T

he government has revised a procurement regulation on oil and gas upstream operations that is intended to involve more local suppliers in the procurement of goods and services in the oil and gas sector.

Upstream oil and gas regulator BPMigas head R. Priyono said Wednesday that under the revised regulation the government’s oil and gas production sharing contract (PSC) holders should procure at least 30 percent of their goods and services needs from local companies.

“The revision of the regulation is quite important to ensure that local companies can benefit from the oil and gas operations. Currently, most of the suppliers are foreign companies,” he told a media briefing at the agency’s office in Jakarta.

In order to be able to take part in the supply of goods and services for large projects, a local company could establish a consortium with other local firms to improve its technical and financial capabilities, he said.

The revised regulation also allowed local companies to team up with foreign companies in providing the goods and services, he added.

“We don’t undermine the capability of local companies. However, since the oil and gas industry is capital-intensive, technology-intensive and possesses high risk, we have to make sure that all projects are managed safely and professionally,” Priyono said.

BPMigas has made several moves to boost the involvement of local companies in the oil and gas industry.

According to the agency’s data, goods and services provided by local companies in upstream oil and gas operations accounted for 63.4 percent of the total procurement project value, which reached US$10.79 billion (Rp 94.6 trillion) last year.

In 2009, 49 percent of a total project value of $8.98 billion went to local companies.

The agency has planned to boost the local company’s share to 65 percent in 2011, 70 percent in 2014 and 91 percent in 2025.

Although the total value of goods and services provided by the local companies had reached above 50 percent, many oil and gas companies still mostly use foreign goods and services for their projects.

BPMigas deputy for general affairs Rizal Asir said that the agency’s efforts to invite more local companies in the exploration and production activities were being hampered by the deep waters and lack of infrastructure in the eastern part of the country, where most of the projects were located.

In the revised regulation, loans from state-owned banks would also be included as a local component in the procurement of goods and services in the industry, he reported. That policy, he added, was a follow- up of a government letter requesting PSC holders to use state-owned banks for all transactions in their procurement of goods and services.

“The letter was issued in April 2009. It also contained a request for all PSC holders to move their abandonment and site relocation [ASR] funds from overseas banks to Indonesia’s state-owned banks,” Rizal said.