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Indonesian govt eases licensing to boost production
Publication Date : 18-09-2013
The government pledged on Tuesday to introduce a new policy that would significantly simplify the complicated licensing procedures in the upstream oil and gas sector, in a bid to revive the country’s depleting oil and gas production.
Coordinating Economic Minister Hatta Rajasa said in Jakarta on Tuesday that the government was studying 284 kinds of investment-related permits in the oil and gas sector, including 69 for upstream oil and gas operations.
“Particularly, in the upstream oil and gas sector, the government will make it much simpler. We can remove several of the 69 permits and categorise the rest into only eight groups,” he said after attending a meeting with President Susilo Bambang Yudhoyono at the Presidential office.
Each of the groups would be able to be processed at once, Hatta said. “For instance, the train passing permit, river passing permit, lake passing permit, and other similar permits, could be grouped into one,” he said.
The minister acknowledged the simplification would not be easy as it involved multiple state bodies as well as regional administrations. Businesspeople have repeatedly voiced complaints over the complicated permission processes when it comes to regional administrations.
“The central government is now pushing service-level agreements to provide a legal umbrella for the inter-ministry cooperation. This is hard but must be done because issues surrounding permissions had been one of the greatest complaints from the investors,” Hatta said.
“As for the regional administrations, the synchronisation will be handled by the Home Minister [Gamawan Fauzi],” he said.
The permit simplifications were part of the government’s four packages of economic stimulus announced late last month. The measures, which also included tax breaks and relaxation of investment licenses, were the government’s attempt to spur economic growth and stabilize the weakening rupiah.
Yudhoyono first highlighted the licensing problem in Indonesia during a speech delivered before oil and gas executives at the opening ceremony of the 37th Indonesian Petroleum Association (IPA) convention in May this year.
In his speech, Yudhoyono said that he had asked the officials within the Energy and Mineral Resources Ministry and related ministries to minimise the licenses needed by oil and gas contractors.
Separately, the IPA chairman Lukman Mahfoedz applauded the government’s plan, citing that land acquisitions and licensing remain the biggest problem for investors in the oil and gas sector.
In addition, the president director of publicly listed PT Medco Internasional Energi also highlighted expensive drilling costs as the main problem in the oil and gas industry.
“The drilling cost in Indonesia is two or three times higher than in the Middle Eastern and North African countries. The government must also give their attention to the supporting industry such as services and rig rentals because it can also cut the drilling cost,” he said in a text-message.
Indonesia, a former Southeast Asian member at the Organization of the Petroleum Exporting Countries (Opec), currently produces around 830,000 barrel per day (bpd) of crude oil or less than the 1.6 million bpd it booked in 1995 due to aging oil fields. Problems related to exploration licenses have made Indonesia only contribute 14
per cent to the Southeast Asia region’s newly discovered oil and gas reserves in 2012 or far behind Malaysia with 72 per cent, according to research by the energy think tank Wood Mackenzie Group.