Practice Areas: Mining and Energy
The draft bill on oil and gas is one of the most anticipated regulations to be passed by the House. The following are some of the features of the draft bill:
Government Control
The government will be responsible for the management and
supervision of the distribution and transportation of oil and gas
through issuance of regulations on, amongst others, policies on oil
and gas utilization, reserves and the distribution of oil fuel
(Bahan Bakar Minyak – BBM), national BBM reserves, etc.
Natural Oil and Gas Business Agency (Badan Pengusahaan
Minyak dan Gas Bumi)
Referred to as the Business Agency (Badan Pengusahaan) in the
draft bill, it will obtain its legal establishment status under a
law and will be a public legal entity. It will be responsible to
the President for supervising upstream oil and gas activities.
Domestic Market Obligations (DMO)
Compared to the current oil and gas law, the draft bill increases
the DMO to at least 25% to meet domestic demand. The current law
limits DMO to 25%.
Cooperation Contracts
A cooperation contract remains an option under the draft bill with
some adjustments. A contract will be valid for 30 years, extendable
by the business entity or permanent establishment subject to
certain requirements such as approval from the DPR, opening a new
area and obtaining at least 30% of current production, and applying
more advanced technology or secondary recovery efforts. Extension
periods are not specified in the draft bill and therefore might be
at the discretion of the DPR.
Cost Recovery
Operating costs to be recovered should cover at least: exploration
costs; exploitation costs; gas transportation costs from the
production point to the delivery point; and post upstream activity
costs.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.