something to read whilst we wait, page-14

The recent arrest of the head of Upstream Oil and Gas Regulator Special Task Force (SKKMigas) in relation to allegations of bribery was expected to accelerate revisions to the 2001 Oil and Gas Law in a bid to ensure legal certainty in the upstream sector, analysts said over the weekend.

SKKMigas was formed as a temporary replacement for the now-defunct BPMigas, which was disbanded by the Constitutional Court on Nov. 13, 2012, in a verdict that annulled several articles of the law that had been used as the legal basis for the erstwhile regulator.

At the time, SKKMigas, previously named SKS Migas and later SKMigasbefore being rebranded under its current name, was formed in less than 24 hours after the Constitutional Court ruled that “the government must take
over BPMigas’ functions temporarily in order to respect existing oiland gas contracts”.

BPMigas was established to supervise the country’s oil and gasindustry after the government reformed state-owned oil and gascompany PT Pertamina, which under the New Order regime had a dual-function role.

However, the court, led by chief justice Mahfud MD, ordered that astate-owned business entity must be formed to replace BPMigas permanently in order for the 2001 Oil and Gas Law to be in line with the Constitution.

Still, even after SKKMigas head, former deputy energy and mineral resources minister Rudi Rubiandini, was arrested on Aug. 13 in a graft scandal related to a crude oil tender, lawmakers have yet to show signs that it would conclude the revisions anytime soon.

“Pak Rudi’s arrest should be a catalyst […] to the acceleration of the revisions of the 2001 Oil and Gas Law,” said Pri Agung Rakhmanto, an energy expert with the Jakarta-based think-tank ReforMiner Institute.

Sources told The Jakarta Post that SKKMigas would restructure its organization following Rudi’s arrest, including changing the names of the deputies.

Currently, deputies at SKKMigas include Widhyawan Prawiraatmadja, head of the commercialization control division that also oversees oil and gas trade. Rudi allegedly accepted US$700,000 in bribes from the Singapore-based oil trader, Kernel Oil, in relation to a crude oil and condensate tender supervised by SKKMigas.

Commenting on this, Pri Agung said restructuring the organization would only highlight that top positions at SKKMigas were “politically driven”.

In addition, he said, it would look like SKKMigas was going to be a permanent body.

“Lawmakers should follow the Constitutional Court’s order [to finish the revisions]. Simultaneously, the government should issue a Perppu [government regulation in-lieu-of-law] as the basis of a new, permanent body,” he said.

The unsettled law revisions meant oil and gas contractors were wary of working in an environment without legal certainty. In addition, a string of legal-related incidents recently have cast more of a shadow over the industry.

Earlier this year, three employees at Chevron Indonesia — the country’s biggest oil producer — were sentenced in graft cases in a controversial criminal prosecution by the Attorney’s General Office that many oil and gas contractors perceived as “criminalization of production-sharing contracts [PSCs].”

China’s PetroChina encountered problems in Jambi when local officials sealed dozens of its oil wells following disagreements over the contractor’s licensing in the region.

Separately, Satya W. Yudha, a Golkar Party lawmaker in the House’s Commission VII overseeing energy affairs, said the legislators would finalize the revisions of the law by 2014.

“With or without [the graft scandal], we will try to finalize the revisions on time,” he said.

Indonesia left the Organization of the Petroleum Exporting Countries (OPEC) in 2008 due to a continued decline in crude oil output due to aging oil fields and rising fuel imports