INTERVIEW: Minister still holds a key role in oil and gas industry: Official (Repeat)

Director general of oil and gas Rachmat Sudibyo said in a recent interview with Petromindo.Com?s reporter Godang Sitompul that although the new oil and gas law has named the Implementing Body, --- which is better known locally by its Indonesian abbreviation ?Balak? ? as the country?s highest oil and gas authority for upstream sector, the Minister of Energy and Mineral Resources would still play a key role as an intermediary between the agency and the President.

The following are the excerpts of the interview.

Question: Could you tell us about the progress of the drafting of the governmental regulation on the Implementing Body?

Answer: We put priorities on the drafting of the governmental regulation on the Balak so that the transition period ? I don?t want to say a vacuum -- won?t become too long. As a matter of fact, (under the new law), it has to be established within the one-year transition period. We expect to establish it in less than one year so that the supervisory jobs and functions held by Pertamina over the production sharing contractors could be transferred to the Balak.

Q: What will be the main contents of the regulation?

A: Obviously, the contents pertain to the organizational structure of the Balak. How will its organization look like, its supervisory board, etc.

A: How?s about the Balak?s position?

Q: It has been explained in the law. What remains to do is to specify its form, and the number of its deputies.

Q: Will Balak have representatives in the regions?

A: It won?t. It will be like Pertamina?s MPS (directorate of production sharing management). In a recent meeting between (the central government) and the regional administrations of the oil and gas producing areas in Cikarang (small town east of Jakarta), we agreed to set up the oil and gas team in each province. It think this team will act as bridge (between the central and regional governments). Do we need Balak in the regions or not? I think the teams will be enough. (They will handle issues like) the counting of oil and gas revenue to be received the regions, the oil lifting, the production sharing contract system applied in the regions, cost recovery. We have also said that the forums that we shall set up together with the oil and gas producing regions may hold meetings regularly. Let?s say once a year or more. The forums can be used to discuss the policy matters etc.

Q: You just said the Balak will be look like the MPS. Do you mean that the MPS workers will become the Balak employees?

A: I think in principle, it will be like that. Why? Because, time is too short (for the government to recruit new people to be Balak?s staffers). It will be some kind of a massive transmigration. Of course, if there are MPS?s workers who are not willing to move, we shall recruit outsiders. The Balak is open for anyone who is professional and able to do the supervisory job and functions over the oil and gas industry.

Q: In doing its job, to whom the Balak will accountable? The President or Minister? If it reports to the Minister, will it not create an impression that it has lost some of its independence?

A: In principle it is accountable to the President. The governmental regulation will explain this. But, I don?t know whether the explanation will be like what I am going to say. (The Implementing Body) may submit its reports through the minister, but it is not accountable to the minister, but the President. It is impossible for the President such detailed and technical reports as those made by the Balak. Thus, I think, a minister is needed to evaluate the reports. Of course, the minister can tell the President about his or her judgement whether the reports are good or acceptable or others.

Q: In case of dispute between the Balak and the PSCs (production sharing contractors) and if the Balak loses the dispute, who is going to be responsible for the loss?

A: The types of the cooperation contracts allowed by the law are the contracts which do not contain potential financial risks for the government or Balak. Why? Because all risks, including financial risks, must be faced by contractors. There are no funds that the government or Balak should give (to contractors in case of losing dispute with them) and there are no risks that the government or Balak should face. Furthermore, the Balak will control the management (of the contractors) and the government holds title to the oil and gas output until the point of delivery. Thus, that is the rule: there are no risks for the Balak. This is a contract license, in which Balak has no obligation. It is contractors that have obligations. If we took a look at the existing production sharing contract system, Pertamina has no obligation at all. There are no risks at all. Of course, some people, who are against the new oil and gas law, pointed out the fact that Pertamina once experienced a financial problem. It was related to a tanker business. But, the Balak will have no tanker business. The Balak will only supervise the production sharing contractors. If anything, the Balak will not be allowed to sell oil. It won?t be allowed to do that because it is a trading business. Because of it, it has to appoint other parties to sell the government?s portion in the contractors? oil and gas output. Under the law, the Balak is not allowed to engage in trading, because trading entails loss risks and others. Thus, there are rulings that will really safeguard the Balak. This is what Pertamina has thus far done. There are 160 contracts that have been signed by Pertamina. Do you think Pertamina has ever found problems with the contracts? Never. It is because the contracts are unilateral.

Q: Which parties are involved in the drafting of the governmental regulation on the Balak?

A: As in the drafting of the oil and gas bill, all parties are welcome to give inputs.