Local content in upstream oil-gas reaches 50%

The value of commitment for goods and services procurement in the upstream oil and gas sector during the period of January ? October 2016 has reached US$6.23 billion or around Rp 80.1 trillion, of which local content on cost basis amounted to 49.9 percent.

?We?ll be continually committed to increasing the local content in the upstream oil and gas industry,? SKK Migas? Deputy in charge of Supporting Business Control, Rudianto Rimbono, said when opening the Supply Demand Forum in Batam on Wednesday.

He said that efforts to increase the national capacity in the upstream sector needed the support of the government. The government can realize it through the application of regulations that are friendly to the local business players and create a market certainty for owners of technologies to increase their investments in Indonesia.

The Supply Demand Forum is a coordination meeting between SKK Migas, business players in the supply chain management, contractors, and providers of goods and services in the upstream oil and gas sector with a view to consolidating data on the sector?s needs and the supplying capacity of the local industries.

Rudianto also noted that the Forum was also expected to make a breakthrough in improving the efficiency and effectiveness of the supply chain management, simplifying tender process, and creating multiplier effects to the national economy, based on the prevailing policies and regulations.

According to him, the local suppliers are facing a number of challenges in providing the local content to the upstream oil and gas industries. The challenges include quality improvement, prices, time of production and delivery of the goods and services for the upstream oil and gas sector. ?To increase efficiency, the costs of local suppliers should be cut,? he said.

He said the improvement of the national capacity could also be achieved through the use of state-owned and region-owned banks? (BUMN/BUMD Banks) payment system. During the period of April 2009 until October 2016, the transactions through the BUMN/BUMD banks reached US$ 57.55 billion or around Rp 748 trillion. Besides, the upstream industries deposited the funds for abandonment and site restoration (ASR) in the BUMN banks. As of Sept. 30, 2016, the deposit of ASR funds in BUMN banks amounted to US$ 840 million or around Rp 11 trillion.

He pointed out that the goods and services procurements by state-owned companies (BUMN), such as PT. Pertamina (Persero), PT. Elnusa, PT. Wijaya Karya, PT. Rekayasa Industri, and PT. PAL had also increased. During the period of 2010 ? 2016, the value of the procurements was US$5.63 billion or about Rp 73.5 trillion. ?All of these are resulted from the multiplier effects of the upstream oil and gas sector to our national economy. This is not to mention about the results of efforts of SKK Migas and the production sharing contractors in saving costs by maximizing the use of available assets. As of October this year, through the joint procurement we?ve managed to save a total US$ 187 million or about Rp2.44 trillion, and through optimization of assets use at US$ 19.2 million or around Rp 250 billion,? said Rudianto.

Editing by Benget Besalicto ST.