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)