Newly appointed Energy and Mineral Resources Minister Ignasius Jonan and deputy Arcandra Tahar have vowed to continue implementing the policies propagated by interim minister Luhut Pandjaitan during the ministry’s leadership vacuum. While the energy and minerals sector is widely known as a snake pit, Luhut, who also serves as coordinating maritime affairs minister, made moves to revise several government regulations to improve the sluggish business climate, including offering incentives for the upstream oil and gas industry. During Monday’s handover ceremony, Jonan expressed his commitment to continue Luhut’s work. “There are several priorities that were highlighted by the minister,” said J onan, citing the gas-rich Masela and East Natuna blocks, the relaxation of the mineral export ban, the flagship 35,000 megawatt (MW) program and the revision of the cost recovery rule.
Jonan and Arcandra will face the daunting task of bringing back business confidence to invest in the energy and mining sectors that were once the economy’s top sectors but have been bludgeoned by low commodity prices and weak global demand over the past few years. Arcandra, who holds several international patents in offshore fields, also touched on the government’s realization that the current cost recovery mechanism a reimbursement scheme for oil and gas exploration and production costs was ineffective in attracting contractors to conduct exploration activities. During Luhut’s two-month tenure as interim energy and mineral resources minister. the government told the House of Representatives that it would seek to slash its cost recovery budget to US$10.4 billion from $ 11.7 billion in next year’s state budget, while still honoring existing contracts. “Howeven there is a much bigger opportunity to cut down on cost recovery that has not been signed, such as the Masela and Natuna blocks. This is not a one-day job as it needs both funds and analysis,” Arcandra said.
Jakarta-based think-tank Institute for Essential Services (IESR) executive director Fabby Tumiwa said it was a given that the duo would continue Luhut’s work as the targets had been set during the beginning of President J oko “Jokowi” Widodo’s administration. He emphasized the need for more government supervision of the 35,000 MW program in order to ensure that state-owned electricity firm PLN would not decrease its renewable energy portfolio even further from 8.1 percent and would reach the 97 percent electrification target by 2019. Presently, the electrification ratio stands at around 88 percent. “We only have three years left,” added Fabby.
Oil and gas businesses expected the new pair to help push for the reinstatement of an assume-and-discharge system, which was nixed in 2010 in favor ofthe current cost recovery scheme, in the impending revision to the Oil and Gas Law, Indonesian Petroleum Association (IPA) executive director Marjolijn Wajong said. Meanwhile, the smelting industry is hopeful that Jonan and Arcandra will rethink the government’s plan to relax the export ban on unprocessed minerals next year because such a ban could discourage down-streaming efforts that could add value to the count1'y’s economy. “We hope that the ban relaxation will be revoked,” Processing and Smelting Association (APSEI) deputy chairman Jonatan Handojo said.
Jakarta Post, Page : 1, Tuesday, Okt, 18, 2016
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