New energy law will 'reduce foreign control'

Fitri Wulandari, The Jakarta Post, Jakarta

In a bid to "reduce foreign control" of energy resources, the House of Representatives is currently drafting a new law on energy that would require the government to obtain House approval before awarding contracts to foreign companies.

Soetrisno, a senior legislator at House Commission VIII on energy and mining, said on Monday that the new law would also allow the House to annul contracts given to companies with a bad reputation for environmental management.

"Energy is a strategic commodity," declared Soetrisno, who heads the commission's special team drafting the new law.

The House is determined to complete the law before its current term ends in October.

The new law would consolidate and synchronize all the existing energy laws including oil and gas law (passed by the House in 2001), the electricity law (approved in 2002), and the geothermal law (2003).

Soetrisno said that the new law was aimed at reducing the control that foreigners had over the country's energy resources.

He explained that under the planned new law, the government would have to obtain approval from the House before signing contracts with foreign companies in oil and gas projects, power infrastructure development and renewable energy projects.

Transactions with foreign countries, for example, on the sale of liquefied natural gas (LNG) would also require House approval.

"The projects should comply with Indonesian law and benefit the country," Soetrisno explained.

He added that the new bill was also being drafted amid concerns over rapidly depleting energy resources in the country.

Current oil reserves of 5 billion barrels will be exhausted in 10 years, according to most estimates, while natural gas reserves of 90 trillion cubic feet are projected to run out in 30 years. Coal reserves which currently stand at 100 million tons would run out in 50 years.

Activists and experts, however, criticized the bill for its poor and oversimplified wording, a reflection of its hasty drafting. It does not focus on the sustainability or the affordability of energy for the public, they said.

Soetrisno, however, claimed that the new bill would not dampen investor interest in the country's energy sector, as it would give investors better legal certainty. He did not elaborate.

The government is trying to woo investors back into the country's energy sector after being in the doldrums for the past couple of years.

For instance, the government is offering better oil and gas splits to lure back foreign investors. Indonesia needs new oil exploration, which local companies are unable to do, to compensate for high crude oil production and to prevent it from being a net oil importer in the near future.