Photo: Soechi Lines

JAKARTA (TheInsiderStories) – Indonesian Ministry of Energy and Mineral Resources recently revoked a regulation which governs the entry of foreign workers in the Oil and Gas sector, as a part of efforts to create more investment-friendly regulation.

By this policy, Oil & Gas companies operating in Indonesia that intend to hire foreign workers do no longer require a recommendation for an Expatriate Placement Plan from the Directorate General of Oil and Gas.

Sub-contractor companies (both Oil & Gas or non-Oil & Gas) used by Oil & Gas Company can work in the Oil & Gas sector without any approval or recommendation from the Directorate General Oil and Gas. This applies to both new and renewable work permits.

The Directorate General for Oil and Gas no longer has the authority to supervise foreign workers in the oil and gas companies. The supervision of foreign workers will now be conducted by the Ministry of Manpower and the Immigration Office.

After the abolition of the rules, businessmen in the sector can directly apply licensing for foreign workers to work in Indonesia.

So far, large oil and gas companies use foreign workers such as Chevron for the Rokan Block and East Kalimantan Block and also BP Indonesia for Tangguh and ExxonMobil projects for the Cepu project.

Special Task Force for Upstream Oil and Gas Business Activities recorded there were 1,000 foreign workers work in that sector in 2014, somehow the figures fell significantly to 300 workers in 2016.

The decline in the number of foreign workers was due to the weakening of oil prices, which caused some projects to be delayed. This condition also has encouraged several oil and gas companies to send back their foreign workers to headquarters, such as Inpex Corporation workers who have returned to the headquarter office due to the delay of the Masela Block development.

In addition, the reduction of foreign workers in oil and gas projects is also because of the efficiency program in several companies. In total, the cost of foreign labor in cost recovery has fallen by about 50 per cent in the period 2014-2016.

The Indonesian government has attempted to boost oil and natural gas output to meet the rising of energy demands from domestic market by raising fresh investments in the sector, particularly in exploration.

Indonesia, a net oil importer, has been striving to revive its dwindling oil and gas production amid rising global oil prices.

Indonesia’s crude oil output peaked at 1.7 million barrel per day in the mid-1990s, however, in recent years the oil production has decreased to only half that level due to aging wells and other reasons.

Although the performance of Indonesia’s crude oil industry has been sliding rapidly since the mid-1990s, domestic oil production has tumbled due to weak investment in exploration, foreign exchange earnings from the oil and gas industry remain important assets for the country.

However, low crude oil prices, bleak legal certainty, and the need for much more capital-intensive exploration in deep water are matters that limit investment in this industry. In recent years, several big global players, in fact, left the Indonesia’s oil industry.

Written by Elisa Valenta, email: elisa.valenta@theinsiderstories.com

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