Thu, 11 Feb 2010

From: The Jakarta Post

By Alfian, The Jakarta Post, Jakarta
The development of at least 16 oil and gas blocks owned by state oil and gas firm Pertamina has been delayed due to the company’s failure to obtain recommendation from the environmental office, a senior official said.

The State-Owned Enterprises Ministry’s deputy for mining and strategic industries, energy and telecommunications, Sahala Lumbangaol said in Jakarta on Tuesday that the Energy and Mineral Resources Ministry could not issue the necessary permits for the development of the 16 oil and gas blocks because a recommendation from the environmental office had not been obtained.

Speaking during a hearing with the House of Representatives’ Commission VI on state enterprises, Sahala said the licensing problem had become a major obstacle for the development of Pertamina’s oil and gas blocks.

“Eight of the required licenses have been proposed since 2008 but have not been issued so far,” Sahala told legislators at the hearing.

Oil and gas has been the backbone of Indonesia’s economy, contributing about 30 percent of total state revenue. Oil and gas contributed as much as Rp 182.63 trillion of the total Rp 235 trillion (about US$25 billion) in revenue derived from the energy and mining sector in 2009.

Evita Herawati Legowo, the director general for oil and gas at the Energy and Mineral Resources Ministry, confirmed the licensing problems.

“Yes, that’s true. The total number of blocks [facing license problems] is higher than 16,” she said.

The 2009 Environmental Law requires business entities to secure environmental permits before their beginning operations.

The permit is issued by a minister, governor or regent, depending on the area of operation. A failure to secure environmental permits would result in the termination of the business license.

Oil and gas upstream director Edy Hermantoro said the environmental law set unrealistically tough restrictions.

“The regulation is very tough. Officials issuing the licenses may be implicated. The issued license, for construction for example, can be withdrawn when the stipulated standards are violated,” Edy said in a text message.

Evita, however, said that her ministry and the Environment Ministry had come to an agreement to solve the problems, but did not say why the problems persisted.