JP/18/bill
New oil and gas bill set for legislation
Moch. N. Kurniawan The Jakarta Post Jakarta
If an oil and gas bill is passed into law on Tuesday, it will end the 30-year monopoly of state oil and gas company Pertamina over the country's oil and gas industry.
The House of Representatives is scheduled to hold a plenary session to pass the government-proposed oil and gas bill after several months of debate.
"It's now time to pass the bill into law. Frankly speaking, this law will become a masterpiece among the country's laws," legislator Emir Muis of the Indonesian Democratic Party for Struggle (PDI Perjuangan) faction, who is a member of the House's special team to debate the oil and gas bill, told the Jakarta Post on Saturday.
He said that the House had done its best to accommodate all the parties' aspirations during the bill's debate.
"What have we not included in the draft law?" he asked.
Emir said the House was determined to pass the bill on Tuesday despite criticism from various parties, including the Consultative Forum of Oil Producing Regencies and some executives of foreign oil and gas companies.
The regency forum has taken great pains to block the bill.
"We have sent letters to the speakers of the People Consultative Assembly and the House, and the President to delay passing the bill. We hope they heard us," Irfan N. Djafar, the East Lampung regent, who is also the regency forum's secretary, told the Post.
"Should the bill be passed into law, we will consider holding a mass demonstration in the oil and gas fields," he added.
The forum has repeatedly protested the bill for not giving regents a role in formulating the national oil and gas policy and in supervising the implementation of the policy.
A.R. Natanegara, the vice president of major American oil company Conoco Indonesia, blasted the bill, saying that foreign investors had identified at least five articles in the bill which would cause problems for foreign investors, including those that concern tax, the establishment of an executive body, the obligation of investors to supply gas to the domestic market, the status of existing contracts and the licensing of operations.
The new bill is aimed at liberalizing the country's oil and gas sector, removing state oil and gas firm Pertamina's decades- long monopoly on the sector and turning the state company into a limited liability company.
If the bill is passed into law, it will replace Law No. 44/1960 on oil and gas and Law No. 8/1971 on Pertamina.
If it is passed into law, the government will set up an executive body and regulate bodies which will end Pertamina's monopoly.
The executive body will take over Pertamina's role in signing contracts with contractors, while the regulating body will manage the domestic fuel supply and distribution.
Emir said that it would give a two-year transition period for Pertamina to turn into a limited liability company.
He said if the bill was passed it would maintain the production-sharing contract scheme, but it would also give room for other contract schemes with investors as long as it benefits the country.
The bill also stipulates that contractors will be allowed to choose either to pay taxes in accordance with the tax regulation applicable at the time their contracts are signed, or in accordance with existing regulations, he said.
Investors will also be obliged to undertake community development, an obligation which is nonexisting in previous laws, Emir said.
Emir said that the bill also obliged contractors to supply gas to the domestic market to guarantee a sustainable availability of the fuel locally.
"We must realize that gas will be widely used in the future. We don't want companies to just export it, they must also meet the local demand," he said. "If investors don't like that, they can leave the country."
For box:
Key points in the oil and gas bill: * The establishment of an executive body to replace Pertamina's role in dealing with investors. * The establishment of a regulating body to manage domestic fuel supply and distribution. * Pertamina will be given two years to become a limited liability company. * Contracts with investors are based on a production-sharing contract scheme or other contract schemes as long as they benefit the country. * Investors are allowed to choose a tax ruling based either on the regulation applicable at the time their contracts are signed or on existing regulations. * Investors are obligated to undertake community development and to supply gas for domestic use.