Jakarta plans sweeping changes

Jakarta plans sweeping changes

The government of Indonesia has embarked on a sweeping review of all aspects of its upstream oil and gas industry including licensing, policies and regulations.

The oil and gas governance reform team was formed in November with University of Indonesia economist Faisal Basri at its helm. Its first act was to recommend that the country stop importing RON 88 low-octane gasoline and replace it with RON 92, and for local refineries to be upgraded so that they could produce the higher-octane fuel.

The team also recommended a fixed subsidy for fuels. The government responded by cutting the subsidy for gasoline altogether and setting a fixed subsidy of 1,000 rupiah per litre for diesel and other types of biofuel.

Civil society groups are pushing for an even broader reform programme to achieve energy security. They want to see a reformed production, transport and sales system including transparency in crude oil procurement abroad, stability of electricity supply point to refineries, exploration for new oil reserves, consistent and sustainable energy diversification a strong energy conservation programme.

"We also have to limit and ration energy subsidies only for the middle to lower class and the vulnerable, supported by a good database and consistent mechanism to supervise distribution," said Maryati Abdullah, coordinator of the Indonesian chapter of Publish What You Pay (PWYP), a global network of civil society organisations promoting an accountable resource extractive sector.

"We also have to revitalise our domestic refineries to reduce costs, as well as cutting red tape, bureaucracy and oil cartels for more transparent and competitive oil and gas governance."

Henri Subagyo, executive director of the Indonesia Center of Environmental Law (ICEL), said Faisal's team should also take the opportunity to push reforms through legislation. The 2001 Oil and Gas Law is among those up for review under the 2015 legislation programme in the House of Representatives.

"An all-aspects, upstream to downstream overhaul of the sector would need a clear legal reference," he said, adding that the civil society network had come up with its own version of a revised bill.

"We are pushing for good governance and more transparent upstream to downstream management in the sector," he said. "We also call for the separation of regulatory, executing and supervisory bodies in the sector, with the latter more empowered to ensure fair distribution." 

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