Talks on oil and gas bill grind to a halt

JAKARTA (JP): Deliberation of a bill to overhaul the oil and gas sector is deadlocked as the House of Representatives and the government both refused on Wednesday to compromise on the most crucial issue -- the right to award contracts -- despite days of lobbying.

The head of the House's special team for the deliberation of the oil and gas bill, Erie Soekardja, told reporters all factions of the House wanted the new law to maintain the current contract- awarding system, rejecting a change in the system proposed by the government.

"The government may hold mining rights but as far as the awarding of oil and gas contracts is concerned, the government has to delegate the contract-awarding right to a state company, be it state oil and gas company Pertamina or other companies to be formed by the government

"Thus, we want a contract-awarding system which is all in all similar to the current system," Erie said, explaining that awarding contracts to certain companies amounted to conducting business with the companies, and the legislators did not want the government to do business with any companies.

Under the existing law, Pertamina gives contracts to oil and gas contractors and controls and regulates the industry.

Under the new bill, the government will take over the rights to award contracts and control and regulate the industry.

Minister of Mines and Energy Kuntoro Mangkusubroto, who looked tired on Wednesday afternoon after a half-day debate to settle the disagreement over the issue, was reluctant to comment.

On Tuesday, Kuntoro said the government would not compromise with the House on the issue.

He said that according to the constitution, the right to award contracts lies with the state.

Under the 1971 Law No. 8 on Pertamina, the state delegates this right to Pertamina.

Under the new oil and gas bill, the government will exercise the right in the name of the state.

He said that in the past, state companies, including state coal company PT Bukit Asam and tin company PT Timah, also controlled the awarding of contracts in their sectors, but the government later took over the rights.

"The time is over for state companies to still control the industry," Kuntoro said.

Erie said the legislators find it acceptable that the government award contracts to companies in the minerals sector, but they could not accept that a similar scheme be applied in the oil and gas sector.

"Different from the mineral resources, the oil and gas resources are strategic and vital. And under the constitution, the oil and gas resources should be used for the maximum benefit of the people," Erie said.

Kuntoro said that by depriving Pertamina of its non-business activities, including the awarding and control over contracts, the government wanted to make the state company focus on its core business and become a world-class enterprise.

He said he had anticipated that the bill would be strongly opposed by the well-connected people who feared losing lucrative business opportunities following the shrinking role of Pertamina in the country's oil and gas industry. (jsk)