The Energy and Mineral Resources Ministry fears implementation of a new environmental law may lead to problems that could seriously hit production and investment in oil and gas.
Evita Legowo, director general for oil and gas at the ministry of mines and energy, told reporters on Wednesday that the worst case scenario on the implementation of the new environmental law could result in as much as a 40 percent decrease in national oil production.
"The Environmental Law will threaten national oil production and it could drop by *up to* 40 percent from our target," Evita said.
This year, the government is targeting to produce 965,000 barrels oil per day (bopd) as laid down in the 2010 national budget. Last year Indonesia produced about 960,000 bopd, so the government is hoping for a modest increase.
Oil and gas have historically been the backbone of the Indonesian economy, contributing up to 30 percent of total state revenue. Oil and gas contributed as much as Rp 182.63 trillion in revenue derived from the energy and mining sectors in 2009.
There are several provisions in the law that could directly affect the level of production and investment in the oil and gas industry, Evita said, the most important being the increased complexities because of the involvement of regional governments in the issuing of permits.
Evita argued that such provisions would require central and regional governments to make use of similar definitions on various terms and provisions pertinent to oil and gas production, particularly those that concerned the environment.
The environment law passed by the House of Representatives last year, requires business entities to secure environmental permits prior to launching their operations. These permits are issued by a minister, governor or regent, depending on the area of operation. A failure to secure the required environmental permits would result in the termination of the business license for a given concession or working area.
Previously the State-Owned Enterprises Deputy Minister for Mining and Telecommunication, Sahala Lumbangaol, said that the development of at least 16 oil and gas development areas by Pertamina had been delayed due to the failure to obtain the required environmental permits.
Evita also raised the definition of the concept of clean energy referred to in so many provisions in the law.
"One of articles mentions about cleanness, the problem being that oil production industries may result in some dirty *or polluting* consequences," she said.
Ambiguities in the environment law, she said, made it difficult for companies to fulfill environmental standards and guidelines set by the new legislation.
"Those regulations have to be fulfilled by all oil and gas production sharing contract holders (KKKS) by April. I would have to express my apologies if oil production targets might then not be achieved," Evita said.
She continued that state oil and gas producer PT Pertamina and PT Chevron Pacific Indonesia would be the two companies most effected by the new Environmental Law.
The probable negative impact of the law on the industry was confirmed by Bagus Sudaryanto, operations director of PT Pertamina EP, saying complications created by the law could lead to the company failing to reach its production target of 128,000 bpod.
"We are still calculating a more precise estimate of the *possible* decline in production," Bagus said.(*)
Evita Legowo, director general for oil and gas at the ministry of mines and energy, told reporters on Wednesday that the worst case scenario on the implementation of the new environmental law could result in as much as a 40 percent decrease in national oil production.
"The Environmental Law will threaten national oil production and it could drop by *up to* 40 percent from our target," Evita said.
This year, the government is targeting to produce 965,000 barrels oil per day (bopd) as laid down in the 2010 national budget. Last year Indonesia produced about 960,000 bopd, so the government is hoping for a modest increase.
Oil and gas have historically been the backbone of the Indonesian economy, contributing up to 30 percent of total state revenue. Oil and gas contributed as much as Rp 182.63 trillion in revenue derived from the energy and mining sectors in 2009.
There are several provisions in the law that could directly affect the level of production and investment in the oil and gas industry, Evita said, the most important being the increased complexities because of the involvement of regional governments in the issuing of permits.
Evita argued that such provisions would require central and regional governments to make use of similar definitions on various terms and provisions pertinent to oil and gas production, particularly those that concerned the environment.
The environment law passed by the House of Representatives last year, requires business entities to secure environmental permits prior to launching their operations. These permits are issued by a minister, governor or regent, depending on the area of operation. A failure to secure the required environmental permits would result in the termination of the business license for a given concession or working area.
Previously the State-Owned Enterprises Deputy Minister for Mining and Telecommunication, Sahala Lumbangaol, said that the development of at least 16 oil and gas development areas by Pertamina had been delayed due to the failure to obtain the required environmental permits.
Evita also raised the definition of the concept of clean energy referred to in so many provisions in the law.
"One of articles mentions about cleanness, the problem being that oil production industries may result in some dirty *or polluting* consequences," she said.
Ambiguities in the environment law, she said, made it difficult for companies to fulfill environmental standards and guidelines set by the new legislation.
"Those regulations have to be fulfilled by all oil and gas production sharing contract holders (KKKS) by April. I would have to express my apologies if oil production targets might then not be achieved," Evita said.
She continued that state oil and gas producer PT Pertamina and PT Chevron Pacific Indonesia would be the two companies most effected by the new Environmental Law.
The probable negative impact of the law on the industry was confirmed by Bagus Sudaryanto, operations director of PT Pertamina EP, saying complications created by the law could lead to the company failing to reach its production target of 128,000 bpod.
"We are still calculating a more precise estimate of the *possible* decline in production," Bagus said.(*)
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