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INDONESIA - Rachmat Sudibyo & BPMigas.

The Chairman of BPMigas, the E&P regulator, Rachmat is a prominent upstream expert. Under him are four deputy chairmen and three of them are from Pertamina. The Ministry's Director General for Oil and Gas is another prominent upstream expert, Iin Arifin Takhyan, who until late 2002 was head of Pertamina's upstream division. Until early August 2002, Rachmat used to be director general of the ministry's Oil and Gas Directorate.

Set up in August 2002, BPMigas 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 BPMigas executives are appointed by the president of the republic.

Overseeing more than 175 contracts, BPMigas 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 BPMigas 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 does play a role in the marketing of LNG from new integrated gas E&P/downstream ventures, such as the US$5-5.5 bn Tannguh venture in Papua involving a BP-led consortium, and two Pertamina-led LNG projects.

For example, Rachmat in 2003 played a key role in negotiations with Sempra Energy for LNG supplies from Tangguh to the US West Coast. Eventually this lead to a deal whereby Sempra will purchase 3.7m t/y of Tangguh LNG which will be shipped to a terminal in Baja California. Regasified gas will then be pumped north to California. This, in fact, is the first Asian LNG project dedicated partly to the North American West Coast.

In mid-2004, Rachmat signed preliminary agreements with three Chinese companies - Sinocheers, First China Petroleum and China National Chemical Corp. - for LNG to be supplied from Indonesia to the Chinese mainland. There was no mention of price terms, volumes, a timeframe or sources of LNG. Sinocheers is a Guangdong-based oil unit of Hong-Kong-based GeoMaxima Holdings which plans to import LNG into north-eastern China. First China Petroleum, based in Zhejiang province, intends to import gas to the coast and the north-east. Beijing-based China National Chemical Corp. plans to sell gas in and around the Chinese capital. A press report that they will import up to 4.2m t/y of LNG for 15 years are yet to be confirmed.

Rachmat has wanted BPMigas to be more successful than Pertamina in attracting foreign investment to the petroleum E&P sector. In late February 2003, BPMigas said it was to consider improving the oil and gas revenue split for new PSCs on a case-by-case basis. Speaking on the sidelines of a petroleum conference in Jakarta, Rachmat said individual companies were welcome to suggest ways to improve the terms of PSCs provided that the contractors' share was limited to 40%.

BPMigas was to consider other incentives. Rachmat said BPMigas may be more flexible in the local market obligation, under which contractors have to make available a certain part of their production internally. The news was welcomed by oil companies, albeit cautiously, as they noted that with the exception of some acreage such as frontier blocks and remote PSCs, Indonesian terms still dictate an 85:15 split in favour of BPMigas for oil production and 70:30 for gas.

BPMigas has been staffed by the 500-plus former employees of Pertamina's PSC Management Directorate, which was dissolved when the regulatory authority was established. These employees have been guaranteed the same pay as before, with their transfer to BPMigas completed in July 2002.

The employees were given the option of returning to Pertamina, if they so chose, after July 2003.

Prominent among BPMigas Chairman Rachmat's associates are Kardaya Warnika the deputy chairman in charge of PSCs, who has been co-ordinating closely with a ranking executive at the Ministry's Oil and Gas Directorate, Novian Thaib; and Zanial Achmad, the deputy chairman in charge of planning.

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 ChevronTexaco. This was the first province to take a direct upstream equity. In partnership with Pertamina, Riau took control of the CPP block which produces oil (see Oil & Gas Market Trends No. 10).

BPMigas 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 big producer of natural gas and has Indonesia's second biggest LNG complex in which ExxonMobil is a major partner of Pertamina (see Gas Market Trends Nos. 10 & 11).
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Publication:APS Review Oil Market Trends
Date:Mar 21, 2005
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