Kuntoro has tough task in securing House nod<\/p>\n
By Johannes Simbolon<\/p>\n
JAKARTA (JP): Minister of Mines and Energy Kuntoro
\nMangkusubroto will be traversing a rocky road over the next few
\nmonths in his quest to secure approval for the oil and gas bill
\nfrom the House of Representatives.<\/p>\n
The bill, which was submitted to the House of Representatives
\ntwo weeks ago, contains many points which not all factions in the
\nHouse find agreeable and analysts say deliberation on the bill
\ncould be tough and take a long time.<\/p>\n
But Kuntoro is still optimistic the House will endorse the
\nbill in one or two months.<\/p>\n
\"I know many people don't feel comfortable with the bill. But
\nI am optimistic the House will endorse it in one or two months,\"
\nKuntoro announced on Thursday after a plenary session of the
\nHouse for the first deliberation of the bill.<\/p>\n
The ministry tried to replace the existing oil and gas law of
\n1960 and the 1971 law on state oil and gas company Pertamina
\nseveral years ago but failed due to strong opposition from
\nvarious parties, including Pertamina.<\/p>\n
According to Kuntoro, the House made the first call in 1994
\nfor a new oil and gas law which was simple, to-the-point,
\ntransparent and antimonopolistic to replace the existing oil and
\ngas laws.<\/p>\n
Response<\/p>\n
In response to the call, the Ministry of Mines and Energy
\ntogether with related ministries and concerned agencies and
\norganizations drafted a bill and submitted it to then president
\nSoeharto in 1996.<\/p>\n
However, Kuntoro said Soeharto's administration dropped the
\nbill due to opposition from Pertamina.<\/p>\n
The House called again for a new law in the wake of Soeharto's
\ndownfall last year.<\/p>\n
According to Kuntoro, drafting of the new bill started in June
\n1998 and involved many experts, representatives of various
\ngovernmental offices, local and international consultants of law
\nand finance, professional organizations, academics, legislators
\nand Pertamina.<\/p>\n
The 46-chapter bill contains a number of points which analysts
\nsay will fundamentally change the face of the country's oil and
\ngas industry.<\/p>\n
First, it will lift the monopoly on the country's oil and gas
\ndownstream sector awarded to Pertamina by the 1971 law. It will
\nalso allow foreign enterprises to develop refineries and market
\ntheir products domestically.<\/p>\n
Kuntoro has promised to gradually eliminate the government's
\nfuel subsidies by 2002 to encourage foreign investment in the
\nrefinery sector.<\/p>\n
Second, the government will take over the rights granted by
\nthe 1971 law to Pertamina to award oil and gas exploration and
\nproduction contracts and to regulate and manage oil and gas
\ncontractors.<\/p>\n
The bill says the government will take over all the rights two
\nyears after the bill is passed into law.<\/p>\n
Pertamina currently regulates and manages oil and gas
\ncontractors through a special division called Foreign Contractors
\nManagement Body.<\/p>\n
Third, the bill implies that oil and gas contractors may
\nchoose types of contracts other production sharing contracts
\n(PSC) for operations. Today, the PSC system is obligatory.<\/p>\n
Kuntoro said that by removing Pertamina's monopoly and
\nstripping it of its rights to contract private companies for
\nexploration and production and to manage and regulate them, the
\nbill aims to make the largest state company concentrate on its
\ncore business as an oil and gas limited liability company in
\ncompetition with international oil and gas companies.<\/p>\n
\"The existing laws, in their 30 years of implementation, have
\nnot promoted the dependency and ability of the state oil and gas
\ncompany.<\/p>\n
\"Besides, the state company is not orientated toward
\nempowering the people's economy and enhancing provincial
\neconomies as it has to carry out a dominant social mission
\nassigned by the government,\" Kuntoro said in a news release.<\/p>\n
The Golkar Party, the Armed Forces and the Indonesian
\nDemocratic Party factions in the House welcomed the government's
\ninitiative in proposing the oil and gas bill.<\/p>\n
They agreed with the bill's objectives of removing Pertamina's
\nmonopoly on the downstream sector and stripping the company of
\nits rights to award oil and gas contracts and to regulate and
\nmanage the country's oil and gas contractors.<\/p>\n
Corruption<\/p>\n
They ascribed the rampant corruption, collusion and nepotism
\nin Pertamina during former president Soeharto's administration to
\nthe company's monopoly rights and they expressed hope that with
\nthe elimination of the monopoly the unfavorable business
\npractices could be put to an end.<\/p>\n
Pertamina announced last year that it had awarded Soeharto's
\nfamily and cronies at least 159 contracts without competitive
\nbidding.<\/p>\n
Pertamina has annulled and renegotiated most of the contracts
\nwhich it said caused the company huge losses.<\/p>\n
The United Development Party (PPP) faction, however, stopped
\nshort of supporting the bill's efforts to eliminate Pertamina's
\nmonopoly on the downstream sector and the transferring of
\nPertamina's rights to award oil and gas contracts, and to
\nregulate and manage oil and gas contractors.<\/p>\n
It said there was no guarantee that a move would stop
\ncorruption in the country's oil and gas sector.<\/p>\n
\"PPP is worried that the bill will only give another party the
\nopportunity to engage in corruption, collusion and nepotism in
\nthe country's oil and gas sector,\" PPP legislator A. Walid said
\nduring the House plenary meeting.<\/p>\n
He said PPP wanted Pertamina's monopoly on the downstream
\nsector kept in place to keep fuel prices on the domestic market
\ncontrolled and affordable.<\/p>\n
PPP also expressed concern about the possibility of many
\nPertamina workers being laid off if the government takes over the
\ncompany's job of managing and regulating oil and gas contractors.<\/p>\n
\"PPP is concerned with the fate of Pertamina's workers, in the
\npossible transfer of status, position or lay-offs,\" Walid said.<\/p>\n
Golkar wants Pertamina's monopoly to be removed gradually and
\nsystematically instead of two years after the bill's enactment.<\/p>\n
The party also proposed that the government maintain the
\nobligatory PSC system because it had \"proven beneficial to the
\ngovernment\".<\/p>\n
All factions regret that the bill barely mentions measures to
\nempower national oil and gas companies.<\/p>\n
Some of them dismissed the bill as too liberal and said they
\nsuspected Kuntoro had been too influenced by foreign companies in
\ndrafting the law.<\/p>\n
But Kuntoro denied any foreign influence.<\/p>\n
\"The bill was drafted by ourselves,\" he said.<\/p>\n
He said on Friday that he would compromise with the House to
\nmake for a \"less liberal\" law, provided that the House agreed to
\nremove all monopolistic practices in the law.<\/p>\n
He also said he would agree to maintain the PSC system as long
\nas \"it is considered beneficial to the government\".<\/p>",
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