President signs regulation on oil body

The Jakarta Post, Jakarta

President Megawati Soekarnoputri has signed a regulation on the establishment of an Implementing Body, which will take over from state-owned oil and gas company Pertamina as the country's highest authority in the oil and gas sector.

The body, which is better known by the acronym Balak, will perform jobs that had been held by Pertamina for decades. These include awarding oil and gas concessions, signing contracts with oil and gas contractors and supervising the operation of oil and gas contractors, as well as regulating the industry.

The establishment of the body was stipulated by Law No. 22/2001 on the oil and gas industry, which took effect on Nov. 23, 2001.

Minister of Energy and Mineral Resources Purnomo Yusgiantoro said on Wednesday that even though the regulation establishing the body had been signed by the President, there were still some "administrative things" that needed to be completed before the new agency officially began operations.

He did not elaborate on what these administrative tasks were, Antara news agency reported.

The copy of the regulation was not immediately available on Wednesday, but according to Law. No. 22/2001 the agency is to be independent and accountable to the President.

The agency will be headed by a chairperson, who will be appointed and dismissed by the President, following consultations with the House of Representatives.

The chairperson will be assisted by a vice chairperson and several deputies, all of them experts in the industry.

Analysts estimate that the Balak will have about 500 employees, similar to the number of employees at Pertamina's directorate of production sharing contract management, which supervises the country's oil and gas contractors.

In fact, the government has offered all of the employees at the directorate the opportunity to move to the new body. Reportedly, some of the employees have declined the offer, fearful that the salaries at the body would not be comparable to what they earn at Pertamina.

With the establishment of the Balak, Pertamina will now be gradually transformed into a limited liability company -- a status that will eventually allow the state company to sell its stocks to the public.

Analysts are in agreement that the chairmanship of the Balak is an extremely strategic position. These analysts have warned that the position could become a bone of contention among politicians, as it could provide numerous opportunities for the illegal collection of financial resources.

Analysts have thus urged the government to entrust the position only to a professional, in the hope that this will help prevent the sort of corruption that has plagued the industry for decades.

According to current rumors among those in the industry, the current director general of oil and gas at Ministry of Energy and Mineral Resources, Rachmat Sudibyo, will be the first Balak chief.