can be applied with some adjustments to reduce its effect in the state budget at the time of application of the petroleum fund. Keywords: Sovereign Wealth Fund, Petroleum Fund, Petroleum Fund of Norway, Oil Stabilization Fund, Primary Balance, Ratio Debt to GDP