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3. Executive body to take over management of oil and gas sector from Pertamina. (Mines and Energy).

Based on a Government Regulation No. 42/2002 on Executive Body for Oil and Gas Upstream Activities signed by President Megawati Soekarnoputri on July 16, 2002, the government decides to hand over the job of managing oil and gas sector to an Executive Body.

The state-owned oil and gas company Pertamina is given six months to hand over all documents connected with the production sharing contracts and other forms of contracts to the new body. The head of the new body and the president director of Pertamina are required to get all administrative matters related to the oil and gas contracts finished in a year.

According to the PP No. 42/2002 all state assets under Pertamina related to development and supervisions of production sharing contracts will be handed over to the new body with the approval of the finance minister.

The new body will be charged with duties including offering consideration to the minister about policy in the preparation and offer of new working areas and cooperation contracts; signing cooperation contracts, undertaking monitoring and reporting to the minister the implementation of cooperation contracts; naming sellers of oil and gas with a target of providing profit as much as possible for the state.

In carrying out its function, the new body has the authority in supervising the main activities of contractors, developing all assets of contractors transferred to the state, coordinating with other related bodies or institutions needed in the implementation of activities in the upstream sector of oil and gas.

Meanwhile, the Energy and Mineral Resource Minister Purnomo Yusgiantoro has asked the parliament to immediately conduct fir and proper test for the head of the Executive Body namely oil and Gas Director General Rachmad Sudibyo that on August 9 the new body would be operational and take over the j function of Pertamina. Meanwhile, the status of Pertamina will be changed into a limited company.

Oil and Gas Law

PP No. 42/2002 is a realization of the new Oil and Gas Law. In connection with the implementation of regional autonomy and the implementation of AFTA in the oil and gas sector in 2003, the government with the approval of the parliament has issued a new Oil and Gas Law. The law No. 22 in 2001 was issued on Nov. 23 in 2001. Under the new law Pertamina no longer holds the monopoly in the management of the oil and gas sector. Other state companies and regional administration companies (BUMD0 and cooperatives as well as small enterprises and private businesses are allowed to operate in in the upstream and downstream sector of oil and gas industry.

However, the government will continue to control management of the oil and gas sector through the Executive Body and a Regulator Body to control and regulate the distribution of oil and gas up to the downstream sector. In line with the new law, in no longer than one year after the law comes into force the new body will be fully operational and in two years Pertamina will become a new limited company. Pertamina, however, will continue its function of procuring oil fuels for domestic consumption in 4 years. Meanwhile, the energy and mineral resource ministry will not transfer the authority to issue post exploration investment license to BKPM as the new oil and gas law has regulated a contract system for business in the upstream sector using the production sharing contract system. BKPM has said post exploration investment is a direct investment.

Management of CPP block

One of the jobs of the Executive Body to be implemented in August this year is the transfer of the management of the Coastal Plains Pekanbaru (CPP) Block in Riau from PT Caltex Pacific Indonesia (CPI) to a consortium of PT Bumi Siak Pusako (BSP0 on August 9. CPI will end its contract for the oil block on Aug. 8. The Executive Body, instead of Pertamina, will sign the hand over. Pertamina itself will cooperate with PT BSP in operating the oil field. The original contract of CPI already ended on August 8 last year but the government extended the contract for a year as the government or Pertamina was not yet ready to take over the management. The government was concerned with preventing disturbance to the process of production in the oil block.

The CPP Block produced around 65,000 barrels of crude oil a day when it was under CPI but the production has decreased lately. Now its production is estimated between 35,000 and 50,000 barrels per day. CPI failed to keep it promise to the improve the productivity by turning out 50,000 barrels per day during the one year extension With the production below 50,000 barrels per day the government will suffer an opportunity loss of up to US$ 17 million without additional investment in CPP block.

Exploration wells

In the past 10 years drilling has been made for 103 exploration wells. Production sharing contractors (PSC0 drilled 93 of the wells and Pertamina drilled 10 wells. Around 51.5% of the exploration wells were offshore and 48.5% on shore including 9.7% by Pertamina. In 2000, there were 81 exploration wells including 13 by Unocal in East Kalimantan and 11 wells by Maxus in Southeast Sulawesi as shown in the following table.

The success ratio in explorations in Indonesia is high averaging 52.6% in the 1995-2000 period. The highest ratios were recorded by Premier Oil 100%, Santa Fee 100%, Total Indonesia 100%, Caltex Pacific 75%, Unocal 61.5%, Conoco 60%, Gulf 50% and Expan 50%. Total failure was recorded by Kondur, Santos, Talisman, Exxon, Canada Pet and Golden Spike.

Oil Production

The country's oil production rose 15% from 404.69 million barrels to 465.38 million barrels but exports dropped to 195.16 million barrels from 244 million barrels. Imports also declined to 62 million barrels from 72.6 million barrels. PSC contributed 90.25% or 419.7 million barrels to the production in 2000. In the first quarter of 2001, the production totaled 111.65 million barrels with PSC contributing 89.9%.
Exploration wells drilled by PSC and Pertamina
Offshore and onshore, 1991-2000

 Year Pertamina PSC Total

 Onshore Offshore Subtotal

 1991 6 44 73 117 123
 1992 15 45 63 108 124
 1993 11 29 72 101 114
 1994 9 31 35 66 75
 1995 9 32 39 71 80
 1996 12 39 49 88 100
 1997 12 33 55 88 100
 1998 5 68 72 140 145
 1999 8 51 30 81 89
 2000 9 25 47 72 81
Average 10 40 53 93 103
growth (%) 9.7 38.8 51.5 90.3 100.0

Source: Directorate General of Oil and Gas/Data Consult
Exploration wells drilled by companies, 2000

 Companies Area Onshore Ofshore Total

I. Pertamina Indonesia 9 0 9
 1. EP. Prabumulih South Sumatra 0 0 0
 2. EP. Prabumulih South Sumatra 4 0 4
 3. EP. Cepu Central Java 4 0 4
 4. EP. Sangata East 1 0 1

II. Production Sharing Indonesia 25 47 72
 Contract (PSC)
 1. PT Caltex P.I Riau 4 0 4
 2. Gulf Res a. South 4 0 4
 b. East 0 2 2
 3. Expan Sumatra 6 0 6
 4. Lasmo East 0 1 1
 5. Santos Madura 0 1 1
 6. Maxus Southeast 11 11
 7. Total Indonesia Natuna Sea 0 2 2
 8. Unocal E. Kalimantan 0 13 13
 9. Kondur Malaca Strait 0 2 2
 10. Conoco Natuna Sea 0 5 5
 11. Premier Oil a. Natuna 0 5 5
 b. Pangkah 3 0 3
 12. Talisman Madura 0 1 1
 13. Santa Fe a. Jabung 3 0 3
 b. Salawati 1 0 1
 14. Exxon Cepu, Central 1 0 1
 15. Kanada Pet. Indonesia Sumatra 0 1 1
 16. Samper Sulawesi 0 1 1
 17. Kodeco Madura 0 2 2
 18. Korea Sambidjong N.N. Java 1 0 1
 19. Golden Spike Pasiraman 1 0 1
 20. Lasmo Cumi-cumi, 1 0 1

Source: Directorate General of Oil and Gas/Data Consult
Oil and condensate production, 1999-2000


 Company Crude Oil Condensate

 1999 2000 1999 2000

- Pertamina 37,753,767 45,682,718 195,526 720,149
- PSC 366,927,128 419,699,970 49,106,528 51,400,608
Total 404,680,895 465,382,688 49,302,054 52,120,757

Source: Directorate General of Oil and Gas
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Comment:3. Executive body to take over management of oil and gas sector from Pertamina. (Mines and Energy).
Publication:Indonesian Commercial Newsletter
Geographic Code:9INDO
Date:Aug 13, 2002
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