House debate over oil and gas bill makes slow progress

JAKARTA (JP): The deliberation of the new oil and gas bill is unlikely to be completed this month as scheduled because the debate is progressing slowly, a legislator said on Thursday.

Tubagus Haryono of the Golkar Party faction said the deliberation of the oil and gas bill was certain to extend to the next sitting period of the House of Representatives.

"We should be closing the debate on the bill by tomorrow (Friday), but we can't," Tubagus said following a discussion of the bill with oil and gas company executives organized by news website Petromindo.com.

The government submitted the bill last February with the initial hope of having it enacted by April.

If enacted it would replace two current laws -- Law No. 44/1960 on the oil and gas industry and Law No. 8/1971 on state oil and gas company Pertamina.

The bill is being deliberated by the working committee of the House's Commission VIII, which oversees mines and energy affairs.

The committee has already pushed back the target date for the completion of deliberations on the bill to the end of the current sitting period on July 23.

As it appears unlikely this new date will be met, the discussion is set to continue during the House's next sitting period, which will end in October.

Legislators hold three sittings a year, each for three months, with a one-month recess after each sitting period.

Next week, the House will go into recess, during which lawmakers will attend the special session of the People's Consultative Assembly slated for Aug. 1.

Tubagus cited preparations for the Assembly special session as one of the reasons for the drawn-out debate of the bill.

He said discussion of the bill's over 70 items took longer than originally expected.

According to him, the oil and gas bill is difficult to discuss because of its highly technical content.

The working committee, he said, had just completed its deliberations on the form of future oil and gas contracts.

At present, oil and gas firms operate under production sharing contracts, or PSCs, with Pertamina.

"We found that as of now, the production sharing contract scheme is still the best," he explained.

A production sharing contract allows the government to control the country's oil and gas production.

Given the country's reliance on revenue from the oil and gas sector, this feature helps ensure the stability of the state budget.

Tubagus added that control of oil production was also vital to Indonesia's membership in the Organization of Petroleum Exporting Countries (OPEC).

"You can't be an OPEC member if you cannot control your own production levels," he explained. OPEC's policy is to maintain a favorable crude oil price through the control of supply.

Tubagus said one of the unsettled issues of the bill was the status of the so-called implementing body in the oil and gas sector.

In the bill, the government proposed the formation of the implementing body to take over Pertamina's regulatory role in the upstream sector.

The bill proposes that future PSCs be signed by the implementing body instead of Pertamina, as is currently the case.

"The government wants the implementing body to become part of it, while some of us want the body to be independent," he explained.

Tubagus asserted that if the government, via the implementing body, signed PSCs, state assets would be put at risk in the event the government lost a legal dispute in a commercial court.

"We're still seeking more input from related parties in the industry over this issue," he said, adding that this would be done during the recess.

Another unresolved issue, he went on, was the transitional period for Pertamina to become a normal state enterprise, stripped of its regulatory role.

Tubagus said the government hoped for a two-year transition, while legislators were demanding a shorter period.

The transitional period is necessary to spin off government assets from Pertamina.

Separately, an expert staffer for economy and finance at the Ministry of Energy and Mineral Resources, Kardaya Warnika, was upbeat that the deliberation of the bill could be completed in the next sitting.

"We've narrowed down the problems and have reached agreement on a number of items," he said.(bkm)