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Oil and gas industry demands legal certainty in Jokowi's second term

Securing more investments meant that the government needed to improve regulatory certainty over the domestic oil and gas industry, said industry player Tumbur Parlindungan, former chairman of the Indonesian Petroleum Association.

Norman Harsono (The Jakarta Post)
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Jakarta
Tue, October 22, 2019

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Oil and gas industry demands legal certainty in Jokowi's second term Illustration of worker in oil and gas industry. (Shutterstock/File)

I

ndonesia’s oil and gas industry stakeholders have expressed hope that President Joko ”Jokowi” Widodo’s energy team in his second five-year term would introduce changes and legal certainty that attract the necessary investments to conduct exploration and, thus, make new oil and gas discoveries.

The newly inaugurated President offered ministerial positions to several prominent individuals on Monday, but the Presidential Palace remained tight-lipped on the Cabinet configuration, the announcement of which is expected to occur on Wednesday.

“The rule of thumb is, if we want to increase oil production, we need new discoveries. We have only managed to slow down the natural decline of existing reserves,” said industry player Tumbur Parlindungan, former chairman of the Indonesian Petroleum Association (IPA), at an industry outlook discussion in Jakarta on Monday.

Securing more investments, he continued, meant that the government needed to improve regulatory certainty over the domestic oil and gas industry.

Tumbur said that Article 7 of the amended Ministerial Regulation No. 52/2017 on gross split production sharing contracts (PSC) was an example of a regulatory uncertainty that creates disincentives for investment.

Read also: Dark skies ahead for Jokowi-Ma'ruf economic team: Economists

The article allows the government to increase its share of earnings, without approval from the contracting company, if a field was more productive than expected. However, the article also allows the opposite response if fields are less productive than expected. In its unamended version, the regulation capped such changes in shares at 5 percent.

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