Oil and Gas Transportation and Infrastructure in Indonesia

Oil and Gas Transportation and Infrastructure in Indonesia

Gas transportation by pipeline in Indonesia is regulated under Government
Regulation No. 36 of 2004 regarding Upstream Oil and Natural Gas Business
Activities as has been amended by Government Regulation No. 30 of 2009 ("GR
36") and Ministry of Energy and Mineral Resources ("MEMR") Regulation No. 19
of 2009 regarding Natural Gas Business through Pipelines, and is controlled
by the Downstream Oil and Gas Regulatory Agency ("BPH Migas"). It can only
be carried out by a business entity established in Indonesia that has
obtained a transportation license from the MEMR, unless such transportation
is a continuation of the upstream activities of a Production Sharing
Contract ("PSC") Contractor.

The MEMR, as mandated by the Oil and Gas Law (Law No. 22 of 2001 regarding
Oil and Gas), has established a transportation master plan. This master plan
is relied upon by BPH Migas to, inter alia, determine transmission routes
and distribution networks, tender Special Rights, and to determine tariffs
in accordance with techno-economic principles.

Governmental Authorizations

In addition to a gas transportation license from the MEMR, a business entity
must also obtain Special Rights from the MEMR to transport gas by pipeline
within the stipulated transmission and distribution routes by way of tender.
An environmental license must also be obtained by preparing the relevant
environmental document, which can be an Environmental Impact Analysis
("AMDAL") or Environmental Management and Monitoring Efforts ("UKL/UPL"),
depending on the length and pressure of the pipelines.

Land Rights to Construct Pipelines and Infrastructure

Generally speaking, land rights will be obtained by negotiating with owners
and occupiers, in accordance with prevailing laws. To the extent these
facilities are used for upstream activities within the framework of a
cooperation contract, the Contractor will have to comply with the Oil and
Gas Law, Government Regulation No. 35 of 2004 regarding Upstream Oil and
Natural Gas Business Activities as has been amended several times, the
latest by Government Regulation No. 55 of 2009 ("GR 35"), and the relevant
implementing regulations to be issued thereunder. Contractors are
responsible for the payment of these rights. Land that is purchased for a
facility will become the property of the state, while land that is leased
for a facility will be leased in the name of the Contractor.

Title to land purchased for facilities used for downstream activities
outside of a cooperation contract may be held in the name of the business
entity engaging in the transportation or storage activity.

Projects that serve the public interest may enjoy more Government
involvement in the land procurement process, as stipulated in Presidential
Regulation No. 71/2012 as has been amended several times, lastly by
Presidential Regulation No. 148/2015. The President has also issued a
regulation and an instruction to enhance cooperation among governmental
entities in smoothing the preparation and operation of nationally strategic
projects.

Access to Pipelines and Storage Facilities

Access to oil and natural gas transportation pipelines and associated
infrastructure is organized by BPH Migas by relying upon the transportation
master plan stipulated by the MEMR.

A pipeline or storage facility operator cannot be required to expand its
facilities to accommodate new customers. Facility sharing is obligated by GR
36 only to the extent the relevant facility has sufficient capacity so that
the facility sharing will not impair the operations of the facility owner.
Facility sharing is also subject to economic considerations, such as the
facility owner's investment return rate. BPH Migas is the authority that
oversees and regulates facility sharing.

Setting Terms for Oil/Gas Transportation

In general, and subject to BPH Migas' authority to set tariffs for the
transportation of natural gas through pipelines, parties may agree on the
terms of the agreement for the transportation and storage of natural gas. A
"contractual regime" is in its early stages of evolution.

BPH Migas has the authority to determine and supervise the tariffs for
natural gas transportation through pipelines that will be charged by the
operator of the pipeline to the users. The relevant operator must submit
the proposed tariff to BPH Migas. BPH Migas will then verify and evaluate
the proposed tariff. BPH Migas will discuss with the related pipeline
operator and the users before determining the tariff.

For the transportation of natural gas, the applicable regulation provides
that the agreement between a gas pipeline operator and user must be set
forth in a gas transportation agreement. The regulation also requires the
operator of the gas pipeline to prepare an access arrangement outlining the
terms and conditions for the joint use of the pipelines owned by the
operator. This, as well as the tariff, must be approved by BPH Migas. The
access arrangement will include management guidelines and technical and
legal rules. The gas transportation agreement must be in accordance with the
access arrangement.

Crude oil transportation is not subject to the Government's approval,
whereas fuel oil is relatively more heavily regulated in terms of
distribution, pricing and availability.

--- --- --- --- --- --- --- --- --- --- --- --- --- --- ---

Link to Original Article:
http://www.lexology.com/library/detail.aspx?g=bfce89e4-e911-460f-8868-27dd08
d310f1&utm_source=Lexology+Daily+Newsfeed&utm_medium=HTML+email+-+Body+-+Gen
eral+section&utm_campaign=Lexology+subscriber+daily+feed&utm_content=Lexolog
y+Daily+Newsfeed+2017-07-07&utm_term=

--- --- --- --- --- --- --- --- --- --- --- --- --- --- ---

John Diecker
APT Consulting Group Co., Ltd.

www.aptthailand.com