BPMIGAS wants more domestic components in upstream activities

The country?s upstream oil and gas regulator BPMIGAS has issued a new guideline for oil and gas contractors operating in Indonesia to prioritize local suppliers in their procurement of goods and services, which is part of efforts to push for greater involvement of local companies and banks in the upstream activities.

BPMIGAS Chairman R. Priyono said that under the newly revised guideline, domestic companies must handle at least 30 percent of the value of the procurement contract. ?A minimum 50 percent of the physical work service must also be conducted within the Indonesian territory,? he said on Wednesday, during a ceremony held to officiate the second revision of PTK No 007 (Working Guideline No 007).

He added that local companies could set up a consortium to help achieve technical and financial capacity. ?If (they?re) unable, part of the work could be sub-contracted to foreign firms.?

BPMIGAS has continued to increase domestic components in upstream activities each year. According to the blueprint of the Ministry of Energy and Mineral Resources, domestic components in 2010 were targeted at 55 percent. Out of the US$10.97 billion worth of procurement of goods and services made by oil and gas contractors during year, domestic components accounted for 63.4 percent, up from US$8.98 billion in 2009, in which domestic components accounted for only 49 percent of the total value.

Rizal Asir, Deputy of General Affairs at BPMIGAS, however, said that in the future, there will be tougher challenges to meet the domestic component requirement as exploration and exploitation activities have started to move toward the eastern part of Indonesia located in deeper sea, which means that upstream activities will be more intensive in terms of capital, technology and risk, and would require other supporting resources with higher standard of quality. ?The local components must be able to adapt to this development or they would be left behind,? he said. (bernard)