The government has formed a new task force to temporarily take over the role of the now-defunct BPMigas following the Constitutional Court’s ruling to disband the upstream oil and gas regulatory body.
Speaking before hundreds of BPMigas staff at the dissolved body’s headquarters in Jakarta on Thursday, Deputy Energy and Mineral Resources Minister Rudi Rubiandini said the government had issued two ministerial decrees as the legal basis for the formation of the task force.
“The government is transforming BPMigas into a new transitional unit under the direct supervision of the Energy and Mineral Resources Minister Jero Wacik,” said Rudi, who spoke to the workers on behalf of the minister to clarify matters.
Under the two decrees, all former BPMigas deputies and employees will resume their previous duties under the task force, which will be known as the Upstream Oil and Gas Business Activities Implementation Unit (UPKUHM). The decrees, however, do not refer to the fate of former BPMigas chairman, R. Priyono.
At the time of its winding-up, BPMigas employed 765 permanent workers and 101 non-permanent employees.
Rudi said that with the decrees, the new task force would continue to operate as usual in overseeing the country’s oil and gas output from oil and gas contractors and issuing licenses for liquefied natural gas (LNG) shipments from Indonesia.
The ministerial decrees were announced following President Susilo Bambang Yudhoyono’s statement on Wednesday ordering Jero to directly manage the nation’s oil and gas business contracts following the court’s verdict.
Yudhoyono has assured all oil and gas companies in Indonesia that the existing production sharing contracts (PSCs) will be unaffected despite this shake-up in the industry.
As many as 302 oil and gas contractors currently operate under the PSC scheme in Indonesia, a former Southeast Asian OPEC member. They came under the direct supervision of BPMigas, with 67 of them having reached production stages.
On Tuesday, the Constitutional Court dissolved BPMigas in a verdict following a judicial review of Law No. 22/2001 on oil and gas. A number of Islamic organizations and individuals filed the request for the judicial review, arguing that the existence of BPMigas contravened Article 33 of the Constitution, which stipulates that the state should reap the most benefit from the country’s natural resources to ensure the welfare of the people.
The court’s panel of judges found that BPMigas did not directly administer the country’s oil and gas resources, instead handing control over to state-owned and private companies through cooperation contracts.
The court said such a mechanism limited the state’s ability to maximize the benefits from natural resource management for people’s welfare as stipulated in Article 33 of the 1945 Constitution.
The Energy and Mineral Resources Ministry would assume the functions of BPMigas until a new law was drafted to serve as the legal foundation for the supervisory body, the court said in its ruling.
While declining to comment directly on the court’s verdict, Yudhoyono did mention that the establishment of BPMigas in 2002, replacing the state oil and gas firm PT Pertamina’s rights to govern the oil and gas industry, was meant to avoid a “conflict of interest”.
“The founding of BPMigas, which was carried out according to the Law No. 22/2001 on oil and gas during the rule of Megawati Soekarnoputri, has both basic and clear ideas,” he said, mentioning his predecessor’s name, who leads the nation’s largest opposition party, the Indonesian Democratic Party of Struggle (PDI-P).
Separately, the Indonesian Chamber of Commerce and Industry’s (Kadin) deputy chairman for oil and gas, Sammy Hamzah, welcomed the government’s quick reaction following the court’s ruling, which he said had alarmed many investors, including foreign companies, in the industry.
“What the government must do is to reassure investors that the investment climate in the industry is still stable, and guarantee that contractors’ business activities will go on as usual in spite of this recent verdict,” he said.
PT Chevron Pacific Indonesia’s (CPI) vice president for government policy and public affairs, Yanto Sia-nipar, said his company hoped the new decrees would provide legal certainty over the implementation of existing PSCs. “If so, Chevron will be able to continue its investment in Indonesia, just as we have been doing for years,” he said.
The US-based energy giant’s local subsidiary accounts for around 40 percent of Indonesia’s annual oil output.