The House of Representatives is weighing over the possible closure of upstream oil and gas regulator BPMigas and downstream regulator BPH Migas due to decaying administrative performance and failures to meet targets.
The deputy chairman of House commission VII overseeing energy and mineral resources, Sutan Batughana, said here Tuesday the commission would hold several discussions with oil and gas investors operating in Indonesia to hear their opinions on the regulators' performance to determine whether closure was necessary.
"We have received reports that the performance of these two bodies has worsened -- for example, in the process of securing business permits -- and we want to verify this with the business actors," Sutan said after the first closed meeting with oil and gas contractors Tuesday.
"Some have complained the process to secure approval from BPMigas for budget spending on exploration and exploitation activities (now takes longer than) when Pertamina controlled the sector, and that this has hampered our oil production," Sutan, who led the hearing, said.
He also referred to BPMigas' failure to increase the nation's oil production despite a sharp increase in recovery costs.
He said the recovery costs repaid by the government to oil block contractors in recent years had continued to increase despite the decline in the country's oil production.
Figures from the Energy and Mineral Resources Ministry show the amounts being paid out by the government under the cost recovery system surged from US$7.63 billion in 2005 to $9 billion in 2006, even though output declined during that period from 1.06 million barrels per day to 1.04 million barrels per day.
One rumor in circulation holds that after accusations of failing to do his job, BPMigas chairman Kardaya Warnika will be replaced by the current director of upstream oil and gas development at the Energy and Mineral Resources Ministry, Priyono.
Lawmakers also discussed BPH Migas' failures in the distribution of oil and gas in the downstream sector, particularly kerosene, as it was now considered scarce in the market.
"We may disband the body if it proves to be failing in guaranteeing supply for the public, because that's its job," Sutan said.
BPMigas and BPH Migas were formed as independent bodies in charge of regulating the oil and gas sector under the 2002 Oil and Gas Law, which liberalized the sector and ended state oil and gas company Pertamina's monopoly.
The chairman and members of the two bodies are installed by the President with the consent of the legislative body.
Tuesday's meeting was attended by oil and gas companies Pertamina, Royal Dutch Shell and UK-based BP. In the next meeting, the commission will continue the hearing by summoning other oil and gas companies.