New oil and gas law transfers power from Pertamina to two new bodies

The new oil and gas law, to be submitted to the House of Representatives at the end of this month, will significantly trim down the power enjoyed for many years by the state-owned oil and gas firm Pertamina, according to the Kontan economic weekly in its June 5 edition.

The paper said that under the new law, much of Pertamina's authority would be transferred to two new bodies called the mining cooperation contract executing body or BPKP, and the regulatory body or BP.

The BPKP is responsible for developing the country's up stream oil and gas sector including exploration and exploitation activities. BPKP, for instance, has the responsibility to audit the implementation of the cooperation contract (KP), the budget of the KP, working plans of the KP, and the development of the oil fields.

"BPKP acts like Pertamina's BPPKA," said director general of oil and gas Rachmat Sudibyo, referring to the foreign contractors management and development body.

Under the current law, contracts between Pertamina and its foreign oil and gas contractors are based on the so-called production-sharing contract. But under the new law, the contract is changed into the cooperation contract (KP).

Meanwhile, the role of BP is more focused into the down stream of the oil and gas sector including refinery, transportation, storage, trade and marketing.

According to the new law, BPKP reports to the Minister of Mines and Energy, although its members are appointed by the President.

While BP reports directly to the President. It's interesting to note here that members of BP consisted of government employees and people from the private sector.

Kontan said that the new law would give huge power to both the Minister of Mines and Energy, and the President over the country's lucrative oil and gas sector.

According to the new law, Pertamina must change its status into a limited liability company in two years, which means that Pertamina would be no different to the private oil and gas firms. Pertamina must also make a cooperating contract with BPKP. But the company will still be allowed to manage the oil refineries and its oil terminals.

The new law also stipulates that foreign oil and gas companies are only allowed to enter the exploration and exploitation activities. They're not allowed to enter downstream activities including the purifying, transportation, and marketing areas.

The law also forbids the selling of certain fuel products overseas, which should help resolve the rampant fuel smuggling out of the country. (*)