Indonesia's Pertamina nixes regulatory role after dissolution of BPMigas

Amahl S. Azwar in Jakarta/The Jakarta Post
Asia News Network

Jakarta (The Jakarta Post/ANN) - PT Pertamina president director Karen Agustiawan says that the Indonesian state-owned company has no plans to take over the supervisory role of recently dissolved upstream oil and gas regulator BPMigas.

Speaking at a press conference yesterday, Agustiawan said that Pertamina would not deviate from its plan to become one of the leading oil companies in Southeast Asia by 2014 and in the world by 2023.

"We do not wish to be involved in regulation," Agustiawan said. "I object that the company would have to go back to the old days during this transition period."

Under the tenure of president Soeharto, Pertamina was given dual roles as an oil and gas operator and as a industry regulator. Pertamina lost its regulatory function when BPMigas was created in 2002 after the enactment of the Oil and Gas Law.

Agustiawan's statement, made before Energy and Mineral Resources Minister Jero Wacik and State-Owned Enterprises (SOEs) Minister Dahlan Iskan, put an end to speculation that Pertamina was keen to resume work as a regulator to obtain more oil and gas projects amid tough competition from foreign contenders.

Previously, Salis S. Aprilian, the president director of Pertamina Hulu Energi (PHE), said that Pertamina was ready if the government decided to transfer BPMigas' remit to them.

PHE is Pertamina's subsidiary for the upstream oil and gas business, managing domestic and overseas oil and gas fields administered under production sharing contracts (PSCs) and joint operating body-production sharing contracts (JOB-PSC). It also holds participating interest in several blocks.

Iskan said that the ministry wanted Pertamina to meet its current targets, confirming that he had no desire for Pertamina to take over the work of BPMigas.

"Pertamina has learned from the past. In reality, Pertamina has already gained momentum to become a professional company after its regulatory function was transferred to a new agency, BPMigas," he said.

Pertamina has estimated that it would have an average oil and gas output of 583,600 barrels of oil equivalent per day (boepd) this year, much less than Malaysia's Petroliam Nasional Bhd. (Petronas), for example, which currently has an average oil and gas production of 1.63 million boepd, according to its website.

The Constitutional Court dissolved BPMigas in a decision last week upholding a judicial review of the Oil and Gas Law filed by several organisations, including Indonesia's second-largest Muslim social organisation, Muhammadiyah.

The review claimed that BPMigas had been "pro-foreign interests and was unconstitutional".

The government quickly moved to create the SKSPMigas task force to replace the regulator after the court announced its decision. President Susilo Bambang Yudhoyono appointed Wacik to lead the task force.

Earlier this week, major rating agency Moody's said in a report that although all existing oil and gas PSCs remained valid until their expiration after the court ruling, "the regulatory transfer and uncertainty arising from the pending formation of a new supervisory body and new law are credit negative for Indonesia."

Another prominent ratings agency, Fitch Ratings, said in its report yesterday that while the ruling "highlights regulatory and legal risks in Indonesia, especially in the natural resources sector", it would have "minimal immediate impact on the operations of the country's upstream oil and gas companies".

Commenting on the reports, Wacik said that even though the industry was initially shocked by the dissolution of BPMigas, he remained optimistic that prominent investors would continue to support Indonesia.

"I have discussed this with multinational oil and gas companies who have been doing business here for years and are facing a number of changes in the regulations. They have never left, for Indonesia's economic growth is very promising," Wacik said.