INDONESIA - Kardaya Warnika & BP Migas.

The Chairman of BP Migas, the petroleum E&P regulator, Kardaya is a prominent energy expert. He took up this key position in April 2005, succeeding Rachmat Sudibyo who had reached retirement age in 2004. He holds one of Indonesia's leading bureaucratic positions.

According to the Jakarta post in 2005, Kardaya's salary has been about 120m rupiah (then about $12,541) per month. That has been more than double the 50m rupiah salaryi of President Susilo B. Yudhoyono.

From 2002 to April 2005, Kardaya used to be one of the four deputy chairmen of BP Migas under Rachmat, with three of the deputies having been from Pertamina. At times, Kardaya served as acting chairman of the regulating agency.

Kardaya works closely with the Director-General for Oil and Gas of the Ministry of Energy and Mineral Resources, Luluk Sumiarso, a prominent expert who in 2005 succeeded Iin Arifin Takhyan (who until late 2002 was head of Pertamina's upstream division; and until early August 2002, Rachmat used to be director-general of the ministry's Oil and Gas Directorate).

Set up in August 2002, BP Migas manages all types of E&P contracts for oil and gas including the PSCs. With offices separate from the ministry's, it reports directly to the president of the republic's office. Its activities are scrutinised by parliament. As in the case of Pertamina's top management, the senior BP Migas executives are appointed by the president of the republic.

Overseeing almost 200 contracts, BP Migas holds the state's shares in PSCs and all other upstream agreements, having replaced Pertamina as partner of related foreign and local companies. But, although BP Migas is not allowed to trade in the oil and gas entitlements of the state and has appointed Pertamina as its agent for this role, it has taken over the marketing of LNG from Pertamina. Djoko Hartono heads BP Migas' LNG marketing division (see background in omt12IndnsWhoMar21-05).

Kardaya was born on Aug. 17, 1952, in Cirebon, West Java. He received his education at the Bandung Institute of Technology, the University of Indonesia and Universite de Lyon, France, where he graduated in 1987 with a PhD in energy economics.

In 1999-01 Kardaya was director of E&P at the Ministry's Directorate-General for Oil and Gas. In 2001 he became assistance minister for economics and financial affairs at the Ministry of Energy and Mineral Resources, a position he held until 2003, although he became BP Migas deputy chairman when this was established in August 2002.

Kardaya has been chairman of the Society of Indonesian Petroleum Engineers (IATMI). He is also a member of the Indonesian Gas Association, committee member of the World Energy Council, the international Society of Petroleum Engineers, and the Indonesian Institute for Energy Economics.

As head of the IATMI, Kardaya in 2000-01 was instrumental in getting the society to provide input to the government for the new Oil and Gas Law which was passed by parliament in late 2001 and subsequently became effective. This provided for deep restructuring of the petroleum sector, separation of E&P regulation responsibility from Pertamina, creation of BP Migas, and eventual privatisation of Pertamina.

Kardaya got the IATMI to be responsible for re-ordering management of Indonesia's renewable energy resources. This included giving priority to geo-thermal electricity, and a dedicated association for this was established subsequently.

Kardaya has been committed to a range of non-industry pursuits, especially those which showcase Indonesia. He has served as committee chairman for the Bali 10-kilometre run, which attracted national and international athletes. Kardaya is married and has three children.

One of the tough jobs on Kardaya's hands as head of BP Migas since April 2005 has been to convince would-be E&P investors that the endemic corruption within government agencies has been a thing of the past. E&P companies have been struggling to make sure that their field development plans were not subjected to the old requirement that work should be given to "preferred" sub-contractors. Kardaya faces the fact that, although he made sure BP Migas was "clean", most efforts by the government to stamp out corruption, collusion and nepotism (locally known as KKN) have been fruitless.

The main reason BP Migas has been clean, relative to other state agencies, has been the high range of salaries it offers to its top management and staff. Nor does BP Migas take sides in disputes between foreign and local companies, or between foreign companies and Pertamina. Since 2004, when the regulating agency spoke against Pertamina's decision not to extend the E&P rights of ExxonMobil to the Cepu block, BP Migas has made it a point to show its impartiality.

The same is true in the case of awarding new E&P agreements for oil and gas blocks which BP Migas offers annually. BP Migas has often shown that it does not take the side of Indonesian companies in disputes with their international counterparts (IOCs).

Kardaya has been particularly careful in dealing with E&P companies owned or controlled by powerful Indonesians, always "playing fair" as one such figure put it in 2006. Such companies include the fast-growing Energi Mega Persada (EMP), which is owned by the Bakrie family business - Bakrie Brothers and Bakrie Group.

The Bakrie Group and its companies, including the mining firm Bumi Resources, are controlled by Co-ordinating Minister for People's Welfare Aburizal Bakrie who is one of Indonesia's three super-ministers in President Susilo's government. EMP and Bumi were merged in 2006 to become a much larger group rich in cash and more capable than before in operating abroad as well as in Indonesia. Within Indonesia, the latter group's proven and probable petroleum reserves were in mid-2006 estimated at 437m barrels of oil equivalent.

EMP is a partner of Pertamina in an integrated gas E&P/LNG venture in Indonesia which may become an exporter of LNG. In 2005, EMP and Thailand's state-run PTT signed an MoU for integrated gas E&P/LNG ventures to be in operation by 2010. The MoU is effective until Sept. 30, 2007.

Prominent among BP Migas figures is Deputy Chairman Trijana Kartoatmodjo, who in early was among top candidates competing with Kardaya Warnika for the top position (see OMT). One of BPMigas' first tasks in August 2002 was to oversee the handover to the province of Riau of the Coastal Plains Pekanbaru PSA assets in onshore Central Sumatra from Chevron. This was the first province to take a direct upstream equity. In partnership with Pertamina, Riau took control of the CPP block (see gmt11IndnsFieldsMar12-06 & omt11IndnsFieldsMar12-07).

BP Migas and the Jakarta government have been facing pressure from oil/gas producing provinces and regencies (regencies are sub-divisions of a province) demanding a role in the management of PSCs and other contracts in their regions. Although these regions failed to block passage of the new oil and gas law in parliament in late 2001, they have continued to lobby the Jakarta government for more say in the distribution of petroleum revenues to the provinces and regencies.

Aceh, a province commanding the northern part of Sumatra island, has been promised up to 70% of the area's oil and gas revenues under a special autonomy law passed in 2001 by Jakarta. Aceh is a producer of natural gas and has Indonesia's second LNG complex in which ExxonMobil is a partner of Pertamina (see gmt12IndnsGasExptMar19-07).