Oil, gas government regulations face further delay

Fitri Wulandari, Jakarta

The State Secretariat has asked the Ministry of Energy and Mineral Resources to revise drafts of government regulations on downstream and upstream sectors of the oil and gas industry, pushing many investors to delay their projects further.

Minister of Energy and Mineral Resources Purnomo Yusgiantoro said the state secretary had returned the drafts for revision, particularly to clarify assets controlled by state oil and gas company PT Pertamina.

"It should be clear what assets will be controlled by the company and what should be returned to the state," Purnomo said. The governmental regulations are aimed at regulating implementation of Oil and Gas Law No. 22/2001.

Purnomo did not specify the assets, but under the law, which has stripped Pertamina of its monopoly in the industry, Pertamina must return its oil and gas working acreage to the government, while the firm may continue to operate the areas as a production- sharing contractor.

The Oil and Gas Upstream Regulatory Body (BP Migas) has taken over Pertamina's authority to manage oil and gas areas and oversee production-sharing contractors.

Purnomo did not give details, either, on parts of the draft downstream regulation that needed alteration, but said the draft did not need major revision.

Revision of the drafts means investors will need to keep their projects on hold for longer.

A number of investors who have obtained temporary licenses to engage in a variety of downstream sector business activities cannot start operating, given the absence of a regulation to control the sector.

According to the Ministry of Energy and Mineral Resources, investment approvals for the distribution of natural gas have reached US$112.6 million since it was liberalized a year ago. In addition, some seven foreign and domestic companies have obtained temporary licenses to sell and distribute oil-based fuel products.

In the upstream sector, many investors have suspended new exploration programs to seek fresh oil and gas reserves as they wait for the government to issue the regulations.

New exploration is significant, particularly in view of Indonesia's dwindling oil production.

The nation's production has declined over the past five years due to aging oil fields and a lack of investment. The country now produces 1.072 million barrels of oil per day including condensate, or less than the quota set by the Organization of Petroleum Exporting Countries (OPEC). Indonesia is the only southeast Asian OPEC member country.

Businesspeople called on the government to speed up revision of the draft regulations so that investors could start their projects or attract more investors into the country.

"We don't mind revisions (to the draft) as long as they provide legal certainty for investors in the future," deputy chairman of the Indonesian Chamber of Commerce and Industry (Kadin) with responsibility for energy and mining affairs Dito Ganundito told The Jakarta Post.