Indonesian President Enacts Two Oil & Gas Regulations

Indonesian President Megawati Sukarnoputri has enacted two regulations aimed at attracting investment in the country's oil and gas industries.

The regulations, which were enacted Friday, govern both the country's upstream and downstream sectors under the Oil and Gas Law implemented in 2001 to open the oil and gas industry to competition and do away with the monopoly of the state-owned oil and gas company PT Pertamina.

One regulation governing the upstream sector allows, among other things, oil companies to enter production-sharing contracts with the government for up to 30 years, which can be extended for another 20 years, according to a copy of the regulation obtained by Dow Jones Newswires.

Production-sharing contractors also won't be allowed to sell a majority of their stake in a block during the first three years of exploration.

However, they must offer a 10% participating interest to companies owned by provincial governments in the first year of oil and gas production.

The second regulation, governing the downstream sector, permits foreign investment in oil and gas distribution, refining and storage, areas that previously were controlled by Pertamina.

A number of foreign companies, including BP PLC (BP), Malaysia's Petronas and Royal Dutch/Shell Group (RD), have applied for licenses to open gas stations in Indonesia.

The new regulations are expected to attract foreign investors to the country, which has been suffering a steady decline in its oil output after years of production. Investors stayed away at least in part because of a lack of regulatory certainty.

Indonesia's crude oil output stood at 966,465 barrels a day in September, far below OPEC's current quota of 1.3 million b/d.