Fri, 11 Mar 2011

From: Reuters

From: Reuters

JAKARTA, Indonesia - Indonesia will issue a regulation to exempt oil and gas vessels from a new cabotage rule, a move that will ensure foreign vessels can continue offshore oil and gas exploration, a senior energy ministry official said on Thursday.

The energy ministry had earlier forecast the rule could cut the country's oil production by 156,000 barrels per day, while the Indonesian Petroleum Association (IPA) had warned it could lead to potential investment losses of up to $12.6 billion.

The cabotage rule, stipulated in a maritime law passed in 2008, would require companies to use Indonesian-flagged vessels to transport goods domestically, but the oil and gas sector is dominated by foreign support vessels.

The law had been due to come into effect on May 7, but strong criticism from oil and gas contractors has led the parliament to allow the government to issue a derivative rule excluding upstream oil and gas vessels from the law.

"We will issue the regulation before April 7," Evita Legowo, the director for oil and gas at the energy ministry, told reporters on Thursday.

Indonesia's Maritime Affairs Ministry said that 49 foreign-flagged oil and gas vessels are operating in Indonesia currently.

The IPA's estimated investment loss figure was based on the four biggest oil and gas contractors operating in Indonesia -- Chevron Corp , ConocoPhillips , Total and Exxon Mobil Corp .

Regulatory uncertainty and risk has deterred investment in the sector, leading to declining output at ageing fields and sudden shutdowns in oil wells that have often derailed the former OPEC member's plans to meet annual production targets.