Fitch: Little impact from dissolution of BPMIGAS on Indonesian O&G companies

(Singapore/Jakarta-21 November 2012) -- Fitch Ratings has said that the recent court order to abolish the Indonesian upstream oil and gas regulator, BPMIGAS, has minimal immediate impact on the operations of the country's upstream oil and gas (O&G) companies.

The ruling does not impact existing upstream contracts made under BPMIGAS since its establishment in 2002, as these are not invalidated by the court ruling. Furthermore, the regulatory functions of BPMIGAS have been transferred to the Ministry of Energy and Mineral Resources with immediate effect.

Fitch believes that the immediate impact of the ruling is limited to possible delays on completion of contracts for oil and gas exploration, development and production that were under consideration at the time of BPMIGAS's dissolution, including both new and contract extensions.

Although upstream operators are not materially affected by this development, the ruling highlights regulatory and legal risks in Indonesia, especially in the natural resources sector. Fitch already incorporates a higher level of regulatory risk than other jurisdictions when assessing the credit quality of Indonesia resources companies.(ends)