The government is urging oil and gas contractors to utilize the services of Indonesian firms in their 2009 projects, as part of efforts to support domestic economic growth amid the global economic crisis, said the State Ministry for State Enterprises.
In a meeting on Wednesday with Raden Priyono, head of upstream oil and gas regulator BPMigas, as well as a representatives from a number of private contractors and state-owned companies, State Enterprises Minister Sofyan Djalil urged foreign and domestic contractors to work with Indonesian service firms.
“We want to increase the participation of domestic companies, particularly state-owned enterprises, in oil and gas projects,” Sofyan said.
In 2008, domestic service firms had revenues of $2 billion to $3 billion working on oil and gas projects. This year, the government wants to increase this figure by an additional $1.5 billion.
Sofyan said the firms’ services include drilling, construction of ports and airports, and even food services. State-owned enterprises that stand to benefit include PT Wijaya Karya Tbk, PT Adhi Karya Tbk, PT Krakatau Steel and PT PAL Indonesia.
“Ideally, we would like to increase the participation of domestic service firms in projects by more than 50 percent from last year,” Priyono said. The ministry and the regulator, however, still have to hammer out the details of the plan with oil and gas contractors, he said.
The announcement comes one month after BP Migas revealed that contractors will have to use Indonesian banks for all business transactions conducted in the country, in a bid to support the domestic banking sector.
Suyitno Padmosukismo, executive director of the Indonesia Petroleum Association, welcomed the plan to increase the participation of domestic firms, but questioned whether some companies were capable of providing the necessary services.
“They need to be competitive enough to offer good prices, because contractors have been cutting costs since oil prices fell,” Suyitno said.
With oil now at about $39 a barrel, many companies are likely to postpone new exploration and drilling projects until prices rise again. Fifty-three out of 64 contractors in Indonesia have already submitted their 2009 budgets for ex ploration and drilling.