Tuesday, October 21, 2008

Domestic Market Obligation (DMO) issue in OiI/Gas in Indonesia

In the Oil and Gas activities in Indonesia, one of the interesting parts to be observed is the Domestic Market Obligation ( DMO) issue.

Why is it interesting ? This is really interesting because, this DMO is imposed towards the Producing Oil/Gas Companies in Indonesia by the Government of Indonesia (GOI) together with the Peoples House of Representative in Indonesia (DPR) to make sure that the Indonesian Domestic Consumption on Oil and Gas per the running Calendar Year, are being fulfilled.

Accordingly this is within the framework of implementing National Interest of a Nation for the continuity of the development and progress of such Country.

With respect to this issue, it appears that every Nation and Country in this world shall have its task in imposing its National Interests.

As far as the Industries, State Owned Companies, cars and public transportation, Airplanes, Vessels, Army Vehicles, which are the base fundamental needs of such Nation, are still by enlarge are being energized by the oil fuel/ gas, then the institution of such country which is the Government and the House of the Peoples Representatives (DPR) , shall do its up most to ensure that such source of energy to supply their Industry as the back bone of their country are flowing.

The above circumstances, may probably be the reason why DMO is imposed under the Production Sharing Contracts (PSC)/Technical Assistance Agreement(TAC) / Enhance Oil Recovery (EOR) by the Government of Indonesia ( GOI) now being represented by BP Migas.

Relating to this issue, the significant elements among others shall then be as to what kind of formula and to what extent of volume of DMO, shall be shared by each Producing Oil/Gas Contractor in Indonesia.

There has to be a certain Total Number of Domestic Consumption of Fuel/Gas per Calendar Year that has to be established by the GOI together with the DPR based on their studies.

Furthermore what are and from where are the sources for such Domestic Consumption of Oil /Gas, meaning as to how much is it driven from Outside of Indonesia and how much is taken from Inside of Indonesia.

Relating to the "Sources from Inside Of Indonesia", it appears that such DMO shall be shared or based on a certain Quota among "All of the Oil/Gas Companies who are already in the production Stages In Indonesia".

This Quota, is then equally shared prorate among "All of the Oil/Gas Companies who are already in the production Stages In Indonesia".

Based on the above perception, a certain formula was then applied in each and every PSC, TAC, EOR, which based on the Existing Law No. 22 Year 2001, including the Decision of the Constitution Court In Indonesia, such DMO is 25 % of the Oil /Gas Equity entitlement or oil /gas portion of each respective Oil/Gas Contractor in the Calendar Year.

However, as I understand, Law No.22 Year 2001 is now being reviewed, for which, relating to this DMO issue, I understand from a source, that DPR at this present moment is suggesting the DMO figure to be 75%, which appears to be a rather high figure. The representative from the Oil/Gas Community or the Indonesian Petroleum Association shall have their saying in the hearing with the DPR relating to this revision of the Law No. 22 Year 2001 including to the DMO issue .

Agung Supomo Suleiman Senior Partner of the Law Firm of Suleiman Agung & Co

Blog: http://www.sacolaw.blogspot.com

Email : agungsacolaw@telkom.net

Mobile phone : 0816830647

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