Cabotage rule to cause huge losses to the country: Transportation Minister

Minister of Transportation Freddy Numberi said on Thursday that the application of the cabotage principle in May of this year as stipulated under Law No 17/2008 on shipping would cause the country to potentially suffer financial losses of up to US$5.21 billion.

Speaking during a hearing with the House of Representatives Commission V, Freddy said that if the cabotage principle is implemented, oil and gas production in the country would be hampered as foreign flag vessels would no longer be allowed to operate in the Indonesian waters.

Foreign flag vessels operating in the country?s offshore upstream oil and gas sector whose contract will expire by the May 7 deadline when the cabotage principle is implemented totals 49 units.

Freddy said that market price for such category C vessels of the drill type is currently about Rp 6 trillion, while the price for a second-hand jack up rig is Rp 0.6 trillion.

Director General of Oil and Gas Evita Legowo had earlier made a similar warning, saying that the enforcement of the cabotage rule in May would disrupt national oil and gas production.

"The national production target at oil and gas off-shore fields will start to decline by 156,020 bpod of oil and 2,549 mmscfd of natural gas, totaling 595,000 bopd on May 7,? she told in her written statement during a hearing with the House of Representatives? Commission V on energy on Wednesday.

Evita said if no amendment was made to Law No. 17/2008 on shipping, activities to discover and increase oil and gas reserves would be hampered due to a delay in the implementation of seismic survey commitment worth US$188 million.

Elsewhere, Freddy unveiled the country?s requirement for vessels supporting upstream activities until 2015 as follows.

Survey vessel: 16 units
Drilling vessel: 55 units
Construction vessel: 42 units
Operational supporting vessel: 122 units.

The national oil and gas production plan for 2011 will require category C vessels to cover 1,037 activities including 52 survey seismic activities; drilling activities on 51 exploration wells; drilling of 292 development wells carried over from last year; drilling of 367 development wells for this year; and work over of 275 wells.

In total, this year will require 17 category C vessels, Freddy said. (giok)