Nigeria’s oil sector reform has been on the table for over 18 years. President Obasanjo inaugurated the Oil and Gas Implementation Committee (OGIC), led by the late Rilwanu Lukman in year 2000 and this led to Draft National Oil and Gas Policy in 2004. That was the beginning of the endless journey of the Petroleum Industry Bill (PIB) was introduced in 2008.
PIB was split into four parts to accelerate passage: The Petroleum Industry Governance Bill (PIGB), the Petroleum Industry Administration Bill (PIAB), the Petroleum Industry Fiscal Bill (PIFB) and the Petroleum Host and Impacted Communities Bill (PHICB).
The PIGB was finally passed by the National Assembly in April 2018 and forwarded to the President for assent, but that assent has not been given.
Between the period Nigeria started its oil sector reforms and now, Uganda passed its own reforms in 2013, Mozambique passed its Petroleum Law in 2014, Tanzania passed its Petroleum Act in 2015, while Ghana passed its Petroleum Exploration and Production Act in 2016. Perhaps, it is the turn of Indonesia to leave Nigeria behind.
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The country’s President, Joko Widodo recently responded to a proposal initiated by parliament, calling for a plan to revive the ailing sector and boost the country’s energy independence. Widodo met with his senior cabinet members to craft a response to parliamentary proposals for a new law submitted in December 2018.
“The revisions should provide momentum for regulatory reforms to make the oil and gas sector more efficient, transparent, straightforward, sustainable and provide added value to the national economy”, Widodo said according to a statement from the cabinet secretary issued.
Formerly an oil exporter and member of the Organization of the Petroleum Exporting Countries (OPEC), Indonesia’s crude output has plunged while its fuel demand has surged, making the country reliant on imports of gasoline and diesel.
The slump in oil and gas output has followed years of regulatory uncertainty. Recent pressure from the government on state-owned energy producer PT Pertamina to take over assets from oil majors like Chevron and Total has stoked concerns among foreign energy investors about the security of their projects.
Indonesia has struggled to revamp its last set of oil and gas laws passed in 2001 and a parliamentary committee finally proposed a new law to the full body in December 2018.
Issues surrounding the oil and gas sector have long been a source of tension with foreign investors, and resolving these matters has proven challenging for Widodo, who is running for re-election in April 2019.
“The aim of this revision must not only be to push to increase oil and gas production, but also to support the strengthening of national capacities, strengthening domestic industries and investment in our human resources in the oil and gas industry,” according government statement.
Among the changes the parliament proposed and which Widodo and his cabinet will discuss with them is the creation of a new oil and gas business entity that will also serve as a regulator, called BUKMigas, according to a draft of the law as reported by Reuters. That agency will take over from the current upstream regulator SKKMigas and the downstream regulator BPHMigas.
In addition to its regulatory role, BUKMigas will also be able to undertake work in oil and gas exploration and production. However, BPHMigas will still maintain oversight of pipeline fuel and gas transportation.
For the first time, Indonesia would have a state petroleum fund, bankrolled with revenue the government makes from oil and gas production as well as levies and bonuses, according to the draft.
More talks about the proposed law will be held between Widodo’s government and the parliament. Hufron Asrofi, Energy and Mineral Resources Ministry Legal Bureau Chief told reporters that the government is compiling a list of problems with the current draft for discussion.
According to a note on Indonesia’s oil and gas policy published recently by Fitch Solutions Macro Research, much work is still needed to attract investment to the oil and gas sector.
“When viewed in the context of intensifying competition for foreign direct investments across South and Southeast Asia, Indonesia remains at risk of falling behind, despite its impressive reserves profile and large market, if the tightening state grip over the sector is not loosened.”
But then, the country is now moving in the direction of overhauling its oil and gas law to resolve the uncertainties.
FRANK UZUEGBUNAM
