Mining and Energy

Mining and Energy

Stories: Key Points from Oil and Gas Law, Pertamina/Riau Historic Deal, Power Pricing Deals

KEY POINTS FROM NEW OIL AND GAS LAW

Indonesia 's parliament passed a new oil and gas law on Tuesday ( 10/23/01 ), removing a decades-old monopoly that state oil company Pertamina held over this key sector. The following is a summary of the main points of the law, which still requires detailed implementing regulations. It is these regulations that will eventually define whether or not the law will do what it is supposed to do and how it will affect foreign businesses operating in this key sector.

Establishment within one year of a so-called Implementation Agency under government control to handle all contractual issues with oil investors. Unclear if this body will report direct to the president, cabinet or the Ministry of Mines and Energy;

The above requires Pertamina to transfer all production sharing contracts and other contractual agreements it has with investors to the agency;

All existing contracts will be honoured until they expire;

Establishment of a Regulatory Agency under government control within one year to deal with downstream activities, including overseeing oil product imports, supply and distribution. This area is now open to private foreign and local companies.

Pertamina to become limited liability company under state control within two years. Unclear if its name will be changed;

Pertamina to implement any rights and obligations it has under existing contracts until it becomes a limited liability company;

Pertamina will hold overall responsibility for domestic fuel supply and distribution for four years;

The detailed regulations that will follow the above law will call for among other things, a complete audit and assignment of assets and liabilities of Pertamina.

The audit will identify oil and gas activities in exploration and exploitation, importation, processing, transportation, storage and marketing and liquefied natural gas activities in which Pertamina is involved.

The president will issue a decree identifying which assets and liabilities will be assigned to the limited liability company and which assets will be subject to divestiture by means of public auction or taken over by the government.

The assets that will definitely be assigned to the limited liability company include a portion of activities in Pertamina's existing upstream and downstream activities; all ventures in which Pertamina is an oil and gas producer on its own property; certain potential production assets in the form of acreage for exploration and all liquefied natural gas activities.

Besides the limited liability company, separate subsidiaries will be established and be involved in upstream activities, LNG activities, importation, marketing, transportation, storage, processing and other non-oil and gas related businesses.Source: Reuters and Joyo News Service

Pertamina , Riau Sign Historic 50-50 deal in CPP Oil Block

JAKARTA , Jan. 3 (Reuters) - Indonesia state oil company Pertamina has signed 50-50 percent share agreement with Riau province on the Coastal Plain Pekanbaru (CPP) oil block which would be in effect from August 2002, Riau province governor Saleh Djasit said on Thursday.

Production from the block is now handled by Caltex Pacific, the country's biggest oil contractor. Its contract runs out in August. Caltex is owned by ChevronTexaco Corp <CVX.N>.

Indonesian officials said the Riau deal would likely serve as a model for other areas of the country when existing contracts expire.

"Riau people welcome the signing of this agreement. A 50-50 percent deal in CPP is the best for the moment for Riau. The future of the oil industry is in our hands now," he told reporters.

"According to the agreement, after two years there will be an option that Riau can take its stake as high as 70 percent or as low as 55 percent," Djasit said.

He said Riau province would be represented by its own company and would participate in management of the oil field. "Riau will be ready with funds and management," He said.

The Indonesian government had earlier said it wanted Pertamina to have a 90 percent stake and Riau 10 percent to maintain production levels.

Caltex produces around 50,000 barrels per day (bpd) of crude oil from the CPP field in central Sumatra .

Pertamina's president director Baihaki Hakim said the firm would ask Caltex to give a commitment to Pertamina on using its pipeline to flow the crude to the port.

"There seem to be no problem from Caltex to give a commitment to flow the crude using their pipes. But we want clear cooperation because most oil pipeline in the area is owned by Caltex," Hakim said.

"We need about $50 million to maintain production level of 50,000 bpd of oil," he added.

Djasit said that the oil industry in Riau had not lifted the public's living standards and the agreement in the CPP block would give hope for improvement.

"Up until now there is unfairness between the (abundance of) natural resources in Riau (and the) real condition of the people. Almost 43 percent of the people are poor. We are also concerned to see the infrastructure is still far from improved," Djasit said.

Mines and Energy Purnomo Yusgiantoro said the agreement between Pertamina and Riau on CPP would become a model to other areas in the future when contracts expire. "Today is a historical moment because other regions in Indonesia will look to this agreement for their future too," he said.

PLN Reaches Preliminary Agreement with Paiton

State electricity company PT PLN has reached a tentative agreement to pay 4.93 US cents per kilowatt hour over 40 years to privately-owned PT Paiton Energy Co., the operator of the Paiton I power plant, according to PLN's director Eddie Widiono.

Indonesia Agrees With Siemens on Electricity Price

JAKARTA , Dec 26 (Reuters) - Indonesian state electricity company PT Perusahaan Listrik Negara (PLN) agreed on Wednesday to pay 4.80 cents per kilowatt hour to PT Jawa Power, majority owned by Siemens AG, a senior PLN official said.

The cash-strapped state giant will also pay around $400 million in arrears to Jawa Power after years of failed negotiations centring around PLN's objection to the unit price, which it said was too high and had been imposed on it by the government of former president Suharto.

"These have been long negotiations with Jawa Power but now the government has agreed that PLN will pay 4.80 cents per kilowatt hour (kWh) to Jawa Power for 30 years. This is a breakthrough," PLN President Director Eddie Widiono told reporters.

"We will sign the terms of agreement as soon as possible," he added, without elaborating.

PLN signed a power purchase contract with Jawa Power in 1995 under which it agreed to pay around 6.5 cents per kWh for electricity supplied from Jawa's 1,230 megawatt power generator in East Java .