Government expects new oil and gas law out in April

JAKARTA (JP): Minister of Energy and Mineral Resources Purnomo Yusgiantoro said on Monday that he hoped the House of Representatives would be able to pass a new bill on oil and gas in April this year.

"The debate on the bill might take until the end of the year, but we hope to speed the process up so that the bill can be passed in three to four months time," he told reporters following a canceled plenary meeting with the House.

Purnomo was supposed to formally submit the oil and gas bill before legislators in a plenary meeting on Monday but it was canceled as legislators were preoccupied with the plenary meeting on President Abdurrahman Wahid's alleged role in the Bulog and Brunei financial scandals.

As that particular meeting took longer than expected, the House postponed its session with Purnomo until Monday next week.

According to Purnomo, the new oil and gas bill comprised of eight topics.

These topics, he said, are related to the government's policies on the downstream and upstream of the oil and gas industry, business in the oil and gas industry, and the transformation of state oil and gas company Pertamina into a limited liability company.

The bill would be the third draft on oil and gas laws that have been made since 1996 in attempts to replace the two current laws, Law No. 44/1960 on the oil and gas industry, and Law No. 8/1971 on Pertamina.

The first draft was made in 1994 by the then Ministry of Mines and Energy but it was turned down by the President before it was submitted to the House.

The ministry drafted its second bill in 1999 but it failed to gain the House's support, as political factions criticized the bill for being too liberal.

Factions opposing the bill have said that the oil and gas industry is too important as a state asset to be privatised.

They said full privatization of the industry was untimely, since no major player, including Pertamina, was ready to compete in an open market.

Analysts described the lengthy debate over the bill as a tug- of-war between Pertamina, which they said sought to maintain its control over the industry, and the then Minister of Mines and Energy, Kuntoro Mangkusubroto.

But the present bill is only slightly different from its predecessor.

Like the one in 1999, the new bill would remove Pertamina's exclusive rights over the oil and gas industry.

It would allow foreign oil and gas companies to sell fuel in the local market, by pegging prices to international market prices.

But unlike last time, Pertamina has expressed its full support behind the bill, saying it strives to become a world class company.

Pertamina president Baihaki Hakim, who once headed the United States-based oil and gas firm PT Caltex Pacific Indonesia, has said he planned to transform Pertamina into a world class oil and gas firm.

The present bill gave Pertamina two to three years to prepare before becoming a limited liability company, after the enactment of the bill, Purnomo went on.

Meanwhile, Baihaki said Pertamina was hoping to supply Taiwan with five to six million tons of liquefied natural gas (LNG) starting this year.

"We will join a tender process for the supply of LNG to Taiwan," he said.

He said that for Pertamina to win the tender, it must lobby LNG buyers outside the southern part of Taiwan, the region which is a regular buyer of Indonesian LNG.

"For regions outside the southern part of Taiwan, the total annual demand is about two to three million tons this year, rising to five to six million tons a year afterwards," Baihaki explained.

Indonesia is still the world's largest LNG exporter, but is facing increasing competition from Australia, Malaysia and Qatar.

Taiwan, Japan and South Korea, are Indonesia's main LNG export markets.

Besides Taiwan, Pertamina is also eying to supply India with LNG. Both countries have formed a negotiation team to hammer out a sales contract.(bkm)