BP Migas finally agrees with government on upstream regulation: Official

The Ministry of Energy and Mineral Resources claimed it has managed to resolve differences with the upstream oil and gas regulatory body BP Migas over the proposed government regulation on oil and gas upstream sector, the Koran Tempo daily reported on Monday.

The paper quoted director general of oil and gas Iin Arifin Takhyan as saying that BP Migas has finally agreed to let the government (the ministry) signs oil and gas contracts with production sharing contractors. BP Migas has previously demanded such role.

BP Migas has also agreed that the assets of oil and gas production sharing contractors would be managed by the government after their contracts expire. BP Migas will only have a supervisory role.

Iin, however, acknowledged that the Ministry of Energy and Mineral Resources have to reach agreement with the Ministry of Finance over the crucial issue of value added tax (VAT) and import duties. The Ministry of Finance has insisted oil and gas contractors to pay the VAT and import duties upfront prior to commercial production.

Nevertheless, Iin is optimistic that President Megawati Soekarnoputri will soon approve the regulation on the upstream sector.

The government is also under pressure to immediately complete the regulation on the oil and gas downstream sectors.

These two regulations are the remaining implementing regulations of the Oil and Gas Law 2001 which have yet to be completed. The Ministry of Energy and Mineral Resources have initially planned to complete the two regulations, seen crucial to entice fresh investment in the oil and gas sector, at the end of 2003. (*)