SKK Migas Expects New Mini-Refinery Regulation to Comply with PSC

KATADATA - The Special Task Force for Upstream Oil and Gas Business Activities (SKK Migas) supports the government's efforts to regulate mini-refineries. However, the agency warns that the new rule should not conflict with existing production sharing contracts (PSC).

Head of Public Relations of SKK Migas, Elan Biantoro said that a major obstacle to the mini-refinery business is oil supply. Therefore, the government needs to assure investors who are already building mini-refineries that they will get a guaranteed supply of oil.

However, Elan explained that any guarantee of oil supply for mini-refineries must take into account existing production sharing contracts (PSC), which determine the volume of oil allocated to the contractor, the state and domestic market obligation. The latter is the amount of oil that must be distributed in the country. (Read: Mini-Refinery Development Threatened by Lack of Oil Supply)

If the oil supplied to a mini-refinery belongs to a contractor, then in principle, they hold the rights over the oil and there is no obligation for them to sell them in the country. It is crucial that the government considers this to avoid potential legal issues. "But, as long as it’s fair, it’s fine. The important thing is that it’s not in breach of the PSC," Elan told Katadata on Friday (11/3). 

The Energy Ministry’s Director of Downstream Oil and Gas Business Development, Setyo Rini Tri Utami, reported that mini-refinery investors would make more profit if they source their oil directly from oil wells because this will keep transport costs down. (Read: Government Promises Cheap Oil Prices for Refinery in Well’s Mouth)

Director of the Indonesian Petroleum Association (IPA) Marjolijn E. Wajong claimed that the association had not discussed the supply of oil to mini-refineries with the government. Business players in the upstream sector are still reviewing the plan. "We'll check out the rules, and how they affect our members," she told Katadata, Tuesday (8/3).