Downstream regulation to be completed by year-end

The government has pledged to issue the regulation on the oil and gas downstream sector by the end of the year.

?The director general of oil and gas finished discussion on the draft regulation last month. It is now being discussed by an inter-departmental team consisting representatives from the Ministry of Finance, the Ministry of Justice and Human Rights and the State Secretariat,? director general of oil and gas at the Ministry of Energy and Mineral Resources Iin Arifin Takhyan said on Monday on the sidelines of the Indonesian, International Oil, Gas and Energy Conference and Exhibition.

Iin said his office had discussed the content of the draft regulation with all stakeholders.

?The regulation will regulate all matters in the downstream sector, including the liberalization of the sector,? he was quoted by Bisnis Indonesia as saying.

The regulation will among others regulate the possible use of state oil and gas company Pertamina?s refineries by other firms, according to Iin.

He said other firms could use the refineries to produce fuel in case of under-capacity on the approval by the Downstream Authority. But, should Pertamina use the refineries at full capacity, other firms can not use the refineries.

?New players should pay Pertamina some fee for using the refineries. Thus, this will become an opportunity for Pertamina to add its revenue,? Iin said.

Pertamina has been monopolizing the distribution of fuel across the country for decades, but the Oil and Gas Law of 2001 requires the government to open up the downstream sector for foreign investors.

The plan to liberalize the sector has raised worries that all fuel firms will concentrate in developed areas, such as Java and Sumatra, while neglecting poor areas. However, Iin said, the future regulation will assure that poor areas will also get enough fuel supplies.

The government may appoint a state-owned firm to supply the poor areas with fuel or hold a tender for fuel suppliers to send their products to the areas. The government will provide a subsidy to cover the transportation costs to the area.

?Thus, new players will not shoulder the social-cost burden. Thus far, there are many new players interested to enter the downstream sector,? Iin said. (*)