House debate over oil and gas bill makes slow progress

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)