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Govt promises to handle unresolved problems

Look at that: Pertamina president director Karen Agustiawan (left) talks with Vice President Boediono (center) and Energy and Mineral Resources Minister Jero Wacik on the sidelines of the 38th Indonesia Petroleum Association (IPA) Convention and Exhibition 2014 in Jakarta on Wednesday

Raras Cahyafitri (The Jakarta Post)
Jakarta
Thu, May 22, 2014

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Govt promises to handle unresolved problems Look at that: Pertamina president director Karen Agustiawan (left) talks with Vice President Boediono (center) and Energy and Mineral Resources Minister Jero Wacik on the sidelines of the 38th Indonesia Petroleum Association (IPA) Convention and Exhibition 2014 in Jakarta on Wednesday. About 2,400 oil and gas practitioners from 25 countries are participating in the exhibition, which lasts until Friday. (JP/Ricky Yudhistira) (left) talks with Vice President Boediono (center) and Energy and Mineral Resources Minister Jero Wacik on the sidelines of the 38th Indonesia Petroleum Association (IPA) Convention and Exhibition 2014 in Jakarta on Wednesday. About 2,400 oil and gas practitioners from 25 countries are participating in the exhibition, which lasts until Friday. (JP/Ricky Yudhistira)

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span class="inline inline-none">Look at that: Pertamina president director Karen Agustiawan (left) talks with Vice President Boediono (center) and Energy and Mineral Resources Minister Jero Wacik on the sidelines of the 38th Indonesia Petroleum Association (IPA) Convention and Exhibition 2014 in Jakarta on Wednesday. About 2,400 oil and gas practitioners from 25 countries are participating in the exhibition, which lasts until Friday. (JP/Ricky Yudhistira)

The outgoing administration is hopeful that the problems hampering major oil and gas projects can be resolved before the appointment of a new president in the next five months.

During a speech delivered in the opening ceremony of the 38th Indonesian Petroleum Association (IPA) Convention and Exhibition on Wednesday, Vice President Boediono highlighted certain issues in the oil and gas sector that should be resolved before handing over command.

The delay in the issuance of permits for many large projects has partly contributed to the failure to increase oil and gas production.

To resolve the problems, Boediono called for '€” among other things '€” acceleration in the issuance of permits.

'€œWe have to take decisions that will have a significant impact on the future; for example, problems related to the Muara Bakau and Makassar Straits fields.

'€œLet'€™s leave a good legacy in the oil and gas sector. Do not hesitate in taking decisions, as long as there is no conflict of interest, if it is in the nation'€™s interest,'€ Boediono said in his speech.

He also asked the energy and mineral resources minister, other relevant ministers and the Upstream Oil and Gas Regulatory Special Task Force (SKKMigas) to work together to simplify permits through a service level agreement (SLA) plan.

'€œThe SLA will be good grounding for the new government to manage the sector,'€ Boediono said.

Indonesia, a former member of the Organization of the Petroleum Exporting Countries (OPEC), has watched as its oil fields have depleted.

As the economy has grown, energy demand has also swollen, meaning it must import a substantial amount of oil and oil products to meet domestic needs.

Through a presidential decree issued in 2012, President Susilo Bambang Yudhoyono set an oil production target of 1 million barrels per day (bpd). However, production today is hovering around 800,000 bpd, well below the target.

The IPA said that the gap between oil supply and demand would continue to widen and reach 2 million barrels of oil equivalent per day (boepd) by 2025 due to the low rate of discovery of new resources, while demand keeps soaring.

The government has asked oil and gas companies to boost exploration activities in their respective concession areas to help raise production. However, industry players complained that bureaucracy and over-complicated processes for permits had hampered their exploration activities.

Moreover, particularly following former SKKMigas chief Rudi Rubiandini'€™s conviction for graft, authorities in the oil and gas sector have been more cautious in the issuance of licenses.

'€œWe will finish what we can in the next five months,'€ Energy and Mineral Resources Minister Jero Wacik said in a press conference, responding to the Vice President'€™s call for his ministry to decide the fate of the Muara Bakau and Makassar Strait projects, which are part of the Indonesia Deepwater Development (IDD) project.

The US$12 billion IDD project, developed by US-based Chevron, obtained approval for a plan of development (POD) in 2008. The project involves four production sharing contracts (PSCs) '€” Ganal, Rapak, Makassar Strait and Muara Bakau. In an attempt to secure investment return, Chevron has asked the government to extend the end of the Makassar Strait PSC from 2020 to 2028, to match other PSCs that also expire in 2028.

'€œThe extension of the contract has not been given, but will be decided soon. What has been approved is the Authorization of Financial Expenditure [AFE],'€ the Ministry'€™s oil and gas director general Edy Hermantoro said.

Obtaining AFE is part of the approval process toward a final investment decision, which is when a company can start on engineering, procurement and construction for a certain project.

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