Thu, 10 Mar 2011

From: The Jakarta Post
By Rangga D. Fadillah, The Jakarta Post, Jakarta

The government says local companies will have greater opportunity to supply goods and services for upstream oil and gas operations due to the revision of a regulation on procurement mechanisms.

The head of upstream oil and gas regulator BPMigas, R. Priyono, said Wednesday that the revision required production sharing contract (PSC) holders to hire local companies in the procurement of goods and services with a minimum quota of 30 percent of the project's total value.

“The most important thing is we want local companies to be the winners in their own country, because currently most companies handling the procurement of goods and services in the oil and gas industry are owned by foreign entities,” he said at a media briefing at the agency's office in Jakarta.

He further said that a local company could establish a consortium with other local companies to improve both its technical and financial capabilities to professionally handle projects from PSC holders.

The revised regulation also allows local companies to hire foreign companies to conduct part of a project if it is beyond their capability, he added.

“We don't undermine the capability of local companies, but since the oil and gas industry is capital-intensive, technology-intensive and involves high risk, we have to make sure that all projects are managed safely and professionally,” Priyono said.

BPMigas is working hard to boost the involvement of local companies in the oil and gas industry. Agency data show that last year, local companies managed 63.4 percent of the total value of procurement projects of US$10.79 billion.

In 2009, only 49 percent of the total project value of $8.98 billion went to local companies. The agency plans to boost local companies’ share to 65 percent in 2011, 70 percent in 2014 and 91 percent in 2025.