Teguh Pamuji – Secretary General, Ministry of Energy, Indonesia
The Secretary General of Indonesia’s Energy Ministry unveils the government’s energy agenda and policy program. He tells EnergyBoardroom about a new law to determine the ‘state take’ of profits, how the Ministry is incentivizing outside investment, the reserve potential in the east of the country, and new legislation which will also define the responsibilities of Indonesia’s regulatory body for the upstream segment.
We understand that the oil and gas law is currently in draft form, but what are the main features that we can ultimately expect from it?
The new law will determine the allocation of the proceeds from oil and gas production by elucidating the ‘state take’ of the profits under a range of different scenarios. By introducing a greater degree of flexibility at the legal level, lawmakers will be hoping to incentivize outside investment in exploration. Though our national volume of oil and gas production may be declining, Indonesia still enjoys considerable hydrocarbon reserve potential in the underexplored eastern part of the archipelago so the rule changes will seek to make the fiscal terms governing those areas more attractive to private sector investors.
The new legislation will also crucially define the repositioning of Indonesia’s regulatory body for the upstream segment. SKK Migas, the special task force for upstream oil and gas was, after all, only ever intended to be a temporary structure following the disbandment of BPMigas. The forthcoming amendments will thus determine how the new regulatory structures governing hydrocarbon exploration and production will look. The legal framework for downstream activities may additionally be revised which would have an impact on the mandate and functioning of BPH Migas as well.
What has been keeping you most busy in recent months?
Firstly, I have been occupied overseeing the restructuring that has been taking place inside the ministry. Not only do we have a new minister of energy and changes in key personnel, but also we have simultaneously been undergoing a period of reevaluation in which we have been analyzing how we can accelerate the achievement of our targets.
We have been overhauling our internal machinery and reporting structures at the top, middle and lower levels with a view to performing more efficiently and effectively as an organization. Ultimately government has to be much more responsive in implementing the political agenda that the electorate has voted for. We cannot allow bureaucratic inertia to get in the way and become an impediment to action. Our expectation is that the new set-up will be much more action orientated and conducive to effective policy formulation and implementation.
Meanwhile, my team has been very busy with the preparation of new regulations such as the coordination of the revisions to the oil and gas law that are currently being debated in parliament. This represents, without doubt, the most significant piece of legislation of the year for the Ministry and a lot of effort will have to go into ensuring that it is operationally fit-for-purpose.
What additional steps can be taken to increase inward investment into the energy sector as a whole?
Lawmakers have flagged up a number of impediments to investment in the energy sector and the new oil and gas bill will seek to address these issues. Longstanding bottlenecks relate to the difficulties of license and land acquisition which have had a tendency to delay energy projects. A new one-stop service will therefore streamline and simplify the award of permits and facilitate the purchase of land. Many of these initiatives actually originated within the parliament, but are now being sponsored by the government as part of the comprehensive package of proposals being put forward.
One of the historic bottlenecks holding back Indonesia’s capabilities in refining has been the difficulty of acquiring the land for such large-scale products. Now the government has stepped in and guaranteed the availability of land which removes an important obstacle. Tax incentives are also being awarded to those investing in refineries and we can already see the positive momentum generated with countries such as Azerbaijan, Kuwait and Iran all now stepping forward and offering to invest in Indonesia’s refinery construction and upgrade programmes.
Could you outline the functions of the secretariat and describe your role as secretary general?
The secretary general acts as the primary interface between Minister Surdiman Said and the various directorates reporting to the ministry. Within the Ministry of Energy and Mineral Resources, there are four distinct directorates each dedicated to a particular thematic area. These comprise: oil and gas, mining and coal, renewables and energy conservation, electricity and power. Each one of these bodies is tasked with translating the Minister’s vision into policy and monitoring any government programmes being implemented. My function as secretary general is essentially to coordinate all these component parts and ensure that they interact smoothly and effectively.
This year, for example, the government and parliament have reached agreement on an oil production target of 825,000 barrels per day and it falls to me to coordinate the action plan between the directorate general of oil and gas and the regulatory apparatus of SKK Migas in how to realize this in material terms.
As lawmakers seek to entice foreign investment into the upstream segment, one proposal being mooted is to broaden out the PSC model and allow for other regimes such as a tax and royalties system. Is this likely?
At the moment, all sorts of different options remain on the table for discussion. Under the current law in force, the term PSC is not addressed explicitly so it has been very difficult to implement anything different. This is all set to change with the unveiling of the new law which will clarify exactly what can and what can’t be done. Today’s government understands that some oil and gas fields are more complex to develop than others and that E&P activity in difficult arenas such as deep-water entails a much more risky and expensive venture. We therefore agree that the incentives offered need to be increased for such scenarios; the idea is to enshrine this logic in the new legislation.