T

he House of Representatives has approved the government’s request to continue to allow the oil and gas sector to operate certain types of foreign vessels as an exception to a new cabotage law.

Chairman of House Commission V overseeing transportation affairs Yasti Soepredjo from the National Mandate Party said on Thursday that the House had asked the government to issue a government decree, rather than revise the shipping law, to allow the operation of several types of foreign vessels in oil and gas exploration and production activities in the country.

“We have asked the government to issue a governmental decree containing detailed explanations of the operations of special vessels used in offshore oil and gas activities which are not used to transport people and/or goods,” she read from the commission’s decision in Jakarta.

She said that the decree had to be issued by April 7, a month before a cabotage regulation that would prohibit foreign vessels from operating within Indonesia’s maritime territories is to be implemented.

The government had initially asked the House to revise the shipping law to give a stronger legal
base for the operation of several types of foreign vessels in the oil and gas sector.

The director general of oil and gas at the Energy and Mineral Resources Ministry, Evita Herawati Legowo, praised the House’s decision despite that the House disagreed with the government’s request to revise the 2008 shipping law.

“The most important thing for us is that this problem can be solved as soon as possible, so the oil and gas production activities can continue without any disturbance,” she told reporters after the hearing session with the commission.

As widely reported earlier, the Indonesian Petroleum Association (IPA) estimated that Indonesia’s oil and gas production might fall by around 196 million barrels of oil equivalent this year if the cabotage principle was fully implemented in May 7. The country might also lose as many as US$13 billion in investments.

Transportation Minister Freddy Numberi, who also attended the hearing session, said that in 2011 there would be 1,037 oil and gas production activities requiring the utilization of at least 17 vessels that comprised four categories of vessel – survey, drilling, construction and operational support – that were not available in the country.

“The country might lose total revenue of $5.2 billion in 2011 from the oil and gas sector if there is no clarity on the status of those foreign-flagged vessels,” he told the commission members.

According to upstream oil and gas regulator BPMigas, as of March 2010, 88 percent or 468 vessels in the oil and gas industry were domestic-owned, and the remaining 12 percent or 63 vessels were owned by foreign shipping companies.

Minister Freddy said that the prices of the vessels in the four categories were very expensive, ranging between Rp 1 trillion and Rp 6 trillion each.

He then acknowledged that the use of foreign vessels in offshore oil and gas operations was acceptable as long as they were not used to transport people and goods.

“The implementation of the cabotage principle is very important. It has boosted the number of domestically owned vessels from only 6,041 in 2005 to 9,945 in 2010. But, for the oil and gas industry, we need some leeway,” he said.