T

he graft scandal of the suspended oil and gas regulator SKKMigas chief, Rudi Rubiandini, sends negative signals of the nation'€™s legal uncertainty to oil and gas companies operating in Southeast Asia'€™s biggest economy.

'€œIt is very crucial for the central government to maintain the stability of activities in the upstream oil and gas sector in times like these,'€ Indonesian Petroleum Association (IPA) chairman Lukman Mahfoedz said on Wednesday.

The IPA serves as the country'€™s umbrella for 53 local and multinational companies, including giant oil firms like ExxonMobil and Chevron, and represents 90 percent of the country'€™s oil and gas exploration and production activities.

Lukman, the president director of the nation'€™s largest publicly-listed oil and gas firm, PT Medco Energi Internasional, a company linked to business tycoon Arifin Panigoro, said Rudi'€™s arrest might affect the government'€™s oil output target.

'€œHowever, the association expects that Indonesia will not experience a distressed investment climate [as a result of this case],'€ he said, adding that the IPA supported '€œgood governance'€ in the industry.

Rudi was arrested by Corruption Eradication Commission (KPK) investigators last week at his house in South Jakarta in a sting operation along, with his golf instructor Deviardi aka Ardi and Simon Gunawan Tanjaya, an executive with Singapore-based oil trading firm Kernel Oil.

The Bandung Institute of Technology (ITB) professor was caught in the act accepting US$700,000 in bribes from Simon.

A string of incidents have occurred recently, casting a shadow of legal uncertainty over the industry.

Other than the sudden dissolution of BPMigas last year and Rudi'€™s recent detention, oil and gas executives are also currently left in the dark as lawmakers have yet to finalize the revisions to the controversial 2001 Oil and Gas Law.

On Nov. 13 last year, the Constitutional Court dissolved BPMigas following a judicial review filed by several groups '€” including the Muhammadiyah Islamic group '€” toward the law.

Less than 24 hours after the court ruling, the government formed SKKMigas as a temporary replacement for BPMigas.

Earlier this year, three employees at Chevron Indonesia '€” the country'€™s biggest oil producer '€” were sentenced in graft cases in a controversial criminal prosecution by the Attorney'€™s General Office that many oil and gas contractors
perceived as '€œcriminalization of production-sharing contracts.'€

Joang Laksanto, chairman of the Jakarta-based Upstream Oil and Gas Communications Forum (FKK IHM), separately said it would now be crucial for analysts and experts to maintain objectivity in expressing their views in the media following Rudi'€™s arrest. '€œThe negative image will hurt investment [in the industry] and will subsequently affect oil production.'€

Indonesia has left the Organization of the Petroleum Exporting Countries (OPEC) since 2008 due to continued decline in crude oil output amid aging oil fields, coupled with rising fuel imports.