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Jakarta Post

Jero Wacik'€™s resignation clouds big gas projects

  • Raras Cahyafitri

    The Jakarta Post

Jakarta   /   Thu, September 11, 2014   /  09:24 am

The resignation of energy and mineral resources minister Jero Wacik over graft allegations may cause further delay in the approval of a number of high-profile oil and gas projects, such as the development of deep-water projects and the extension of major oil and gas block contracts.

Despite promises that the ministry would be in business as usual, even without Jero, some changes in strategic developments '€” for example, in the Indonesia Deepwater Development (IDD) '€” could not be implemented without the minister'€™s signature, Upstream Oil and Gas Regulatory Special Task Force'€™s (SKKMigas) deputy for planning, Aussie Gautama said.

'€œSKKMigas has validated the changes; however, the [energy and mineral resources] minister has the authority to approve it. In the past, SKKMigas had the guts to make a decision so a project moved forward. For now we can'€™t, because everyone is in fear of the possibility of being criminalized and wants to be a super-complier [to regulations],'€ Aussie said Wednesday.

The Corruption Eradication Commission (KPK) named Jero a suspect last week for allegedly forcing his subordinates to collect illegal funds between 2011 and 2013. Jero has tendered his resignation and the outgoing government has yet to announce his replacement or an interim officer for the top post in the energy sector.

Several changes in IDD development needed the minister'€™s approval, including those related to the increase in investment needed, to US$12 billion from the previous $6 billion, and the extension of the Selat Makassar production sharing contract (PSC) by another eight years to 2028 to match other PSCs covered in the giant IDD project.

Given its size and gas reserves, the IDD is seen as highly important for the country'€™s energy security and its goal to end dependency on oil. Vice President Boediono recently called on the authorities to settle problems related to the IDD before the appointment of the new president.

Under current regulations, the extension of a PSC can only be submitted 10 years before expiry. However, there is no deadline for the government to give a decision whether to extend a contract or terminate it, leading contractors to avoid huge investments due to the uncertainty.

The Energy and Mineral Resources Ministry has been working on a ministerial regulation giving more details over oil and gas block contract extensions.

'€œThere are some matters we still need to discuss,'€ the ministry'€™s director for upstream oil and gas, Naryanto Wagimin, said, adding that even if the regulation was finished, no one would sign it.

Uncertainty on PSC extensions and delayed permits due to the vacuum in the ministerial post were now the main concerns of most contractors, said Imron Gozali, the corporate secretary of PT Medco Energi InternaSional. '€œAs a contractor, the only thing we have is a PSC. Even in conflict-torn countries like Libya, the authorities are still able to make decisions. But not here,'€ Imron said.

Jero'€™s status puts more pressure on the energy sector, which has been under the spotlight since the arrest of SKKMigas chief Rudi Rubiandini in 2012 for accepting bribes.

'€œWe are sure that the government will pay significant attention to the development and will do what'€™s necessary to settle the potential negative impacts of the case,'€ said Lukman Mahfoedz, the chairman of the Indonesian Petroleum Association.

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