Local content in upstream sector reaches 56%

The value of services and goods provided by local companies, also known as ?local contents?, for oil and gas companies in the upstream sector reached US$5.312 billion on cost basis from January through November last year, according to upstream authority SKK Migas.

The local content, better known here by the acronym TKDN, accounted for 56.42 percent of the total service and good procurement during the period which amounted to $11.78 billion over the period, SKK Migas? Chief Spokesman Elan Biantoro said in a statement on Tuesday.

Of the $5.312 billion local content, $4.326 billion was provided in the form of services, the remaining $986 million was in the form of goods.

?We are committed to increasing the multiplier effects (of the national oil and gas sector) to other sectors of economy,? Elan said.

He said SKK Migas has kept pushing for the involvement of state owned enterprises (SOEs), including non-oil firms, in the upstream activities. From 2010 through November 2013, procurement contracts worth $3.18 billion for the upstream sector were carried out by non-banking SOEs. Last year, around $662 million worth of contracts were awarded to 15 SOEs such as PT Pertamina, PT Rekayasa Industri, PT PAL, Asuransi Jasa Indonesia and others.

Aside form local components, starting end-2008, the oil and gas upstream sector has obliged the use of the national banks? service for serviced and good procurement transactions. Ever since the policy has become effective, the value of service and good procurement transactions through the national banks has kept increasing. In 2009, the transactions reached $3.97 billion. In 2011, the value increased to $6.348 billion. Last year through November, the transactions reached $7.66 billion. Accumulatively, since 2009 through November 2013, the national banks, both owned by the central and regional governments, have handled transactions worth $31.94 billion.

The service of national banks has also been utilized by the oil and gas contractors to store funds for Abandonment and Site Restoration (ASR) program. The ASR funds stored at national banks rose to $134 million in 2013, from $112 million in 2012. As of November 2013, the ASR funds deposited at national banks totaled $478 million.

Elan said SKK Migas alongside PSC holders has tried to save costs through joint procurement and asset use optimizing programs. As of November 2013, the costs saved through joint procurement reached $109.7 million, while the costs saved through asset use optimizing reached $40 million.

Editing by Johannes Simbolon