Oil group defends controversial TAC system<\/p>\n
JAKARTA (JP): An oil and gas association defended on Monday
\nthe controversial technical assistance contract (TAC) system,
\nsaying the system had the noble goal of empowering local oil and
\ngas investors.<\/p>\n
Effendi Siradjuddin, the vice chairman of the TAC-Petroleum
\nExploration and Production Company Communication Forum, said the
\nTAC system was introduced in the early 1990s by state oil and gas
\ncompany Pertamina to increase the role of local investors in the
\ncountry's oil and gas industry.<\/p>\n
However, Effendi said the TAC system gained a bad reputation
\namong the public because politically connected businesspeople
\nduring former president Soeharto's administration abused the
\ncontract system to enter the country's oil and gas sector and to
\nmake quick money acting as brokers.<\/p>\n
\"As a matter of fact, the TAC system is good in the fact that
\nit is aimed at creating strong local oil and gas firms aside from
\nPertamina.<\/p>\n
\"Unfortunately, some people have abused the contract system to
\nthe extent that the public now thinks all TAC contractors are
\nbad. In fact, not all TAC contractors are bad,\" Effendi said
\nduring a media conference. He was accompanied by several top
\nexecutives of the association at the conference.<\/p>\n
Most of the country's oil and gas contractors operate under
\nproduction sharing contracts (PSCs), under which the government
\ntakes 85 percent of the output, leaving the remaining 15 percent
\nto the contractors.<\/p>\n
The TAC system has gained public attention following a graft
\ncase in which PT Ustraindo Petro Gas, which is controlled by
\nSoeharto's son Bambang Trihatmodjo, allegedly obtained four TACs
\nfrom Pertamina in 1992 and 1993 through corruption.<\/p>\n
The Attorney General's Office, which is investigating the
\ncase, has named former ministers of mines and energy IB Sudjana
\nand Ginandjar Kartasasmita suspects in the alleged graft, which
\nreportedly caused US$18 million in losses to the government.<\/p>\n
Ustraindo obtained four TACs to develop oil fields in Pendopo
\nand Prabumulih, South Sumatra, Bunyu, East Kalimantan, and
\nJatibarang, West Java.<\/p>\n
The Attorney General's Office said awarding the TACs to
\nUstraindo was illegal because the fields were still in production
\nand Ustraindo illegally used Pertamina's money to develop the
\nfields.<\/p>\n
Effendi said a TAC normally covered oil fields that had
\nstopped production or been abandoned by large companies because
\nthey were no longer considered economically viable. The abandoned
\nfield is, however, still viable for local small companies, which
\nhave lower production costs.<\/p>\n
In comparison, PSCs cover areas which have not yet been
\ndeveloped.<\/p>\n
Under the TAC system, Effendi said, contractors are obliged to
\nprovide all of the investment needed to resume production at an
\nabandoned field. It will receive 15 percent of the output, while
\nthe remaining 85 percent will be delivered to the government via
\nPertamina.<\/p>\n
Effendi said a typical TAC contractor produced about 2,500
\nbarrels per day and had about 100 workers, all locals.<\/p>\n
Effendi said there were currently 33 TAC contractors operating
\nin the country, nine of them having come into production with a
\ncombined output of about 12,000 barrels of oil per day.<\/p>\n
Initially, TAC contractors were all local oil and gas firms,
\nbut today more than 50 percent of the TACs are controlled by
\nforeign investors through share acquisitions.<\/p>\n
Many local firms have sold their shares in TAC fields due to
\nfinancial difficulties caused by the prolonged economic crisis,
\nEffendi said.<\/p>\n
\"The main difficulty faced by local TAC contractors is the
\nreluctance of local financial institutions to provide them with
\nfinancing for their projects.<\/p>\n
\"As such, local TAC contractors are very reliant on financing
\nprovided by foreign investors,\" Effendi said.<\/p>\n
He explained that aside from the TAC system, Pertamina had
\nalso introduced the Joint Operating Body (JOB) contract system,
\nwhich has a similar purpose of empowering local oil and gas
\nfirms.<\/p>\n
He said JOB contracts normally covered productive oil fields.
\nPertamina invites contractors to invest jointly to raise the
\noutput of the fields and share in the increased output. (jsk)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/oil-group-defends-controversial-tac-system-1447893297",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}