President Susilo Bambang Yudhoyono renewed calls on Wednesday for oil and gas contractors to help increase output following recent failures to reach production targets.
Yudhoyono, as quoted by Energy and Mineral Resources Minister Purnomo Yusgiantoro, told the contractors that it was a time for them to "share the pain" with the country after pocketing hefty windfall profits from soaring global oil prices.
"Sharing the pain means contractors should help boost output at a time when oil prices are high so that the government can also benefit from higher revenue. If the output is lower, then the revenue will be less.
"The President asked how the contractors, which have enjoyed windfall profits, could share the burden in supporting the national economy," said Purnomo, who recently received intense criticism for his management of the country's energy sector.
Yudhoyono summoned oil and gas stakeholders, including 37 contractors, to the Presidential Palace on Wednesday to seek their commitment to help the government meet the oil output targets set in this year's state budget.
The Energy and Mineral Resources Ministry's directorate general of oil and gas announced late last month that the majority of contractors failed to achieve their daily oil production targets in the first four months of the year.
Twenty-two out of 37 contractors saw their production reports for the January-April period marked with red, as being below target, indicating that the overall national target of 977,000 barrels per day (bpd) of oil was not being reached.
During the period output reached an average of 975,000 bpd.
Among the companies under-performing against target were state oil and gas firm Pertamina, French-based oil company Total E&P Indonesie, Medco E&P and British-based oil giant BP in West Java.
Purnomo said the contractors had renewed promises during the meeting to optimize production and revitalize old wells to meet the oil sales target of 927,000 bpd.
He said the government would closely monitor their production.
The contractors, however, demanded the government reduce the bureaucracy involved in exploration and development of oil and gas blocks in a bid to speed up exploration and raise output.
The complex bureaucracy of six-year-old upstream oil and gas regulator BPMigas is partly blamed for scaring away investors from the industry, with the business community seeing no foreseeable end to such problems.
Autonomy privileges enjoyed by provincial and local administrations have also increased bureaucratic barriers, with officials often trying to "extort" benefits from oil and gas contractors operating in their areas via local bylaws.
After the meeting, BPMigas chairman Raden Priyono said the agency would maximize state revenues from the sector by limiting the scope of refund and recovery claims related to exploration and operations, which have been the subject of prolonged debate.
"Items which are not directly related to operations will not be included in cost recovery. For example, salaries of expatriates who have no work permit here will be excluded from reimbursement," he said.
The agency, he said, was also drafting a negative list of items which would be excluded from cost recovery claims.
Priyono also hinted that oil and gas contractors would agree to revise their existing contracts to clarify which items would qualify for cost recovery.
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