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House expects to pass oil and gas, mining laws this year
With newly appointed legislators in the House of Representatives Commission VII overseeing energy has set an ambitious goal of finishing three important energy-related draft laws this year
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span>With newly appointed legislators in the House of Representatives Commission VII overseeing energy has set an ambitious goal of finishing three important energy-related draft laws this year.
Commission head Sugeng Suparwoto said on Dec. 11, 2019, that legislators aimed to complete drafting amendments of the 2001 Oil and Gas Law and the 2009 Coal and Mineral Mining Law as well as complete a much-anticipated renewable energy law. From what has been revealed, it appears the revisions of the former two laws are likely to lean toward further resource nationalization while the latter law is likely to focus on incentivizing investment.
“Insya Allah [God willing], we will finish the three draft laws [in 2020], even though we typically only finish two laws a year,” said the NasDem party politician.
Discussions on amending the mining and oil and gas laws have dragged on for 11 years.
“It means the 2014-2019 House repeated the inaction of the 2009-2014 House by not producing a single piece of energy or mining legislation,” said Center for Energy and Mining Law (Pushep) executive director Bisman Bakhtiar on Dec 3, 2019.
The new commission members, however, differ from past members in that they have shown greater punctuality since coming to power in September. Members have only arrived up to 15 minutes late for sessions, a vast improvement from previous commission members, who often arrived an hour behind schedule.
Commission VII is slated to add the three draft laws to the 2020 National Legislation Program (Prolegnas) and establish working committees to direct further deliberation of the laws. The deliberations include arranging public consultations, as required by Law No. 12/2011 regarding the drafting of laws and regulations.
Revisions to the mining law will primarily address issues related to domestic processing requirements, foreign ownership and the legal status of contracts of work (PKP2B) for coal miners, with the current legal framework based on the now-defunct 1967 mining law.
“On the surface, it appears that [contracts of work] extensions is the issue most commonly raised. It’s urgent because the contracts of some companies are set to expire,” said Indonesian Coal Mining Association (APBI) executive director Hendra Sinadia.
The contracts of seven major coal miners are set to expire between 2020 and 2025, the earliest of which is a contract expiring in November this year that belongs to Jakarta-based Arutmin Indonesia, a subsidiary of the country’s largest coal miner by output, Bumi Resources Tbk.
Sugeng said he expected the amended mining law to be completed by August at the latest, before Arutmin’s contract expires. He said the commission would expedite the legislative process by holding just two legislative sessions instead of the usual three required for a draft law.
Meanwhile, the revisions of the Oil and Gas Law appear likely to the focus on tightening state control over the natural resources. A draft law made publicly available in 2018 grants the government more flexibility to adjust the domestic market obligation (DMO) rates of oil companies.
The draft amendment stipulates that the government would be able to determine the allocation of oil for domestic needs, which is more ambiguous than the current rule that caps the DMO at 25 percent.
“In a practical sense the manifestations of this, including the more fluid domestic market obligations and less rigid approach to contractual terms, are likely to be viewed with some concern by investors,” wrote business consultancy PriceWaterhouseCoopers (PwC) in its 2019 Oil and Gas in Indonesia Investment Guide.
Lastly, the anticipated renewable energy law is intended to boost industry growth by setting an attractive pricing scheme for renewable electricity and by streamlining industry regulations, most of which are set by the Energy and Mineral Resources Ministry.
