Govt, House agree to exempt oil, gas vessels from cabotage rule

The government and the House of Representatives's (DPR) Commission V have agreed that the foreign-flagged vessels that supports offshore oil and gas activities will be protected by a special government regulation.

With this decision, foreign-flagged vessels will be exempted from cabotage regulation to operate in Indonesian waters, according to a conclusion of the hearing on Thursday between the DPR and the government, which was represented by offcials from the ministry of transportation and the ministry of energy and mineral resources (ESDM).

"We will issue a government regulation before April 7," Evita Legowo, director general of oil and gas at the ESDM, told reporters on Thursday.

The cabotage rule, stipulated in a maritime law passed in 2008, would require companies to use Indonesian-flagged vessels to transport goods domestically. In fact, most activities in the country's oil and gas sector is supported by foreign-flagged vessels.

The law is to come into effect on May 7, but strong criticism from oil and gas contractors has led the parliament to allow the government to issue a derivative rule excluding upstream oil and gas vessels from the law.

Transportation Minister Freddy Number said that 49 foreign-flagged oil and gas vessels are now in operation in Indonesia.

The ESDM earlier warned the rule could cut the country's oil production by 156,000 barrels per day, while the Indonesian Petroleum Association (IPA) warned it could lead to potential investment losses of up to US$13 billion. (godang)