Indonesia will delay until May 2011 the implementation of a controversial policy — the so-called cabotage rule — under which all vessels operating in its waters have to be registered in the country and use the Indonesian flag, a senior government official said Thursday.
“We have a letter from the transportation ministry that the cabotage rule will be implemented in May 2011, not in January,” Evita Legowo, oil and gas director general at the Energy and Mines Ministry, told Platts.
The reasons for the delay in implementing the policy are not clear.
Legowo said the law had originally stated that the policy was to take effect in May, but that the transportation ministry had tried to move it up.
The delay from the January start comes one day after R. Priyono, chairman of Indonesia’s upstream regulator BPMigas, said that the policy would result in a drop of 275,000 b/d, or nearly 30%, in the country’s daily oil and condensate output.
With the delay, Legowo said, the Energy and Mines Ministry is hoping to work out changes with the transportation ministry so that the law is less of a constraint on oil and gas exploration and development projects.
The main compromise that the Energy and Mines Ministry is seeking is an exemption on vessels used in oil and gas activities that would allow foreign-flagged to be used when no Indonesian-flagged vessels exist for a particular purpose or when none are available, she said.
“We understand that this cabotage principle is very important for Indonesia. It will encourage our domestic companies to have their own vessels,” she said.
But she thinks the transportation ministry needs a better understanding of how the law may impact the oil and gas sector.
“We should have better coordination between government institutions,” she said. “We are now looking [with the transportation ministry] to see the best solution. We expect the discussion could be finalized before May,” she said.
Indonesia’s crude and condensate output has been steadily declining for at least the last decade because of natural decline at aging fields. The Energy and Mines Ministry has been trying to reverse that decline. It set a target to produce 965,000 b/d of crude and condensate for this year. But with current production running at about 950,000 b/d, it is pessimistic about achieving the target.
The country also failed to meet its 2009 crude and condensate production target of 960,000 b/d, pumping only 949,138 b/d.
Targets have been set for 970,000 b/d in 2011 and 1 million b/d by 2013, but many see those as unachievable if the new shipping regulation goes into effect.
The new shipping regulation, if implemented, would also cut the country’s gas production by about 20% next year, Priyono said Wednesday. Under the rule, which was notified in 2008, foreign-flagged vessels would not be allowed to operate in Indonesian waters.
Most oil and gas companies operating in the country use foreign vessels for exploration, production and storage. The vessels include jack-up drill ships, submersible drill ships, floating storage, floating production, storage and offloading vessels, LPG vessels, LNG vessels and seismic survey vessels, another official at Energy and Mines Ministry told Platts Wednesday.
Domestic shipping companies are not able to provide all of the vessels oil and gas companies need to operate offshore Indonesia, the official said.
“We have a letter from the transportation ministry that the cabotage rule will be implemented in May 2011, not in January,” Evita Legowo, oil and gas director general at the Energy and Mines Ministry, told Platts.
The reasons for the delay in implementing the policy are not clear.
Legowo said the law had originally stated that the policy was to take effect in May, but that the transportation ministry had tried to move it up.
The delay from the January start comes one day after R. Priyono, chairman of Indonesia’s upstream regulator BPMigas, said that the policy would result in a drop of 275,000 b/d, or nearly 30%, in the country’s daily oil and condensate output.
With the delay, Legowo said, the Energy and Mines Ministry is hoping to work out changes with the transportation ministry so that the law is less of a constraint on oil and gas exploration and development projects.
The main compromise that the Energy and Mines Ministry is seeking is an exemption on vessels used in oil and gas activities that would allow foreign-flagged to be used when no Indonesian-flagged vessels exist for a particular purpose or when none are available, she said.
“We understand that this cabotage principle is very important for Indonesia. It will encourage our domestic companies to have their own vessels,” she said.
But she thinks the transportation ministry needs a better understanding of how the law may impact the oil and gas sector.
“We should have better coordination between government institutions,” she said. “We are now looking [with the transportation ministry] to see the best solution. We expect the discussion could be finalized before May,” she said.
Indonesia’s crude and condensate output has been steadily declining for at least the last decade because of natural decline at aging fields. The Energy and Mines Ministry has been trying to reverse that decline. It set a target to produce 965,000 b/d of crude and condensate for this year. But with current production running at about 950,000 b/d, it is pessimistic about achieving the target.
The country also failed to meet its 2009 crude and condensate production target of 960,000 b/d, pumping only 949,138 b/d.
Targets have been set for 970,000 b/d in 2011 and 1 million b/d by 2013, but many see those as unachievable if the new shipping regulation goes into effect.
The new shipping regulation, if implemented, would also cut the country’s gas production by about 20% next year, Priyono said Wednesday. Under the rule, which was notified in 2008, foreign-flagged vessels would not be allowed to operate in Indonesian waters.
Most oil and gas companies operating in the country use foreign vessels for exploration, production and storage. The vessels include jack-up drill ships, submersible drill ships, floating storage, floating production, storage and offloading vessels, LPG vessels, LNG vessels and seismic survey vessels, another official at Energy and Mines Ministry told Platts Wednesday.
Domestic shipping companies are not able to provide all of the vessels oil and gas companies need to operate offshore Indonesia, the official said.