Indonesia plans to raise local stake in gas and oil

Aug 03, 2006 02:00 AM

The Indonesian government is devising a new policy to increase the ownership of local companies in the country's oil and gas sectors, currently dominated by foreign enterprises, and provide more benefits to local communities. The measure will be included in the government's 2006-2009 policy blueprint for oil and gas, the Energy and Mineral Resources Ministry's director general for oil and gas, Luluk Sumiarso, said.
"How much we are planning to increase the ownership is still to be discussed with all the stakeholders," he was quoted as saying at a seminar. "We will run an assessment shortly with all stakeholders to identify exactly how many oil and gas fields are operated by our own companies," he said.

The new policy also would require the use of more local equipment, services and employees in oil and gas exploration projects, the minister added. Luluk also said the government would revise production-sharing contracts currently used in the exploration and production of oil and gas to ensure future projects would give more benefits to the public.
At present, oil and gas producers operate under a production-sharing contract entitling oil firms to receive 15 % of the total production after the deduction of operating costs, and the government taking the remainder. Gas producers, meanwhile, receive about 30 % of the total net production.

Optimizing the country's share of its own rich oil and gas resources is among the government's main objectives in the 2006-2009 policy blueprint, apart from the planning of reserves, production, exploration technology and environmental impact. The chairman of House Commission VII on energy matters, Agusman Effendi, said the government could apply a different kind of contract for the projects similar to ones used in the mining sector.
"In such contracts, the government receives shares in the form of royalties, so there will no longer be any cost recovery," he said, adding the House had asked the government to look into this as an option. "Cooperation contracts are not the only form of contracts. We want the government to come up with contracts which will be more beneficial to the state."

Novian M. Thaib, an expert adviser at the ministry, said the government applied alternative contracts besides the production-sharing contract, called a "cost and fee" scheme, in which it only paid a fee for any production output. The contract has been used for several projects in East Kalimantan, he added. The chairman of the National Oil and Gas Caucus, Effendi Siradjuddin, supported the government's plan to increase local ownership, and suggested limitations on contracts with foreign companies.
"Local companies should be involved under a joint ownership and joint operatorship agreement, if the contracts are extended," he said.

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