The Oil and Gas Act Revision again got public attention. This act is included in National Legislation Priority in 2016. One of the big issues is institutional framework, especially regarding the idea to establish new State Owned Enterprise (SOE).
Emanuel Bria, Asia Pacific Senior Officer at Natural Resource Governance Institute, in the discussion held by IPC, member of PWYP Indonesia coalition, presented the global practice of oil and gas institutional framework. He explained that to simplify, there are four institutional models in oil and gas management. First, monopoly model. This model is adopted in Saudi Arabia (Aramco) and Mexico. Second, guaranteed role/ option model, where government gives an authority for SOEs. This model can be found in Malaysia and Angola. Third, application with favor model, when SOEs was given the first offer in tender. It is implemented in Mexico (today) and Kazakhstan. Fourth, full competition model, where the SOEs compete with another companies, as conducted in Norway and Columbia.
According to Bria, the situation of Pertamina nowadays can be categorized in the third and the fourth model. The next question is what kind of privilege will be given to Pertamina in exploration and exploitation? For example, by giving the first offering to Pertamina, then offering to another International Oil Company (IOC). “It’s important given its consequence to oil and gas institutional model that will be accommodated in the new Oil and Gas Law,” said him.
Generally, oil and gas institutional framework has four functions, i.g: policy, national development, commercial, and monitoring function. Bria again raised a key question, which institutions can act as a regulator? “Let take Norway as an example. In Norway, the four functions are run by different institutions. While in Malaysia, Petronas plays all the functions,” said Bria.
He added, the newest model namely hybrid model is currently implemented by Petrobras Brazil. The monitoring and evaluation (monev) function is conducted by difference institution, while the operator is monopolized by SOEs and consortium. And the one that ensure that the state interest is accommodated by the company is the institution played monev function.
Related to the institutional aspect, the political competition and institutional capacity are also among the determining factors. Indonesia has similarity with Brazil and Mexico with average institutional capacity and high politic competition.
On this matters, Dessy Eko Prayitno, former Researcher of Indonesian Center for Environmental Law (ICEL) argues, “Demarcation of function among government, SOEs, and regulator is needed. Regardless the institutional model that will be chosen, the important point is institutional capacity improvement”.. He added, we also need to uphold the principles of good governance, particularly transparency, accountability, and good corporate governance.
Special SOEs for Downstream
Seno Margo Utomo, the Expert Staff of MPs from Commission VII underlined, “We need to give particular concern on the downstream industry. It should not be left behind. Thus, we need two SOEs. Pertamina will focus on upstream and another SOE will work in the downstream”. He added, if downstream is managed by Pertamina, the upstream will be neglected. As a business entity, they have tendency to favor low risk business but high benefit.
In one hand, this Oil and Gas Act Revision need to promote Pertamina as a main player in oil and gas sector. “We should learn from Petronas which have endeavored to meet the national energy reserve”, said Yusak Farhan, Expert Staff from Fraction of Gerindra. However, added him, we also need to keep Pertamina monitored. Before the enactment of 2001 Oil and Gas Law, Pertamina had powerful authority.Therefore, it needs a regulatory body to monitor and oversee Pertamina’s works.
There are two big opinions on the regulatory body, whether to establish it within SOE management in the spirit of efficiency or to establish it as an independent body so it can report directly to the president.
As the closing, Abi S Nugroho, from Lakpesdam NU suggests to involve people lives around mining area to participate in monitoring the industry. “The number of mining inspector also needs to be doubled for an optimum monitoring,” said Abi. [Asr, RAWSR]