BPMigas Seeks Cabotage Exemption for Some Foreign-Owned Oil and Gas Ships

Jakarta Globe, Yessar Rossendar, February 07, 2010

Upstream oil and gas regulator BPMigas is seeking to make certain high-tech foreign vessels rented by oil and gas companies exempt from restrictions on domestic shipping set to be implemented next year.

BPMigas deputy chairman Hardiono said on Friday that the regulator had asked the Ministry of Transportation for an exemption because oil and gas companies were concerned that domestic shipping companies would not be able to meet their needs for such high-tech vessels, and that this would curtail investment in the vital sector. The ships in question, rig and seismic vessels, are typically rented from foreign-owned shipping companies for six months or less.

Since 2005, the government has been gradually implementing cabotage, a ban on foreign-owned ships carrying goods between ports in Indonesia, to boost the underdeveloped domestic shipping industry.

The final phase of its implementation will come into force in January next year, requiring oil and gas companies to use only domestically owned ships.

However, Sunaryo, the Transportation Ministry’s director general of sea transportation, said the ministry was unlikely to grant any exemptions to the cabotage rules. He said there was still time for local companies to buy the high-tech vessels or for foreign shipping companies to transfer the vessels to Indonesian owners.

“I encourage the local shipping companies to buy the high-tech vessels,” Sunaryo said.

Hardiono said several oil and gas companies had expressed concern about the potential difficulties of renting high-tech vessels from domestic companies. “Two out of four investors in the Kangean oil and gas block off Madura have pulled back from their plans to invest in the block” because of their concerns, he said.

Because rig and seismic vessels are typically only used for short time periods, and are rented to companies all over the world, it would be inefficient for Indonesian shipping companies to buy them, Hardiono said. However, BPMigas supported the introduction of cabotage rules for other types of ships in the oil and gas industry, he added.

Johnson W Sutjipto the head of the Indonesian National Ship Owners Association said domestic companies did not have enough rig and seismic vessels to service the oil and gas industry.

However, he said they would invest in these vessels because of the huge potential in the oil and gas sector.

“I’m optimistic that the vessels will be available in time, so that it will not slow down investment,” he said.