Oil, gas law not against Constitution, court rules

Oil, gas law not against Constitution, court rules

The Jakarta Post, Jakarta

The Constitutional Court on Tuesday upheld a 2001 oil and gas
law that was designed to liberalize the sector and to gradually
reduce the role of state firm Pertamina, saying the law did not
violate the 1945 Constitution and should therefore remain in
place.

However, minor revisions to the legislation -- notably some
wordings in articles 12, 22, and 28 -- would need attention to
avoid misinterpretations, judge Jimly Asshiddiqie said.

"Based on our investigation, the petition by the plaintiffs is
rejected," he said when rendering the verdict.

The decision was the second important ruling issued by the
newly established Constitutional Court within the past week,
having last week annulled the Electricity Law No. 20/2002.

The electricity law was designed to push ahead the
liberalization of the sector, accelerating the reduction of the
monopolistic authority of state power firm PT PLN.

That decision raised concerns among industry players and
government officials, who warned that revoking the law would only
create uncertainty and hurt efforts to attract investment into
the troubled sector, where a steady drop in output has led to a
rise in fuel subsidy spending.

Under the Oil and Gas Law No. 22/2001, Pertamina's control
over upstream and downstream sectors are transferred to two
regulatory bodies, while new players would be allowed to compete
in the sector.

Meanwhile, the Court said that the three problematic articles
in the law center on the rights to explore and exploit oil and
gas resources, the minimum quota for oil and gas that producers
have to set aside for domestic supply, and the mechanism
determining pricing of oil.

Judge Mukthie Fadjar told a press briefing afterwards that the
wording "rendering the authority" in article 12 could be
interpreted as the government relinquishing control over the
country's petroleum resources.

"Perhaps, 'delegating the rights' would be better," he said,
adding the revision should reflect that the government was
actually allowing private firms to explore for oil and gas with
the assets remaining under state control.

The article 22 stipulates that oil and gas producers are
obliged to dedicate up to 25 percent of their production capacity
for domestic supply.

Mukthie said the article should also have mentioned the
minimum quota in addition to the maximum quota of 25 percent, so
as to help secure oil and gas supplies for the domestic market.

The article on pricing, by which prices for fuels would be
determined solely by market mechanisms, was deemed as being
unfair to the poor. The government should instead make sure that
it controls the prices of commodities that are of high importance
to the people, added Mukthie.

Elsewhere, the verdict was immediately met with fierce
protests from hundreds of members of non-governmental
organizations (NGOs) and a labor union representing Pertamina's
workers.

Seen among the posters they held aloft was one reading
"Congratulations, the government has allowed foreigners to rob
our resources at the expense of Indonesian people."

The organizations had asked the court to nullify the oil and
gas law that they claim would cause job losses at Pertamina and
higher fuel prices.