Govt warned not to lose control over oil and gas sector

JAKARTA (JP): All the major factions at the House of Representatives expressed their support for the recently submitted oil and gas bill, but they warned that the government mustn't loose control over the strategic oil and gas sector despite its liberalization.

The Indonesian Democratic Party for Struggle (PDI-P) faction welcomed the reintroduction of the oil and gas bill, after a similar bill had been rejected in 1999.

The PDI-P faction said the existing oil and gas laws had only led to the creation of a monopoly in the oil and gas industry.

"In fact, some of us have dared to say that in the past the regulations to manage the country's oil and gas sector have been the source of state fund leakages unchecked by the public," the faction said in its general view during the House's plenary session.

It said that because of the importance of the oil and gas sector to this country's economic recovery, a new law must be quickly enforced.

But it noted that the current bill was too general, and that much of its implementation depended on government regulations in which the House had no say.

The faction warned that the enactment of the bill must not become a "blank check" for the government.

"The PDI-P faction generally views the bill as needing more careful discussion," the faction said in its concluding remarks.

Under the current bill, Pertamina would lose its exclusive rights over the oil and gas industry and would transform into a limited liability company.

The law will also ease restrictions imposed on private domestic and foreign companies in oil exploration, production and distribution.

The bill is the third draft since 1996, to replace the current two laws, Law No 44/1960 on the oil and gas industry, and Law No. 8/1971 on state oil and gas company Pertamina.

The first draft in 1994 was turned down by the President before it was submitted to the House, while the second one in 1999 failed to win the House's approval.

In that year, the House was seated by previous factions of the 1997 general election.

Unlike the present factions, they opposed the idea of liberalizing the oil and gas sector.

The Golkar faction said the need for a new oil and gas law was urgent to ensure greater legal certainty amid a changing economic environment.

But the faction warned of the danger of liberalizing the oil and gas sector too much.

Golkar questioned how the government could prevent multinational oil and gas companies from dominating the industry, once Pertamina relinquishes its control.

Foreign oil and gas companies may also sell fuel in the local market, by pegging prices to international market prices.

Consequently, the government must abolish its fuel subsidy spending, a move that might stir public resentment.

"It's a pity if this state guarantee (subsidy) must be revoked as such a move has the potential of threatening public political, economic and social conditions," said the United Development faction in its remark.

It added that privatizing the oil and gas sector was no guarantee that the government would increase state revenues.

"There doesn't seem to be any serious problems with the inflow of oil and gas revenues with Pertamina managing the sector," the faction said.

Minister of Energy and Mineral Resources Purnomo Yusgiantoro said earlier he hoped the House could pass the new bill by next April. (bkm)