Govt issues new regulation on local content requirement

In order to further strengthen the involvement of local industry, the government has issued a new regulation on the minimum level of the local content of goods and services (TKDN) procured by oil and gas production sharing contractors (PSCs) and oil and gas supporting companies.

The new Energy and Mineral Resources Minister?s regulation No 15, 2013 on the use of locally made products on oil and gas was issued on Feb. 22 to replace the previous regulation No. 007 on supply chain management issued by upstream authority BPMIGAS which was now replaced by SKK Migas.

The new regulation which would be implemented beginning May 22 provides no major changes in the level of local content of goods and services used by PSCs and oil and gas supporting companies. But the new regulation will give the energy and mineral resources ministry more authority in providing sanctions to those violating the regulation, which is now held by SKK Migas.

Deputy Minister of Energy and Mineral Resources Susilo Siswoutomo said that under the new regulation, the power to impose the TKDN regulation would be at the hands of the energy and mineral resources ministry. ?SKK Migas will only carry out monitoring of the implementation of the regulation,? he added.

With the new regulation, contractors taking part in a tender for the procurement of goods and services in oil and gas activities should also use the minimum local content requirement as stated in the APDN local product appreciation book, he said.

In the new regulation, the government also sets the minimum level of local content that has to be achieved by PSCs and oil and gas supporting companies under short, middle and long-term programs. The local content of high-grade pipes used for exploring activities should for example reach 25 percent for the period between 2013-2016, 40 percent for period between 2017-2020 and 55 percent for period between 2021 and 2025. (*)

Local content stipulation (TKDN) in upstream oil and gas

No.	Goods	Year* *
		2013-2016	2017-2020	2021-2025
1	Drilling pipes (OCTG)
	a. High Grade	25	40	55
	b. Low Grade	15	25	40
2	Distributing pipes (Linepipe)
	a. Spiral/SAW	50	65	80
	b. ERW	50	65	80
	c. Seamless Pipe	10	30	50
3	drilling mud,? cement, and chemical stuffs ?	40	55	70
4	Electrical Submersible Pump	15	25	35
5	Pumping Unit	40	55	70
6	Machinery & Equipment	20	30	40
7	Wellhead and X-mas tree
?	a. Land	40	55	70
	b. Sea	15	30	40
8	Oil fuels (BBM)	60	75	95
9	Lubricant	50	60	70
10	Other things	15	25	40
?	Services	?	?	?
1	Survey services, Seismic, and Geology Study
	a. Land	60	75	90
	b. Sea	15	25	35
2	Drilling Services
?	a. Land	50	70	90
?	b. Sea	35	45	55
3	FEED Services
	a. Land	60	70	80
	b. Sea	40	50	60
4	a. Land	50	70	90
	b. Sea	35	45	55
5	Shipping Services	75	80	85
6	Flight services	80	90	95
7	Other Services	40	55	75

?** in percentage,? Source: Energy and Mineral Resources Ministry