Cabotage principle disrupts oil, gas production

Chairman of the upstream oil and gas regulator, or BPMIGAS, Raden Priyono said the unaddressed problem related to the implementation of cabotage principle in the country was feared to disrupt national oil and gas production in 2011.

Priyono said the production target might fall 270,000 barrels per day as 54 oil vessels regularly operating in offshore blocks could not be built at home.

"At the end of December the vessels will be pulled out due to uncertainty over the cabotage principle," Priyono said.

He said contractors at Sulawesi Strait were not willing to breach the international law.

"Foreigners don't want to argue when it comes to law, and we cannot just ask them to let the show go on," he said.

The cabotage rule has been familiarized to contractors since 2006 and will fully take effect on Jan. 1, 2011.

Priyono said problems might arise due to the limited availability of Indonesian ships that serve oil and gas activities such as jack up drillship, submersible drillship, cable/pipe laying vessel and seismic vessel.

Most companies do not dare to invest in such vessels due to short-term contracts they will deal with the directorate general of sea transportation suggested in a Nov. 4 meeting with BPMIGAS that production sharing contractors change flags without transfer of ownership. The problem is value added tax importers have to pay, which remains unsolved.

Priyono said BPMIGAS expected the regulation be reviewed. (godang/bernard)