Indonesia’s energy ministry is poised to take over the management of oil contracts from state oil monopoly Pertamina in January, according to industry sources on October 24th.
A letter was sent from the ministry to Pertamina to inform the company of the move. A new draft oil law, under which the ministry will be granted control of oil contracts, is expected to be debated by the country’s parliament, but the ministry, which has more clout than Pertamina, is hoping to exercise its power sooner.
Under current legislation, called the Law on Pertamina, the company has the sole authority to negotiate with contractors concerning working areas before the president approves the contracts. The draft bill, submitted by the government to revoke Pertamina’s monopoly over the oil sector -- particularly over downstream distribution -- has not been discussed in the parliament, and no date has been set for debating the proposed law, after an earlier draft was rejected.
The ministry said that it will begin handling all aspects of oil contracts on January 1st, 2001, when negotiations are to be conducted by a ministry team that would include Pertamina officials.
Industry sources question whether ministry officials have enough experience in negotiating oil contracts and caution that the move might hinder efforts to increase oil production in Indonesia, which is already having difficulty in meeting its current OPEC quota. The country produces around 1.3 million b/d of crude, falling short of its 1.36 million b/d quota.