BP MIGAS DISSOLUTION NOT TO DISRUPT OIL BUSINESS

By Andi Abdussalam

Jakarta, Nov 14 (ANTARA) - The government has given the assurance that the dissolution of BP Migas,  the upstream oil and gas regulator, by the Constitutional Court (MK) on Tuesday would not disrupt oil and gas business activities, and all work contracts will remain effective.   Oil and gas activities, including exploration and exploitation, will not be disrupted in the wake of the Constitutional Court's ruling that led to the dissolution of BP Migas, according to Coordinating Minister for Economic Affairs Hatta Rajasa.          The chief economic minister said that the government had decided to establish a new unit to regulate the nation's upstream oil and gas sector, after BP Migas was dismantled by the MK.   "The new Unit for the Implementation of Upstream Oil and Gas Activity will be overseen by the Ministry of Energy and Mineral Resources. This is in accordance with the Constitutional Court's decision," he added.           Hatta stated that oil and gas activities will not be disrupted because the Ministry of Energy and Mineral Resources will take over the duties of the erstwhile oil and gas regulatory agency and continue the exploration and production activities.             The government has issued a new regulation to lay a legal basis for the establishment of the new unit so there are no uncertainties about the matter. In this case, a presidential regulation was issued on Wednesday to put things in place, he said.           Earlier, oil and gas contractors have urged the government to put an end to the uncertainties surrounding the oil and gas sector following the MK's ruling.            Executive Director of the Indonesian Petroleum Association (IPA) Dipnala Tamzil said  that after the Constitutional Court   issued the ruling, the government should provide immediate directives and guidance in order to reduce the potential impact of the current situation on future investment in Indonesia.           "We hope this issue is resolved soon so the current uncertainties can be gotten rid of," Dipnala Tamzil said.           In order to put an end to the uncertainty, President Susilo Bambang Yudhoyono issued a decree on Wednesday on transfer and implementation of tasks and functions of BP Migas following the agency's dissolution to give legal certainty to oil and gas investors and businessmen.          "The presidential decree is issued to prevent vacuum while at the same time giving certainty to oil and gas businesses," the president said at a press conference in response to the recent ruling of the Constitutional Court.          He said the decree was a reflection of the government's responsibility following the court's ruling. To oil and gas investors and businessmen at home and abroad, he said that "all agreements and contracts that have been made remain effective. All works that are being carried out under the cooperation between BP Migas and parties will continue as they are. So, there must not be any doubt about it."     Legislator Sutan Bhatoegana of Commission VII on energy affairs of the House of Representatives (DPR) has earlier called on the government not to let the  MK's ruling create vacuum in the oil and gas activities.          He hoped legal vacuum  and legal uncertainties should not happen after the Constitutional Court dissolved  BP Migas.          "Old contracts that have been concluded before the disbandment of BP Migas must go continued but no new contracts should  be made for the time being," Sutan Bhatoegana, who is a politician of the ruling Democrat Party said.          So far, exploitations of oil and gas resources had been carried out through tenders organized by the BP Migas. The tenders and work contracts that had been approved by BP Migas should not be cancelled but be resumed, he said.          Sutan said that the tender process carried out by BP Migas was considered by the MK as against the 1945 Constitutions, namely article 33, which states that resources such as water and other natural resources, should be controlled by the government and be used for the benefit of the people.          "So far, even state-owned oil and gas company Pertamina should also follow the tender called by BP Migas, It is the tender process which is not pro-people," he said.          The Constitutional Court on Tuesday dissolved BP Migas after reviewing Law No. 22 of 2001 on PB Migas, saying it  runs counter to the 1945 Constitution and has no legal binding.          The Constitutional Court ruled that the articles governing the tasks and functions of BP Migas in Law No. 22/2001 on Oil and Gas ran counter to the 1945 Constitution and had no legal binding.          The articles found to be unconstitutional were Article 11 sub-article (1), Article 20 sub-article (3), Article 21 sub-article (1), and Article 49.          "All matters relating to the executive body in the elucidation of the oil and gas law contradict the 1945 Constitution and have no legal binding," MK chairman Mahfud MD said.          The Constitutional Court also ruled that Article 1 point 23, Article 4 sub-article (3), Article 41 sub-article (2), Article 44, Article 45, Article 48 sub-article (1), Article 59 letter a, Article 61, and Article 63 of the oil and gas law were against the constitution and had no binding legal force.          The judicial review was called at the request of 30 figures and 12 mass organizations.          According to Sutan, the dissolution of BP Migas is a chance for  improving the oil and gas exploitation in the country.  The dissolution of BP Migas could serve as a momentum to improve governance in the oil and gas sector, he said.          "We, in the Commission VII on the energy affairs of the House, do not question the MK's ruling. What is important is that the oil and gas cultivation will be improved in the future," he added.          In the meantime, Kirlie Ganinduto of the Indonesian Chamber of Commerce and Industry (Kadin), said that the  dissolution of BP Migas will have a bad impact on oil and gas investment because this sector needs legal certainty in the long-run.          He  said  that the dissolution was a "slap in the face" of the oil and gas business players in the country.  "BP Migas can be dissolved, let alone, if it is only a work contract, on the grounds that it is against the 1945 Constitution," Firlie, who is Kadin chairman for upstream oil and gas committee, said in a discussion organized by the Energy & Mining Editor Society.          He said that BP Migas had so far carried out its crucial role well. It has played its crucial role in manpower development, controlling cost and recovery as well as increasing the local content of oil and gas industries.***2*** (T.A014/A/S012) (T.SYS/A/A014/S012) 14-11-2012 23:32:4