Handling the downstream activities of the oil and gas sector need to be seriously considered as lawmakers deliberate a new oil and gas draft law to replace the existing 2001 law.

Economist Faisal Basri, who chaired an ad hoc team for the reform of the oil and gas sector, said better management and governance of the downstream oil and gas sector was necessary as the country would be a big energy consumer.

“It’s necessary to discuss the upstream issue of the oil and gas contracts scheme or cost recovery. However, activities regarding the trading of crude oil and petroleum products will increasingly dominate compared to production activities due to rising consumption and a continuing decline in national output,” Faisal said on Tuesday.

Citing data from the Upstream Oil and Gas Regulatory Special Task Force (SKKMigas), he said Indonesia’s oil consumption would reach 2.8 million barrels per day (bpd) while production would be as low as 96,000 per day by 2050.

Today, the country’s national oil output reaches around 800,000 bpd while energy demand stands at around 1.6 million bpd.

“We need more focus on, for example, open access facilities and the development of refineries that are integrated with the petrochemical industry,” Faisal added.

The government and the House of Representatives are working on new oil and gas legislation to replace the 2001 law, several points of which were declared unlawful by the Constitutional Court in 2012.

The court declared that the existence of the Upstream Oil and Gas Executive Agency (BP Migas) was unconstitutional as it degraded state control over natural resources.

Consequently, BP Migas was dismissed and replaced by the temporary SKKMigas.

With the deliberation of draft legislation, the public likely wants to see what a new regulating body will look like.

In the draft, the Energy and Mineral Resources Ministry proposes that a new regulatory body should be a specially assigned state-owned enterprise. Meanwhile, SKKMigas chief Amien Sunaryadi has argued that a new body should be a specially assigned firm but not state owned, as that would make it a profit oriented body.

Recently, Energy and Mineral Resources Minister Sudirman Said stated that the government would welcome ideas relating to the governance of the upstream oil and gas sector, including discussing changes to implemented production sharing contracts (PSCs) along with the cost recovery scheme.

Maryati Abdullah, the coordinator for civil society organization Publish What You Pay (PWYP) Indonesia, said an alignment between upstream and downstream oil and gas sector policies was necessary.

“What we see now is that the downstream sector has its own way of gas or fuel distribution while the upstream sector also moves on its own with its contract system,” Maryati said.

– See more at: Raras Cahyafitri, The Jakarta Post, Jakarta | Business | Wed, May 27 2015, 8:27 AM – See more at: The Jakarta Post