SKK Migas revises rule to speed up procurement

Upstream authority SKK Migas announced on Monday it has revised its Work Guidelines (PTK) on Supply Chain for Production Sharing Contractors (PSC) to speed up the procurement process at upstream sector.

SKK Migas? Chairman Amien Sunaryadi said aside from speeding up and simplifying tender process, the revision aims to increase the use of local products and service and improve accountability in the service and goods procurement process at upstream sector.

Under the revised PTK, PSC contractors should ask for approvals from SKK Migas if tenders have value of more than Rp 200 billion or US$20 million. Previously, the contractors need SKK Migas approvals for tenders worth more than Rp 50 billion or $5 million.

The revised PTK sets a simpler tender mechanism and quicker tender process for offshore drilling and seismic surveys.

?The measure is in line with the need of upstream operation for process acceleration. Our expectation is that this will support the efforts to achieve the oil and gas production as targeted by the government,? Amien said.

The revised PTK also rules that PSC contractors must be willing to be audited by an independent auditor regarding their compliance with the Indonesian anti-corruption law and/or Foreign Corrupt Practices Act (FCPA) and/or Anti-Bribery and Corruption Act. If PSC contractors refuse the audit, they, as penalty to their actions, won?t be allowed to include the whole contract value to operating costs.

?The contractors are given a greater freedom, but should also be more accountable,? he said.

The revised PTK also aims to increase the utilization of local resources by obliging PSC contractors to make use of local goods and service and obliging consortiums to have local firms as members. In 2014, service and goods procurement commitment in the upstream sector totaled $17.345 billion, with local contents (TKDN) reaching 54.15 percent (cost basis).

Since 2010, state owned firms have been involved in goods and service procurement. In 2010-2014, procurement involving state owned firms totaled $4.51 billion with TKDN reaching 77.25 percent, according to SKK Migas? Business Support Deputy M.I. Zikrullah.

Furthermore, state owned banks have been involved in handling oil and gas transactions since 2009. Last year, the value of transactions handled by central owned banks and regional owned banks reached $12.43 billion, up 50 percent from $8.195 billion.

Besides, PSC contractors put their Abandonment and Site Restoration (ASR) at state owned banks. As of Dec. 31, the amount of ASR put at state owned banks reached $635 million, up by 474 percent from 2009.

?These are all the multiplier effects of oil and gas upstream sector to the national economy,? he said.

Editing by Johannes Simbolon