Wednesday 21 November 2012

Energy Policy, Asian Style

My contacts here in Singapore are abuzz with the news from Indonesia, another nation whose energy policy is up the creek. 

They do need an energy policy because they are a major producer of oil and gas - indeed, a member of OPEC until 2009.  The structure of their oil and gas industry is centred around a system of 'production sharing' agreements (quite common in the developing world) whereby exploration and production companies - substantially foreign concerns, 303 firms in total - are investing billions of dollars in drilling etc, in return for being allowed to receive revenues from part of the production: the rest goes to the state.  This is mediated by a state-owned entity called BPMigas, which is the counterparty to all these deals.

Or rather, was: because last week the Indonesian Constitutional Court put an end to the arrangement, having been petitioned by parties including Muhammadiyah (an Islamic organisation), and the 'scholar and cleric' Hasyim Muzadi, who argued that it was unconstitutional.  The Court agreed, and summarily dissolved BPMigas.  There's nothing like a good bit of constitutional propriety, eh ? 

I had lunch with a couple of BPMigas guys today, who at least have return tickets, but are wondering what awaits them when they fly back to Jakarta. They are not the only ones wondering what happens next: companies right across Asia buy their gas and oil from this crew.  To whom will they make their payments next month? they wonder with a smile, since their contracts are with an entity that no longer exists.  Then again, will next months' cargo arrive at all?

The energy minister, one Mr Wacik, would like it understood that everyone should carry on as if nothing had happened; that a new "task force" called SKSPMigas (see what he did there?  almost sounds the same) will pick up the pieces; and it's all a big mistake.  He's got that right. 

Over at Muhammadiyah, flushed with success, their chairman Mr Din Syamsuddin is planning to have the Coal and Mineral Resources Law overturned next.  Yes, Indonesia is a very big exporter of coal, too.

In due course I am guessing that our new friend and big-time coal importer, Chinese energy supremo Vice President Zhang Dejiang will be having a word in these jokers' ears.  Meantime, energy lawyers across Asia are going to have a splendid Christmas.  Or whatever festival Muhammadiyah celebrates at this time.

ND

6 comments:

Blue Eyes said...

Awesome setup.

So the government's oil/gas exploration vehicle has been declared unlawful so it's just setting up another identical one?

And I bet there are seriously commentators asking why Indonesia isn't accelerating towards developed country status.

Nick Drew said...

ain't a written constitution a wonderful thing !

bet you wish you had one

CityUnslicker said...

Churchill mining foudn out that after investing $200 million plus in Indonesia the Government could decide it never had a concession after all.

Even Indians will not deal with Indonesia - the whole place is a racket beyond comprehension - although this post is fab!

Budgie said...

Ermm, we do have a written constitution. It's just not written down in one document.

rwendland said...

Energy Policy, Telegraph Style:

Body of Rowena Mason article:

"bill-payers are forced to remunerate companies for several new nuclear plants, thousands of wind turbines and potentially “green” fossil fuel stations."

Idiot sub-editor title for story:

"Wind farms to increase energy bills by £178 a year"

Hmmm.

Agence communication said...

i completely true and i agree with those ideas """ They do need an energy policy because they are a major producer of oil and gas - indeed, a member of OPEC until 2009. The structure of their oil and gas industry is centred around a system of 'production sharing' agreements (quite common in the developing world) whereby exploration and production companies - substantially foreign concerns, 303 firms in total - are investing billions of dollars in drilling etc, in return for being allowed to receive revenues from part of the production: the rest goes to the state. This is mediated by a state-owned entity called BPMigas, which is the counterparty to all these deals.""