Govt warned not to lose control over oil and gas sector

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)