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The House of Representatives is weighing over the possible
closure of upstream oil and gas regulator BPMigas and downstream
regulator BPH Migas due to decaying administrative performance and
failures to meet targets.
The deputy chairman of House commission VII overseeing energy and
mineral resources, Sutan Batughana, said here Tuesday the commission
would hold several discussions with oil and gas investors operating in
Indonesia to hear their opinions on the regulators' performance to
determine whether closure was necessary.
"We have received reports that the performance of these two bodies has
worsened -- for example, in the process of securing business permits --
and we want to verify this with the business actors," Sutan said after
the first closed meeting with oil and gas contractors Tuesday.
"Some have complained the process to secure approval from BPMigas for
budget spending on exploration and exploitation activities (now takes
longer than) when Pertamina controlled the sector, and that this has
hampered our oil production," Sutan, who led the hearing, said.
He also referred to BPMigas' failure to increase the nation's oil
production despite a sharp increase in recovery costs.
He said the recovery costs repaid by the government to oil block
contractors in recent years had continued to increase despite the
decline in the country's oil production.
Figures from the Energy and Mineral Resources Ministry show the amounts
being paid out by the government under the cost recovery system surged
from US$7.63 billion in 2005 to $9 billion in 2006, even though output
declined during that period from 1.06 million barrels per day to 1.04
million barrels per day.
One rumor in circulation holds that after accusations of failing to do
his job, BPMigas chairman Kardaya Warnika will be replaced by the
current director of upstream oil and gas development at the Energy and
Mineral Resources Ministry, Priyono.
Lawmakers also discussed BPH Migas' failures in the distribution of oil
and gas in the downstream sector, particularly kerosene, as it was now
considered scarce in the market.
"We may disband the body if it proves to be failing in guaranteeing
supply for the public, because that's its job," Sutan said.
BPMigas and BPH Migas were formed as independent bodies in charge of
regulating the oil and gas sector under the 2002 Oil and Gas Law, which
liberalized the sector and ended state oil and gas company Pertamina's
monopoly.
The chairman and members of the two bodies are installed by the
President with the consent of the legislative body.
Tuesday's meeting was attended by oil and gas companies Pertamina,
Royal Dutch Shell and UK-based BP. In the next meeting, the commission
will continue the hearing by summoning other oil and gas companies.
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