Indonesia Considers Turning SKK Migas into State-Owned Enterprise

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Indonesia’s upstream petroleum regulator Special Task Force for Upstream Oil and Gas Business Activities (SKK Migas), may be transformed into a state-owned business entity as the government hopes to improve the efficiency of the corruption-tainted organization in the country’s energy sector, local daily Jakarta Globe said Thursday.

The government of Joko Widodo, who took over as Indonesian president in late October 2014, intends to turn SKK Migas into a state-owned enterprise (SOE) by the end of March, with the move expected to allow the organization to issue global bonds to boost upstream oil and gas exploration and development.  

“Hopefully it will be finalized by this March,” Indonesian Energy and Mineral Resources Minister Sudirman Said was quoted as saying by the Jakarta Globe.

Sudirman added that the decision to turn SKK Migas into a SOE was made after taking the business considerations into account.

“It’s better to operate it (SKK Migas) as a business entity. Concept-wise it’s in line with what we already had in mind.”

The government will ensure that SKK Migas is kept separated from state-owned oil and gas company Pertamina, which Sudirman commented should “focus on becoming an operator, as an oil company that must continue to improve its competitiveness.”

In recent months, the government has stepped up efforts to restore confidence in investing in Indonesia’s upstream oil and gas sector, an urgent issue as the industry had been plagued by regulatory, legal and contractual uncertainties as well as graft at the energy ministry and the agencies under the latter’s charge including SKK Migas.

The task at hand is made more pressing as Indonesia, Asia’s only ever member of the Organization of Petroleum Exporting Countries from 1962 to 2009, has seen a deterioration in its energy supply-demand balance given rising energy consumption and declining production due to maturing wells and a lack of exploration arising from limited upstream investment.

Meanwhile, three liquefied natural gas (LNG) projects in Indonesia are facing delays due to the current low oil price environment and regulatory obstacles, Widhyawan Prawiraatmadja, a special adviser to the Minister of Energy and Mineral Resources, said as quoted by Reuters Wednesday.

First gas from Inpex Corp.’s Abadi LNG Project in Masela Block in the Arafura Sea in eastern Indonesia is now expected in 2022, three years later than scheduled.

The third LNG train for the BP-operated Tangguh project in West Papua province will commence operations a year later than planned in 2020, the Indonesian official said.

BP’s regional president for Asia Pacific Christina Verchere told Reuters Thursday that the final investment decision for the third train of the Tangguh project will be made in 2016.

Like Tannguh, the second stage of the Indonesia Deepwater Development (IDD) involving the Gendalo and Gehm fields is slated to come onstream in 2020, a year later than the original schedule, as operator Chevron Corp. reassesses the development proposals.

Delays at the Abadi and IDD projects were partially due to the need for the operators to resubmit their development plans as the volumes of gas from the two projects were larger than the initial estimates, Prawiraatmadja said.

 

 

 

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