Government, House complete debate on new oil, gas bill

JAKARTA (JP): The House of Representatives and the government have completed the deliberation process on the new oil and gas bill which is aimed at liberalizing the industry and ending the monopoly of state-owned oil and gas firm Pertamina.

Minister of Energy and Mineral Resources Purnomo Yusgiantoro said on Tuesday that the House was expected to give its final approval in the middle of next month at a plenary session.

"We're glad that we have reached an agreement with the House of Representatives on the new oil and gas law," Purnomo told reporters following a closed-door meeting with House Commission VIII which among other things oversees the oil and gas sector.

The past administrations of B.J. Habibie and Abdurrahman Wahid had failed to obtain legislators approval on the oil and gas bill.

The completion of deliberation on the bill took place ahead of a planned energy conference in Houston, U.S., next week which will be opened by visiting President Megawati Soekarnoputri. The government plans to offer some 14 new oil blocks to foreign investors at the conference.

Under the bill, the government would set up an executive body and regulating body which would end the monopoly of Pertamina in the country's oil and gas sector.

The executive body would take over Pertamina's role in dealing with foreign oil and gas contractors, while the regulating body would manage domestic fuel supply and distribution.

The President would appoint persons in charge of each of the non-profit bodies with approval from the House.

The government would turn Pertamina into a limited liability company with a profit orientation.

Legislator Husnie Thamrin told The Jakarta Post that lawmakers had also agreed on a transition period of not more than two years to transform Pertamina into a limited liability company and not more than four years for the regulating body to take over the role of domestic fuel supply and distribution.

According to Husnie, during the transition period, Pertamina will continue to deal with foreign contractors and distribute fuel products throughout the country.

"The two-year period will allow the executive body to prepare itself and Pertamina to reevaluate its assets," said Husnie.

He said in the first two years, retention fees from current production sharing contracts would still go to Pertamina as income, but once Pertamina had become a profit-oriented company, all retention fees would go to the state after administration costs were deducted by the executive and regulating bodies.

Purnomo said the new bill, which would replace the oil and gas Law No. 44/1960 and Law No. 8/1971 on state oil and gas company Pertamina, gave no room for concession contracts, which allow foreign partners to have full control of project operations, while the Indonesian government receives only royalties from them.

Under current production-sharing contracts, foreign energy companies hand over 85 percent of their oil output and 75 percent of their gas output to the Indonesian government.

"With the House approval of the new oil and gas law, the government wants Pertamina to be a world-class company," Purnomo said, adding that the country's oil industry now faces a brighter future. (03)