Oil and gas sector needs to boost use of local products: Ministers
Monday, July 9 2001 - 05:27 AM WIB
Officials from the Ministry of Energy and Mineral Resources and the Ministry of Industry and Trade met in Jakarta on Saturday to discuss the possibility to increase the use of local products in those two major industries.
Minister of Energy and Mineral Resources Purnomo Yusgiantoro said that the government wanted to increase the use of local products in those industries, without hurting its drive for openness and liberalization of trade and investment.
Therefore, Purnomo said that although the government would give some requirements for investors to use local products, local producers would also be required to meet certain criteria or standards of quality.
Meanwhile, Minister of Industry and Trade Luhut B. Panjaitan said that the cooperation between his office and Purnomo's office was necessary to increase the use of local products in those energy sectors.
He said the use of local pipes in the oil and gas sector, for instance, is still below 40 percent, in the meantime, local pipe producers export their products. The government, he said, needs to find ways to increase the use of local products that have met international standards.
By using more local products, Luhut said it would create a multiplier effect to the whole industries, and also eventually increase more income for the government and create more employment for local people.
Luhut , in his prepared statement for the meeting, said he identified several ?obstacles? for the efforts to boost the use of local products in the oil and gas industry.
The first obstacle, he said, was that the production sharing contractors (PSC) of state oil and gas company Pertamina, using various excuses, are inclined to import their equipment despite the fact locally-made types of the equipment were already available.
?The government (the directorate general of oil and gas at the ministry of energy and mineral resources and Pertamina) should boost supervision. Any requests for permission to import should be turned down unless there is a strong and acceptable reason.?
The second obstacle, he further said, several oil and gas companies had closed down their logistical bases on Batam Island and move them to Singapore without any permission from directorate general of oil and gas and Pertamina.
?The government should prohibit the use of logistical bases outside the country and determine Batam as the one of the logistical bases to support the oil and gas operations in Indonesia.
?The government should order all production sharing contractors which have moved their logistical bases to Singapore to return to Batam,? Luhut said.
Luhut further said the cost-efficiency program launched by Pertamina, called by the acronym of KRIS, had moved the oil and gas companies to shift its procurement activities to outside the country. They hired foreign trading houses to provide them with goods through the so-called ?global outsourcing program.?
Luhut thus called on Pertamina and directorate general of oil and gas to order the PSCs to still prioritize local products in implementing the KRIS cost efficiency program.
Luhut said the country?s local suppliers needed to form a consortium to reduce supply cost as part of the implementation of the KRIS cost efficiency program. But, he said, the establishment of such a consortium could raise suspicions on the part of the country?s anti-monopoly body, which is locally known by the acronym of KPPU, that the consortium would seek to monopolize the supply activities to the oil and gas companies.
He thus proposed both ministers take joint efforts to convince the KPPU that the establishment of such a consortium was necessary to cut supply costs of the country?s oil and gas industry. (Godang./Alex)