Local contractors only control 20 percent of oil and gas spending

Local contractors only managed to control about 20 percent of the total spending made by oil and gas companies in the country, which reaches a total of US$3 billion a year, due to their inability to compete with foreign rivals, Kompas reported on Tuesday.

Kusomo AM, the chairman of the energy and mining department of the Indonesian Chamber of Commerce and Industry (Kadin), said in a seminar on Monday that many local companies went bankrupt due to their inability to compete with foreign companies in securing the contracts offered by oil and gas companies.

Spending made by oil and gas companies is reimbursed by Pertamina as part of the cost recovery program stated in their production sharing contracts. Many local companies want a bigger share in the business cake provided by oil and gas contractors but most of them could not compete with their foreign rivals.

According to Director General of oil and Gas, Rachmat Sudibyo, total spending made by oil and gas companies operating in Indonesia has reached between US$4 billion and $5 billion a year. About 60 percent of the amount are the spending for goods and services.

The director general hopes that local companies should be able to get a greater share in the oil and gas spending in order to help further strengthen the country?s economy. But Kusumo said without the government?s help, it would be difficult for the local companies to compete with the foreign firms.

According to Kusomo, oil and gas production and exploration activities which do not require high-technology should be given to local contractors. (*)