Indonesian Oil and Gas is Going Local

From Jakarta Globe

By Faisal Maliki Baskoro

Indonesia is becoming slightly less dependent on foreign investment in developing its oil and gas sector, as shown by the increasing number of local investors.

According to SKMigas, a temporary oil and gas regulatory body at the Energy and Mineral Resources Ministry, the total committed procurement value in the oil and gas sector reached $13.74 billion.

“Around $8.5 billion, or 63 percent, from that procurement is using local content. We are committed to increasing the use of domestic products to develop our oil and gas sector,” Gerhard Rumeser, deputy general affairs director at SKMigas, said in a statement on Tuesday.

The committed procurement value in 2011 was $11.81 billion, with local content accounting for 61 percent.

The increased local content is partly contributed by state companies as they are engaging more and more in Indonesia’s oil and gas exploration and production. Gerhard said that this year, state-owned enterprises accounted for $1.69 billion of procurement value, up from $630 million last year.

“In order to protect national interests and to promote domestic participation in the oil and gas sector, we have issued a regulation stating that foreign companies must partner with a national-scale local company to participate in procurement tenders. This regulation is proven to be effective,” he said.

Local banks are also encouraged to participate in the oil and gas sector. The government has also made a regulation saying that all procurement transactions use local banks.

According to SKMigas data, in 2009 local banks booked a transaction of $3.97 billion related to oil and gas procurement. Local banks have booked a total transaction of $22.15 billion cumulatively through November.

SKMigas is also looking into ways to make costly procurement less expensive. The government regulatory body claimed it has saved $123.97 million in the first half of this year by arranging joint procurement and asset optimization.

“Last year, we managed to save $103.5 million. We are optimistic that we can exceed our target of $125 million this year,” said Hadi Prasetyo, SKMigas head of public relations, security and formality.

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