Govt might slash red tape for oil and gas firms

Govt might slash red tape for oil and gas firms

JAKARTA (JP): The government is considering freeing oil and
gas contractors from the tedious bureaucratic hurdles they
encounter when procuring goods, materials and services for their
operations, Minister of Mines and Energy Kuntoro Mangkusubroto
has said.

Kuntoro said on Friday he had sent a letter to Coordinating
Minister for Development Supervision and State Administrative
Reforms Hartarto Sastrosoenarto asking him to exempt oil and gas
contractors from the obligation of following the government-
imposed tender procedures.

According to the existing regulation, oil and gas contractors
should follow the tender procedure as outlined in 1994
Presidential Decree No. 16 on the procurement of goods, materials
and services.

"As an alternative, I requested in the letter that oil and gas
contractors be allowed to run tenders for the procurement of
goods and materials in accordance with their respective corporate
rules," Kuntoro said.

Under the presidential decree, oil and gas contractors are
allowed to run tenders for the procurement of goods, materials
and services by themselves.

But state oil and gas company Pertamina, which is assigned to
supervise the operations of oil and gas operations, indirectly
supervise the bidding by conducting audits on their operations by
the end of each calender year.

Contractors also have to report the bidding's results to the
Office of the Coordinating Minister of Development Supervision
and State Administrative Reforms through Pertamina for approval
if the value of the tendered goods and service exceeds Rp 2
billion (US$265,000).

Oil and gas contractors have long expressed concerns over the
tedious bureaucratic hurdles they face in following the
government's tender procedures.

They again expressed their concern during the recent 26th
Convention of the Indonesian Petroleum Association (IPA).

Vice President of Gulf Indonesia Resources, a unit of Canada's
Gulf Resources, Supramu Santosa said during the meeting that the
tiresome tender procedures had forced oil and gas contractors to
store large number of inventories.

The tedious procurement procedures have also slowed down their
activities.

"If we decide to drill a well or conduct a seismic survey
today it will be almost another year before we actually spud our
first well or shoot our first seismic hole," Supramu said.

Pertamina's officials say oil and gas contractors should wait,
often for months, for the ministry to approve the tender's
results and they can't start any related activities until they
get the approval.

Analysts say the tenders' results are often tampered with
during the approval process to serve the interests of the family
and cronies of former president Soeharto and his top officials.

They say the 1994 presidential decree is one of the means
abused by Soeharto's family and cronies to corner lots of
lucrative projects in the oil and gas industry.

Pertamina's directorate for the supervision of oil and gas
contractors has long asked for the government to exempt oil and
gas contractors from such bureaucratic hassles but Soeharto's
administration always turned down the request.

Analysts welcomed Kuntoro's move, saying that in addition to
making the country's oil and gas companies' operations more
efficient, it would also help eliminate collusion, corruption and
nepotism in the oil and gas industry.

They said the move would lower contractors' expenditure and
increase the government's earning from oil and gas operations.
Under all contracts, the government takes 85 percent of
contractors' oil output and has to cover 85 percent of
contractors' operation costs.

"Honestly speaking, our country is notorious among the world's
oil and gas industry for the complex procurement process," one
analyst said. (jsk)