Amien Sunaryadi: Contractors had to pay fees right from the start

TEMPO.CO, Jakarta - Many have questioned the recent appointment of Amien Sunaryadi as the new chairman of the Special Task Force on Upstream Oil & Gas Activities (SKK Migas). After all, he has never been involved with the oil and gas industry. Before his appointment in November last year, Amien was better known for his stint at the Corruption Eradication Commission (KPK) and as an analyst and investigator in the private sector.

Amien was appointed as the SKK Migas chairman to raise public confidence in the organization tasked with regulating upstream oil and gas activities in Indonesia. SKK Migas' image plunged following the arrest of its former chairman, Rudi Rubiandini, on August 2013, on suspicion of accepting bribes.

Since he began working one month ago, Amien has been visiting projects and talking to experts to familiarize himself with his new domain, and met with officials from contracted companies like Britisih Petroleum, ENI, Total and Chevron. "I was shocked to find out that this is the first time they were visited by the head of SKK Migas," said Amien.

From these meetings and briefings with national companies like Pertamina, Amien said he has been able to map out the issues. First and foremost, he said that what he has seen is the inefficiency and slow pace of how SKK Migas works. And this, in his opinion is what prompts companies to bribe SKK Migas officials, basically to get their requests or applications going. From a business perspective, no oil company would resort to bribery unless it was really necessary.

One example is the decision over the budgets submitted by the companies. Although they are private companies, SKK Migas, as a representative of the government is required to determine their spending because it is part of the cost recovery, which would impact on the revenues going to the state.

Last week, Amien met with Tempo reporters Qaris Tajudin and Heru Triyono for an interview at his office in Wisma Mulia, south Jakarta. He spoke openly about the challenges he faces in reforming SKK Migas, given his lack of familiary over the oil and gas industry.

You have been tasked by the Energy and Mineral Resources Minister Sudirman Said to eradicate corruption at SKK Migas?

That was his main message. He asked that we return public confidence in this upstream oil and gas organization.

But wasn't the loss of public confidence caused by the arrest of the former SKK Migas' chairman, Rudi Rubiandini for accepting bribes?

Corruption is just one (of many issues). I notice that in this business, public loss of confidence is often caused by the high level uncertainty involved. For example, the KKKS (the contracted companies) submitted their work budget, but for an entire year many were rejected without any clear reason. So, they don't trust us. Then there's the corruption factor. They are 'extorted' for money everywhere they go.

So how can this public confidence be restored? Isn't jailing Rudi Rubiandini not enough?

It's not enough to expose corruption. Our focus is to work together with business people at the upstream oil and gas industry. We must work fast and efficiently. It's not our job to find out who has committed the corruption, even though the two can be implemented jointly.

What is the reason for this slowness and inefficiency? Where does the problem lie?

It happens mostly at the licensing phase, at the central, provincial and even at the district and city levels. We cannot get rid of licensing, but we hope the process can be carried out faster. One example is when a new company, still at the exploration stage and not producing anything yet, is being asked to pay this fee or that fee, even though there might not be any oil in the area. If there is no oil, the losses should be borne by the state. The local and provincial governments and the people should understand this. If a company is asked to pay all kinds of fees, even from the start, it will understandably be reluctant to invest in any exploration. In other words, another production opportunity is lost.

What will you do internally to improve the process?

We will make the procurement process more efficient for oil and gas companies. SKK Migas will not do the actual procurement. More than 300 companies purchase (equipment and materiel) from 1,500 vendors or subvendors, for their exploration and production needs. Purchases above US$5 million had to be approved by SKK Migas. This process used to take a long time because it was tendered out. When something doesn't look right, the bidding process is repeated. If there are not enough bidders, it is tendered again. We noticed that tenders valued between US$5 million and US$20 million cover quite a bit of transactions, but not in terms of dollar value. Meanwhile, transactions on tenders above US$20 million number much less, but they involve more money. Going forward, only transactions above US$20 million will need to seek SKK Migas approval. Hopefully, this will accelerate the procurement process.

Maybe it will be faster, but will it be cleaner? Without tenders, won't there be more opportunities for corruption?

That's precisely our goal, for them not to resort to graft. If these small conctracts take a long time to process because they're being checked one by one, unscrupulous SKK Migas staff will use this to their advantange. Essentially, we're looking at speeding up the process and making them efficient, so there wouldn't be any reason to pay bribes.

But this could lead to oil companies buying US$20 million-worth of unnecessary or non-existent equipment. Won't this bankrupt the state coffers?

That concern exists. It's happening now. I know that some of the purchases were compromised. The important thing now is how to prevent it. In the revised Work Manual No. 007 (Guidelines to Manage Contractors Supply Chain), we will define what is meant by 'rights to audit' clause. So, in the agreement between the contractor and the vendor, there will be a clause requiring them to agree to be audited. There must also be something in writing saying that contractors and vendors will have the right to appoint independent auditors, if there are indications of a questionable contract. Vendors must also promise to comply with the Indonesia's law on anti-corruption, the American Foreign Corrupt Practices Act (FCPA) and the Anti-Bribery and Corruption law in the United Kingdom. If this is followed, hopefully both vendors and companies will understand that if they cheat, the risks are very high. (*)

Read the full interview in this week's edition of Tempo English Magazine