Oil and gas industry still hampered by the lack of clear-cut regulations

Although the government has issued a new oil and gas law to remove Pertamina?s exclusive rights in both oil and gas upstream and downstream industries, the private sector still face difficulties to enter the two business sectors due to the lack of clear-cut regulations on the implementation of the more liberal law, Koran Tempo reported on Monday.

In the upstream oil and industry or activities related oil and gas exploration and production, investors still waited for the clarification of the status of the Oil and Gas Implementation Body or BPMIGAS, which has replaced Pertamina?s role in supervising and managing the country?s oil and gas upstream operations.

The same thing happened to the oil and gas downstream activities. Although the government has established the Oil and Gas Regulatory Body or Badan Pengatur, which will replace Pertamina?s function in managing and supervising the oil and gas downstream industry such as those related to oil and gas processing, distribution and retail, the privatization of the business sector still faces uncertainties.

Djoko Darmono, the secretary general of the Ministry of Energy and Mineral Resources, said in Jakarta last week that the regulations on the implementation of the Oil and Gas Law which was introduced last year to support the privatization in the oil and gas industry were still being prepared.

He said that inter-governmental team was still working on the regulations both those related to upstream and downstream activities but he admitted that he did not know the latest progress of the team. "The government plans to issue the regulations simultaneously," he added.

He said that one of the obstacles on the issuance of the implementation regulation on the upstream industry was related to the demand from existing business players to allow BPMIGAS to operate as a one-roof service agency. He, however, did not elaborate.

Dudung Natanegara, ConocoPhillips Indonesia?s Vice President for Exploration said that the government should have a target when the regulations to give certainty to existing business players and potential investors.

The most important thing for the government is how to spell out and clarify more systematically all issues, which are not yet clarified by the Oil and Gas Law. "The clarification of the law should involve all the stakeholders," he said.

"Based on information from my colleagues who are involved in the drafting process, the regulations will be completed within the next two months.

According to him, the emphasis on the regulation on oil and gas upstream operation should be given on issues related to the institution that will be responsible to handle the sales of gas and oil production allocated for the government. At present, the sales of the government?s share from the oil and gas production is handled by Pertamina. Indonesia?s oil and gas exploration activities are carried out by private companies under a production sharing contracts in which the government ? in most cases ? receives 85 percent from the net oil production.

The second important thing, Dudung said, is those related to the clarification of BPMIGAS. This agency should be allowed to operate as a one-roof service agency to eliminate inefficiency both in term of money and time.

President Director PT Caltex Pacific Indonesia Humayunbosha shared Dudung?s view. He said that BPMIGAS should act as the government?s representative in the signing of new contract of works. "Like in the past, Pertamina represented all the government?s interests," he added. (*)