Indonesia’s new energy chief seeks to shore up regulator

oil-opec-nw-mdAppointing a permanent leadership at Indonesia’s graft-tainted energy regulator will be a top priority for the new government of Southeast Asia’s largest oil producer, the energy and mineral resources minister said on Friday.

Earlier this year, the former head of Indonesia’s energy regulator SKKMigas, Rudi Rubiandini, was sentenced to seven years in prison for his role in a major graft scandal that reached the top levels of the oil ministry – including the former minister.

The corruption investigations into SKKMigas and the energy ministry, coupled with a court ruling in late 2012 that declared the former regulator BPMigas unconstitutional, have led to delays and indecision for energy companies looking to invest in Indonesia. Rubiandini’s replacement was never formally appointed as chief of the regulator.

Sudirman Said, who previously held senior positions at state energy company Pertamina and PT Indika Energy , was appointed as Energy and Mineral Resources Minister last Sunday by President Joko Widodo.

“We have some pending matters – defining and making a definitive SKKMigas leadership,” Said told reporters on Friday, prior to meeting the current management of the regulator.

SKKMigas was formed to temporarily continue the regulator’s remit – managing the country’s upstream oil and gas production activities with oil and gas firms – until a new oil and gas law is introduced.

“In the near future we hope to continue the process of forming a fixed leadership,” Said said, adding that the energy ministry planned to issue a recommendation to Widodo so that the permanent regulator leadership could be appointed “as soon as possible.”

Said added that his team also were studying a long-delayed revision of Indonesia’s oil and gas law that would further shore up the regulator structure.

“We in the ministry are now studying if we can reach an immediate agreement – because the draft (law) has been discussed numerous times,” said Said. “We hope to overcome all these obstacles.”

Earlier this week, Sudirman told reporters that he would also make tackling corruption within the energy ministry a key goal, and that Indonesia needed to adopt a “sense of crisis” with regards to its future energy needs.

The latter comments, along with the fact that the ESDM is now under the authority of the new Coordinating Ministry for Martime, suggest that exploration of offshore energy projects could be a priority for the new government. Earlier this week, Said also indicated that Indonesia’s ban on mineral ore exports was likely to remain in place.

Indonesia was once self-sufficient in oil and gas but has been struggling for years to attract investment to halt declining output from a peak of around 1.6 million barrels per day in 1995. Indonesia has targeted output of 818,000 bpd in 2014.

The former OPEC member’s oil output is declining, and the country has faced criticism for unclear regulations and complaints about a nationalist stance on resources.

The oil and gas sector is also politically crucial, accounting for about a fifth of Indonesia’s government revenue.