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Interview

with Anton Wahjosoebidjo& Puguh Sugiharto, Facilitating Team Heads, Indonesian Oil & Gas Society (MMGI)

13.09.2007 / Energyboardroom

How should we call this organization, MMGI, in English? How is it structured?

We can call it the Indonesian Oil and Gas Society. MMGI is not conceived as an organization per se, it is more of a communication forum where all the stakeholders of the Indonesian Oil & Gas industry can meet and discuss the main issues affecting them. Despite this relatively informal structure, it still requires some organization in order to plan and carry out regular activities. In this sense, it will have a Secretariat or Directorate that will act like a team overseeing the organization and making decisions on activities. There will be a chairman for practical purposes, but the decisions are going to be made in a collective fashion.

The concept of MMGI is based on a similar organization that was created for the Electrical Power Sector, MKI, on which we worked with Luluk Sumiarso when he was heading the Electricity and Power department in Migas.

Who exactly are your ‘stakeholders’? How have they reacted to this new initiative?

The entire spectrum of the O&G industry is represented: companies, individuals, organizations, associations, NGOs, etc. I think there were around 220 in our first meeting in December 2006. We divided them into several groups: upstream, downstream, supporting companies, etc. At this first MMGI meeting, the most important thing that we achieved was to get everyone to agree on a joint statement indicating our intention to become the foremost agent in the Indonesian Oil & Gas Industry, working towards the prosperity of the people of Indonesia. This is our shared vision. It is completed by some basic principles, such as impartiality, independence, good governance, and partnership with the government.

Initially, there was some reservation from the industry players. Once we explained our plans and what we were out to do, they realized it was a forum beneficial for them. They all signed the final statement showing their support to the organization.

How difficult is it to get so many stakeholders on the same ship?

It can be quite difficult to get everyone to agree, especially as you get further into detail when the differences of opinion come up more often. It is necessary to got through the first phase of disagreements and debate, because in that way we get to know everyone’s position on things. Eventually this allows us to carve out a shared vision, based on common goals and principles for everyone. In this way, we can create synergies among the different stakeholders. We are going to produce white papers for the government based on our concerted views, but we will also leave space for individual opinions to be expressed.

Going back to the origin of the organization, how was it born and how has it been constructing itself?

The need for a forum such as MMGI has been on the table for a while. The government has for a long time complained about the difficulty of trying to advance hand in hand with an industry so atomized and represented by different organizations. With MMGI, we are able to unite all of the stakeholders under common views and values regarding the industry. This makes for much smoother and effective communication between the industry and the government.

We have to recognize the role of Luluk Sumiarso as the driver of this initiative. After his experience setting up MKI, he saw that it was a good model for what has to be done with the O&G industry. Of course there will be differences between MKI and MMGI, primarily because for the O&G industry there are already many organizations active such as IPA, IGA, IATMI, etc. The structure of the organization will be more flexible than MKI.

Once Luluk Sumiarso became the head of Migas in 2006, he began consultations with all of the different players in the industry in order to put together a National Oil & Gas Plan. He noticed how there were so many different and diverging views, which is why he pushed hard for the creation of MMGI. Simultaneously, the new Energy Law was just passed in July 2007, and announces the creation of a National Energy Council. It will be chaired by the President and be responsible for generating the policy and general plan for energy in Indonesia. Once this master framework is established by the government and approved by the parliament, the director generals of the different energy-related entities will have to do all they can to fit into the plan.

How would you describe your relationship with the government?

We are independent from the government but wish to work together with them on the main issues of the O&G industry. We can have discussions with the government regarding the preparation or implementation of policies for the industry. Although there are no representatives of the government in MMGI, some public officials can eventually be members as individuals.

In what stage of creating this new organization are you now?

Currently we are still in the phase of forming it. The facilitating group, which we are a part of now, will give way to a Directorate or Secretariat, because there must be a body leading the whole team. The main activities will be making publications and holding meetings on different issues at the heart of the oil and gas industry. The experience of the Electrical Power Society shows that it is essential to have a Secretariat taking care of the day to day matters and planning activities.

The facilitating team is working on programs that interest everyone. We are discussing the way we will elect the chairman, and someone should be officially named in December. We will probably have a Board of Governors, similar to the Board of Directors in the Electrical Power Society. MMGI will help identify the issues that are common to all stakeholders and prioritize by choosing to handle first the matters which can have a positive impact on all the segments within the industry.

Then there are several areas which we are covering: regulations, capacity building, good governance, technologies, investments, public affairs. There will be focus groups created to manage the current issues.

What are some of the issues that stakeholders are most interested in at the present time?

One of the main concerns that multinationals are raising is the increased participation of the ‘national interest’, which they see as a possible first step towards nationalization. They are worried because they see what is happening in countries like Russia and Venezuela, but in reality we don’t consider this is a serious threat in Indonesia. The government is actually in need of foreign investment and technology, in order to reach its ambitious objective of raising production to 1.3 million bpd.

Looking at the big picture, it seems like there is a lot of focus on production and not enough attention is being paid to promoting exploration. In order to have a sustainable oil industry in the future, there has to be a balance between exploration and production.

As far as regulations, there are some weaknesses of the Oil & Gas Law from 2001, and a good deal of concern regarding its implementation. One of the reasons for this is the handling of cross section issues by different state ministries and levels of government. Hopefully, the creation of the National Energy Council will contribute towards better harmonization and synchronization. Regulations have to be clearer so that there is not so much room for interpretation. They should also be workable, transparent and friendly to investors.

In upstream, cost recovery is a crucial matter which is currently under discussion. This also goes for the general issue of management of the PSCs, because companies complain that the process with BP Migas is long and complicated. Another important issue is the implication of the new Energy Law, which lays down the government’s desire to diversify the national energy portfolio.

Do any major reforms need to be made to the Indonesian O&G system? What other models do you find interesting for managing oil and gas?

We are interested by the Norwegian model, because of the way they manage resources and get the government and parliament to work together. We have regular bilateral meetings with Norway to exchange ideas, but there are no concrete plans with regards to a fundamental change of our model.

There are, however, discussions on how we can improve the PSC system. I know, for example, that there have been problems with the exploration activities because companies that have gotten blocks in the past are unable to explore due to their limited financing capacity. This is being countered by putting stricter conditions on financial capacity to candidates in future bidding rounds.

Is there any final message to OGFJ’s readers on behalf of MMGI?

We are trying to create synergies and are bringing individual opinions together so that the government can have a real partner for moving forward the country’s O&G industry. I believe that all this work by us at MMGI and by the government will pay off and bring benefit to Indonesia and its people.

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