Govt told to set up new oil and gas agency

Ridwan Max Sijabat, The Jakarta Post, Jakarta | National | Tue, February 12 2013, 9:32 PM

An expert says the government has to set up a state oil and gas management board to replace the now defunct Upstream Oil And Gas Regulatory Special Task Force (BP Migas).

“The new oil and gas state agency should be regulated in a law separate from the current 2001 law on oil and gas, which is still being reviewed. This oil and gas management board should have a principal role to conduct negotiations with both local and national mining companies and secure optimal revenues from oil and gas mining activities for the state,” said Hikmahanto Juwana, an international law expert from the University of Indonesia, on Tuesday.

He spoke in a discussion held by the Indonesian Democratic Party of Struggle (PDI-P) faction at the House of Representatives to collect input for the ongoing review process of the 2001 law on oil and gas.

Hikmahanto said both the government and the House could shape the new oil and gas agency in what they thought was the best format only if there was a process to establish a separate law for the oil and gas management board.

The new oil and gas agency, he said, should function as a buffer agency to support the state in regulating the oil and gas industry in the country.

During the review process of the 2001 law on oil and gas, the Constitutional Court dissolved BP Migas, saying that its existence was in contradiction to the amended 1945 Constitution.

Darmawan Prasodjo, an economist with a specialty in mining, said the government and House should have a common perception on how the country’s oil and gas reserves should be managed so that they could secure optimal revenues for the state and people.

“If Indonesia wants to optimize the state’s revenue from oil and gas exploration activities, the government should reform the state-owned oil and gas company PT Pertamina so it can become a big oil and gas operator, like world-caliber mining companies that have not only strong capital but also advanced technology and risk management,” said Hikmahanto.

Currently, Pertamina earns an annual profit worth around Rp 2 trillion (US$207.4 million) and has allocated only 2 percent of its annual profit for the state budget.

Hikmahanto said Pertamina had a lot to do to improve its performance as it still kept its traditional role as merely an oil trader instead of a major oil and gas mining company.

“Malaysia’s Petronas can allocate 40 percent of its annual profit worth Rp 200 trillion to the country’s budget because it has shaped the company as a giant oil and gas miner and operator,” said Hikmahanto. (ebf)