Investors Not Disturbed by Domestic Oil Sale Priority: Minister

TEMPO.CO, Jakarta - Deputy Energy and Mineral Resources (ESDM) Minister Arcandra Tahar said the government`s decision to give priority to meet domestic demand for oil and gas would not disturb investors.

The government has issued a regulation requiring upstream oil and gas contractors to offer their production to state-owned oil firm PT Pertamina before exporting it.

This regulation is needed to regulate priority utilization of oil and gas in order to reduce dependent import, according to information gathered by Antara at the ESDM office in Jakarta on Sunday.

Policy which regulates the obligation of contractors to offer its oil production to PT Pertamina is stipulated in the ESDM Regulation No. 42/2018 on Natural Oil Utilization Priority to meet the need for the commodity at home.

ESDM Deputy Minister Arcandra Tahar dismissed the notion that the enactment of this regulation would reduce investor interest in investing in the upstream oil and gas sector.

"The government is not worried that this will disrupt the interest of investors in upstream oil and gas. Look in other countries, Malaysia, for example, based on our study, Malaysia`s contractors sell domestically," said Arcandra.

"The rules in other countries are tougher, oil and gas contractors, if they want to export their oil and gas production outside, are charged with a relatively high percentage of export duties. Not only in Malaysia, Vietnam also applies this export duty," he said.

Read also: Sengkang Block Exploitation Extended for 20 Years

Arcandra said that this policy does not contradict with the rules in oil and gas production sharing contracts between contractors and the government, and the response from contractors is also positive.

He said he had met and discussed directly with 10 largest oil contractors regarding plan to sell oil to Pertamina. In the meeting held last week, it was concluded that there was no breach of contract from this policy.

Through this policy, according to Arcandra, the government in this case Pertamina can make savings in terms of transport costs compared to oil imports.

The amount of savings depends on the price agreement between Pertamina and the contractor, because it is in a B to B (business to business) domain.

"There is efficiency in terms of transportation costs, if imported, for example, from Africa, the cost can reach 4-5 dollars per barrel, to arrive in Indonesia," concluded Arcandra Tahar.

ANTARA