House expects to oil and gas bill to be passed next month

House expects to oil and gas bill to be passed next month

JAKARTA (JP): Several legislators expressed optimism on
Tuesday that the House of Representatives would pass into law the
oil and gas bill proposed by the government as the House and
government teams had reached agreement on most of the crucial
issues.

Husni Thamrin of the second-largest Golkar faction and Julius
Bobo of the largest PDI Perjuangan faction told The Jakarta Post
that debates between the House and government teams on the bill
were in progress, but the issues being debated were
"unsubstantial".

"Now, the debates revolve around issues regarding the
establishment of the Executive Body and the transitional period
for (state-owned oil and gas firm) Pertamina to turn itself into
a limited liability company," Husni said.

Under the bill, the government would establish an independent
body called the Executive Body to supervise the country's oil and
gas industry -- a role which has been held by Pertamina for the
past three decades.

The bill aims to liberalize the country's oil and gas sector,
lift Pertamina's decades-long monopoly on the sector and turn the
state company into a profit-making limited liability company.

The new law will replace Law No. 44/1960 on the oil and gas
industry and Law No. 8/1971 on Pertamina.

Under the Pertamina law, the state company signs oil and gas
contracts, regulates and supervises the sector on behalf of the
government.

Regarding the Executive Body, which will become the country's
most powerful body in the oil and gas sector, Husni said major
factions in the House preferred that the body be placed under the
President rather than under the Minister of Energy and Mineral
Resources.

The factions also demanded that the appointment of the body's
members by the government were subject to the House's approval,
he added.

Regarding Pertamina's transitional period, Husni said the
House's major factions and the government still had differences
over the length of period.

According to him, Golkar wants a one year transitional period
for Pertamina, The Indonesian Democratic Party for Struggle (PDI-
P) faction has proposed less than a year, while the government
has proposed two years.

"Despite the remaining disagreement, I hope we can pass the
bill into law in October," he said.

One of the crucial issues in the bill, which is being watched
attentively by oil and gas contractors, concerns the type of oil
and gas contract.

The government has for decades signed a production-sharing
contract (PSC) as well as other types of contracts, which are
based on the PSC system, including technical assistance contracts
(TAC) and joint operating bodies (JOB) mandatory for all oil and
gas contractors.

Under the PSC system, contractors have to deliver 85 percent
of their oil output and 70 percent of their gas output to the
government.

The bill proposed by the government gives the option for the
contractors to choose contracts other than PSC contracts.

According to Husni, the House and the government's team agreed
during debates in July that contractors should be given the
option of choosing contracts other than the PSC system as long as
the contracts could provide more revenue for the state.

But, Husni said, under the agreement, the government must ask
the House's approval for any plan to introduce contracts
different from the PSC system.

Julius Bobo from the PDI faction was also upbeat that the bill
would be passed into law next month, but added that some points
of the agreement were not yet final.

"Next month is our target to pass the bill as we have already
been discussing the bill for long enough," he said.

The government submitted the bill in February this year.

He said the issues being debated by the House and the
government included questions of whether to give the Executive
Body the rights to sign the oil and gas contracts as well as
supervision of the contract's implementation, or whether to limit
its authority in watching the contractors, while the right of
signing oil and gas contracts be given to other independent
bodies. (iwa)