Wednesday, December 10, 2008

Practitioner Business Lawyer

  • Yes, I really realize that from the progress of my writing in this Blog it helps me to identify who I am as a profession.
  • I am a practitioner Business Lawyer
  • Why is that so?
  • Because most of my time for this 10 1/2 years I am really practicing myself as a Business Lawyer.
  • By experiencing in assisting the business and entrepreneur in their work, I became more aware that honesty and truth worthiness is the key words of conducting continuous sustainable business ventures.
  • Each party in a contractual transactions has to make their best efforts in getting the best deal they could reached in a certain given time by reaching and closing a deal which will create jobs opportunity for many professions and persons.
  • Each party are given their chances to view from several angles and perspectives before they reached a mutually agreed transactions.
  • Nothing in this world is perfect.
  • Having the same given time by nature, each party are bound to accept the best terms and conditions which they can reach to sign the deal.
  • There are always risks in entering into a contractual arrangements between the parties.
  • But by making the right decisions after viewing all the given possibilities at a certain given time, the management has to succeed in taking and making the right decisions after getting all the necessary inputs from several aspects and angles.
  • It is better to make a decision compared to an attitude of being afraid of making the necessary corporate actions.
  • We as professional business lawyers are really expected to make our best firm legal decisions and legal advices as well as legal steps which are necessary to be taken, in a certain given time, since "time is in the essence" for businessmen in making their business management decisions.
  • To enable such Business Lawyers to make such moves, such Lawyer has to be backed up with knowledge, experience, skills and positive attitudes as well as "mental bravery" to make the necessary legal actions to support the management in pursuing their goals and achievements for the benefits of all the stakeholders.
  • Well, having said the above, let us from this very moment "start" acting and performing ourselves to be a smart business lawyer, which will benefit, the business venture to start its business operations, by giving them the proper and timely legal advices, to maximize their benefits, to their surrounding community as a whole.
Agung Supomo Suleiman Partner Law Firm Suleiman Agung & Co Sunday, December 7, 2008 Business Lawyer Partner Law Firm Suleiman Agung & Co

Wednesday, December 03, 2008

Confident as a Business lawyer

  • Why do you want to be a Business Lawyer ?
  • You have to have a reason why you wanted to be a business lawyer.
  • If you are not confident with yourself, you may forget your dream to be a business lawyer.
  • Why is it so?
  • Well the reason is very simple and straight forward : How can you advise your Business Client if you are not sure about yourself.
  • Your Client is taking risk in choosing you to be their business lawyer.
  • Their business interests from the legal aspects are really very significant part of their overall corporate actions in making their business judgement and business deal.
  • In order for your Client to sleep tight at night, they want to be sure that their business interests particularly when they are having a deal with their business counter part, are well protected to ensure that their business decisions are well accommodated and incorporated in their business transactions with their counter business partner.
  • To ensure that such goal and achievement are fullfilled, such Client needs the assistant from a professional business lawyer who can lead their way and visions from the legal perspective.
  • Accordingly, you as the Business lawyer have to equipped your self with the knowledge and skill including the "self confidence" within your self to give the level comfort to your Client.
Cheers Agung Supomo Suleiman Partner Business Lawyer Partner Law Firm Suleiman Agung & Co

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Saturday, November 29, 2008

Enjoy Drafting Commercial Contracts

  • Drafting Business Commercial agreements
  • Well as a Business Lawyer it is really interesting in drafting and preparing agreements for your Clients.
  • The interesting part of drafting for me as a Business Corporate Lawyer, is because I really love and enjoy experimenting making clauses and provisions which is actually, the art of accommodating our Clients wants to protect their business interests since every pennies of their monies are really worth to be protected in order to maintain the continuity of their business operations.
  • From my experience in assisting our Clients, I understand that they are really rich with new ideas to develop their business.
  • It appears that they never are asleep and are always waiting for new ventures and ideas in setting up and growing their business.
  • It makes us always being inspired by our Business Clients, since they are always seeking for new ventures and opportunities.
  • We as business lawyers have to be smart and must always maintain and enriched ourselves with alternatives ideas and ways to accommodate our Client wants and needs.
  • Why am I really interested in helping our business clients ideas, is because if we can develop in making an agreement which could accommodate their wants in entering into an arrangement with their co investors or counterpart , this will result a ground for our Clients to visualize their business wants and visions, through a proposal written agreement with their co partners or business counter part, which will than be responded by their co partner or co business counter part to incorporate their counter business ideas.
  • These will be followed by several meetings and negotiations between the relevant parties, which will involved the management, technical, commercial, tax, lawyer and other related professions.
  • Accordingly, under a certain cooperation agreement relating to certain business ventures, we usually have to be aware of the commercial aspects, the respective technical aspects, business legal aspects and other relevant aspects.
  • The most important thing that you as a Commercial Lawyer has to do is to really to understand what your Clients wants, wishes and visions.
  • Thus you have to capture and really capture their business visions and goals.
  • Once you have digest their wants and visions, we as Corporate Lawyers will than have to make our best efforts to translate their vision, wishes and wants through the legal agreements that you drafting, in order to assist your Clients wants.
  • if at the end of the day, such negotiated Commercial Agreements are signed on the closing and signing date, this will be the embryo of the new venture which will results new jobs and opportunities and will absorb many workers and professions engaged in such new established ventures and thus with the help of the ALL Mighty, this new venture, may feed many families, kids of such involved people, and makes the lives cycles continue in moving its part;
  • As a Corporate lawyer the above tasks are really very challenging jobs for us.
  • It makes us as Corporate Lawyers really feel alive, maybe it is comparable or the same as painters, who likes to paint, what they captured from their perspective and translate into paintings on their canvas with their paint brush, or photographers or film makers, who can professionally capture this life cycles with their photograph instruments.
Cheers Sunday November 29, 2008 18.20 Agung Supomo Suleiman Partner Business Lawyer Partner Law Firm Suleiman Agung & Co

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Wednesday, November 12, 2008

DMO ON COAL Producers IN Indonesia

  • I read in the News Paper Kompas dated 11 November, that there is going to be a Domestic Market Obligation (DMO), 20-60 million ton per year, shall be stipulated at the latest of December 2008.
  • This amount can be changed in accordance with the real needs movement domestically.
  • It is said that such was the statement from the Director Mineral Program Development Coal, and Geothermal Department of Energy and Mineral Power Resources (Direktur Pembinaan Program Mineral, (ESDM), Sukma Saleh Hasibuan, Monday 10/11) in Cirebon.
  • The production of Coal is 200 million ton per year.
  • The draft of the Ministerial of ESDM relating to this DMO appears to be nearly final.
  • The rulings of this DMO among others includes ruling the minimum DMO coal sales ( PMPBDN) for the entire coal producer in Indonesia.
  • Whereas, the coal mining companies with qualification of coal types which are not matching for the DMO is subject to certain compensation value in the form of fulfilling transfer quota PMPBDN.
  • With Coal DMO, there will be a guarantee of standard price of DMO.
  • Such sources says that according to the Coordinator Committee Securing the State Assets Marwan Batubara the rulings of DMO has to be immediately determined because the coal stock for the State Electricity (PT PLN) is decreasing.
  • According to him the rulings on the DMO must be adjusted with the State financial strenght and the public interest as the user of the PLN services.
  • Meanwhile, the conversion program of coal becoming gas or coal gasification as the mixed fuel source for the Diesel Electricity Power Plant (PLTD) is merely effective to be developed for the territory of Kalimantan and Sumatera.
  • Such Kompas newspaper says that the PLN Expertise Functional Service and Production, Sadar Tobing emphasize that the usage of coal gas for the PLTD territory is geared to the PLTD territory which is near to the mining location, namely West Sumatera (Sumatera Barat), South Sumatera, and Kalimantan. This is to save the transportation cost and storage effectiveness.
  • The Example Project coal gasification in Paliman, Cirebon, is being developed by PLN to gether with the Mineral and Coal Research and Development Centre together with PT Coal Gas Indonesia.
  • Coal Gasification is using the low calorie coal 4.500-5.000 calorie, 6-50 millimeter diameter
  • The usage of the coal gas shall substitute 70% of solar usage.
  • From the PLN test, the usage of coal gasification as solar mixed for PLTD with 130 Kilowatt Power can safe the solar consumption 63%.
Quoted from the Kompas Newspaper of 11 November 2008 by Agung Supomo Suleiman Partner Business Lawyer

Partner Law Firm Suleiman Agung & Co

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Saturday, November 08, 2008

Snapshots on Oil and Gas Rules

  • Based on the considerations of the Law No. 22 Year 2001, the National Development has to be directed to achieve the peoples prosperity by conducting the reformation of all fields of the nation and state based on the Pancasila and the Indonesian Constitution 1945.
  • For Foreigners readers, I would like to inform that Pancasila is the five principles of the Indonesian people and State which is being used as the motto to unite the various ethnics and background culture found in Indonesia.
  • Whereas the Indonesian Constitution 1945, was the Constitution which was established and agreed by the founding fathers of this Nation, during the period when Indonesia was formed after its Independent day.
  • The oil and gas is the strategic nature resources which are non-renewable which is controlled by the State and is the vital commodity which controls the mainstream live of the majority people and has an important role in the national economy so that the management has to maximize in contributing the welfare and prosperity of the people.
  • the oil and gas activities has an important role in giving the real value added to the growth and continuity of of the national economic.
  • The Law No.44 Prp.Year 1960 concerning Oil and Gas, the Laws No. 15 Year 1962 concerning the stipulation of the Government Regulation of Replacing Law No.2 Year 1962 concerning the Obligation of the Oil Companies to fulfil the domestic needs and Law No. 8 Year 1971 concerning the State Oil and Gas Enterprise is no longer in accordance with the development of the oil and gas enterprise
  • Whereas, by still considering the national as well as international development the changes of the laws regulations concerning the oil and gas mining which can establish oil and gas enterprise which is self standing, strong, transparent, having the competitive power, efficient, and having the environmental vision, and boost the potential development and national role.
  • Based on the above considerations and in order to give the legal base for the renewal steps and redress the oil and gas performances the Law No. 22 Year 2001 had been formed.
  • After having implemented since the Year 2001, we understand from our sources there is an amendment being proposed and discussed between the House Representative of the People ( DPR ) and the oil and gas Community.

Agung Supomo Suleiman

Partner Law Firm Suleiman Agung & Co

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Exiting and Thrilling Experiences

  • Well I feel like writing in this Blog of mine.
  • I know its already late at night time shows 1.00 night.
  • Finally I realize that I am a business lawyer and specializing in Oil and Gas, General Mining, Coal Mining, Hotel activities, Construction and financing arrangements.
  • Well in this Oil and Gas, it started when I was working 5 Years as In house Lawyer in Huffco Indonesia (Virginia Company) who has its oil and gas operations under a Production Sharing Contract with Pertamina.
  • These Oil and Gas operations produced oil and gas, where the gas is being delivered to the processing and refinery plant in Bontang being purified and processed as LNG ( Liquefied Natural Gas) which shall be delivered to its customers in Japan. Wauw really exiting isn't ?
  • I was assigned as the in house Lawyer who was reporting directly to the Senior Vice President Exploration & Production, who are mostly engineers.
  • It was really an exiting experience because I was responsible for handling and reviewing the Exploration and Production Contracts, and is also responsible to answer any question from the Management relating to the interpretation of the Production Sharing Contract ( PSC).
  • Some of the questions relating to this PSC are among others what is meant by commercial production, when is the Oil and Gas Company obligated to surrender part of its Contract Area and other significant PSC issues.
  • On the Exploration and Production side, I was responsible to draft and review the E & P Contracts from the legal aspects. Such Agreements covers operational contracts among others the Drilling Contracts, Well Testing, Cementing Agreements, Helicopter Charter Agreements,Vessel Charter Agreements, EPIC (Engineering,Procurements, Installation, Commissioning Agreements) and other Exploration and Production Agreements.
  • It was really exiting and interesting tasks working as In House Legal Counsel in an Oil and Gas Company.
  • The most interesting part of the tasks, which I really enjoyed, is when you are assigned to go to the Site Location, in Badak or Bontang in East Kalimantan of Indonesia.
  • Why is so exiting ?
  • The existing part is because you will directly go to the terrain and remote places, where the access roads are not asphalts but are brown land and dusty, where you can see the pipelines which transported the oil and gas from the production wells in the commercial producing wells, and the oil and gas station gathering, the rigs, the wells, the plants and other oil and gas facilities;
  • You will also see the green forests trees, all around you which makes you feel , you are trapped in a beautifully wild nature.
  • The fun part is also when you fly with the Helicopter Bell 412, and sea the view of the Site Location from the chopper.
  • It is really exciting and thrilling experience.
  • On the Site Location you usually travel with jeeps which is really exiting.
  • Well, such view and adventure in the Fields are really important for you so that you can capture the whole and comprehensive picture, as a contribution when you are drafting the oil and gas contracts.
  • Remember as a Lawyer, part of your job are incorporating the rights and obligation of the parties which is the Oil and Gas Companies and the Supporting Contractors in a contractual agreements which is actually the reflection of the meeting of minds and understandings between the parties.
  • The readers and the stack holders of such Contracts which you are drafting and preparing consists of various disciplines and background which are managements, shareholders, engineers, technical and finance people.
  • So the art of being a Lawyer is to having writing skills to establish communications and understandings between the various stockholders to achieve their common goals and interests.

Agung Supomo Suleiman

Partner Law Firm Suleiman Agung & Co

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Thursday, November 06, 2008

Breaking NEWS - Congratulations OBAMA

  • I wanted to congratulate him for winning the USA Presidential election in USA on November 2008.
  • I really like Obama's style. He is still young in age 47 Years old, but he is really mature when he delivers his speech.
  • All the people around the world no matter where they are, appears to be putting high hopes on Obama, because he really gives hopes of changing this world into a more peaceful place to live.
  • It happens to be that when his mother divorced his father, she married an Indonesian men, namely Soetoro and thus there is certain attachment between his family and Indonesia.
  • In a certain way we are all really proud having Obama elected as the new President of USA.
  • He happens to be at the right time and the right place to make the changes in a positive way.
  • When he made his speech after winning the election, everybody sings : Yes We Can.
  • This is really a dynamic motto which inspired us all Yes We Can.
  • Well again congratulations to Obama.
  • We wish you all the the best, good luck and success in your new position as the Leader of USA.

Wednesday, November 05, 2008

Understanding Indonesian Goals in Mining

  • The Legal Sources of the General Mining Law in Indonesia is Article 33(2) and (3) of the Indonesian Constitutional Law.

What is Article 33 (2) and (3) of the Indonesian Constitution LAW ? Why you as a Foreign or Local General Mining Company who operates in Indonesia, must really understand this Famous Article which was "Planted" in the Indonesian Constitutional Law by the "Founding Fathers" of this Great Nation of Indonesia. Well, let me try to explain to you why this Article 33(2) and (3) of the Basic Constitution Law 1945 is really significant to be understood by the Mining Companies operating in Indonesia.

  • Pursuant to this Article it states that the branch of productions which are important for the State and which exploits the mainstream live of the majority people shall be under the sovereign of the State.
  • The earth and the water and the natural richness which is contained therein shall be under the control of the State and be used at the most for the welfare of the people.
  • Furthermore the basic principal of the control and the beneficial of the natural richness upon the various mining minerals for the social welfare of the people in the mining activities shall be implemented under the Indonesian Mining Law.
  • The Indonesian Nation as the holder of the Ownership Title upon the natural richness in the form of various mining minerals which is contained in the earth and water within the Indonesian Territory which is the "Indonesian Mining Legal Area", shall thereafter "grants the power" to the State to regulate and makes benefit of such national richness with the utmost to achieve the justice and prosperity of the society as a whole.
  • Thus based on the above principals, The State has the Authorization Right ( Hak Penguasaan) upon such National Richness, whereas the execution/the performance of the State Sovereign is called " The General Mining Authorization".
  • Since the State posses the right to control or the Authorization Right ( Hak Penguasaan) upon the various mining minerals, than the State cannot not grant other rights which is more larger then such Authorization Right.
  • Accordingly, what can be given by the State is the General Mining Authorization Enterprise ( Kuasa Usaha Pertambangan Umum ) or abbreviated (Kuasa Pertambangan Umum) General Mining Authorization, which covers the general mining efforts ( usaha-usaha pertambangan umum : general survey, exploration, exploitation, pengolahan ( treatment ) and pemurnian (purification), transportation and selling.
  • Furthermore, the State shall give the performance of the General Mining ( Pengusahaan Pertambangan Umum) to the holder of the Mining Authorization.
  • Since there are many various mining minerals, the State needs to determine the categorization or grouping of such mining minerals and the performance of such mining minerals.

Agung Supomo Suleiman

Partner Law Firm Suleiman Agung & Co

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Monday, November 03, 2008

Slight View on the Mining Law in Practice

The Mining Law in Indonesia regulates :
  1. Ownership
  2. Grouping of minerals according to their importance
  3. The way mining will be conducted by different parties
  4. The role of the Local Government
  5. The way in which mineral development can be licenced or authorized.
  • As regulated under the Mining Law, minerals are divided into 3 Groups based on the historic role, present and the future potential and possible economics significances each of such minerals to the state and the people. These grouping are being determined by a Government Decree from time to time.
  • The Groupings in general are divided into Group A : namely the Strategic Minerals.
  • Under this Strategic Minerals are among others : oil, asphalt, wax, natural gas, coal, brown coal uranium, radium, and other radioactive minerals, nickel, cobalt, tin .
  • Following thereafter is the Grouping B which is the Vital Minerals. This Vital Minerals among others are : iron, manganese, copper, lead, gold, silver, platinum, diamond, silver, mercury, sulphur.
  • These groupings of mineral shall have impacts on the issuance of the mining licenses and /or royalties.
  • While C Minerals are handled by the Provincial Governments. These C Minerals are usually relating to among others limestone, sand, gravel which are developed under a Regional Mining Permit ( Surat Izin Pertambangan Daerah or SIPD) which is issued by the Governor and can cover an area of 25 ha.
Based on the Mining Law, the Mining of Strategic Minerals can only be undertaken by a government agency appointed by the Minister or a state enterprise. Mining can be licensed or authorized in 5 ( five) ways :
  • 1. Ministerial Assignmentt to carry out mining by government bodies or agencies ( Penugasan Penambangan) as in the case of BATAN which is the atomic energy agency being assign to carry out the development of radioactive minerals.
  • 2. Issuance of Mining Authorization ( Kuasa Pertambangan or KP). This KP are granted to Mining Companies (sate or private) or to Indonesian Individuals.
    • As we are aware there are different stages of Mining Authorization which can be applied for.
    • In applying the Mining Authorization, we have to submit the required maps and other administrative requirements.
    • In practice the Mining Authorization will be given for a limited time. Reasoning of this is usually related to guarantee the seriousness of the applicant / the right holder in performing its obligations. If such right holder is not performing any exploration activities for a certain period of time, in a certain Area, the potential minerals in such location will be idle, which on the other hand, can actually can be explored, exploited by the other more serious mining companies to produce the mineral products.
  • 3. Contracts for Foreign or Domestic Companies ( Contract of Work or Coal Cooperation Contract). This is based on regulations under the Mining Act combined with the Foreign Investment Act.
  • 4. License or Permit for People's Mining. This License is granted to small traditional or manual mining operations which are using simple equipment and technology. Usually it is conducted in a small scale or through mutual cooperation using simple tools and equipments.
  • 5. Authorization by District Government ( Surat Ijin Pertambangan Dearah - SIPD) This usually in practice applies to Group C Minerals.
  • From my experience, as In house Legal Counsel in a Mining Company who conducts Mining Operations in Copper, such Company, who operates in Indonesia under a Contract Of Works ( Licence/Authorization) needs a certain volume of limestone for processing its product in the Mill Plant. The Company who conducts the limestone operation holds the Group C Minerals license issued by the Local Government.
  • This Limestone Company was granted work by the Copper Mining Company to manage the usage and supply of the limestone in the Mill Plant. Exiting isn't it.
  • Thus, in practice, you may found situation in the field operation at Site, where a cooperation mechanism, may arise between the Big Cooper Mining Company who is exploring, exploitation and producing the Cooper Mineral which falls under the Group B Vital Minerals, and the Limestone Mining Company who is granted the Authorization by the District Government for its C Mineral of Limestone.
Well, the above is a slight view of the Mining Law and its real implementation in the real practice operations which you may find in the Mining Field Operations in Indonesia, which hopely will be usefull for you readers who are interested in reading Legal aspects related to Mining Operations in Indonesia. Date : November 1 , 2008

Agung Supomo Suleiman

Senior Partner Law Firm Suleiman Agung & Co

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Saturday, October 25, 2008

Understanding Mineral Policy In Indonesia

  • Based on the Indonesian Mining Law it is determined that all minerals found within the Indonesian mining jurisdiction in the form of natural deposits as blessings of God All Mighty are national wealth of the Indonesian people and shall, therefore, be controlled and utilized by the State for the maximum welfare of the people.
  • This policy is based on Article 33 of the Indonesian Constitution Law which specifies that the state maintains total sovereignty over land and mineral resources of the country and that they shall be used and developed for the full benefit and welfare of the people.
  • The government thus administers mineral resources development on behalf of the people.Accordingly, within the spirit surroundings this policy framework, are the laws and regulations established by the Government together with the House of Peoples Representative (DPR).
  • This is different with the system in other countries where individuals owning a certain peace of land will be recognized by State of having title ownership on the minerals found below the land owned by such private individual. Besides the written laws, in practices we frequently found unwritten policies which needs us to get the correct guidance since the interpretation between the individual government officers sometimes may differ on to the other.
  • Accordingly, if we happen to be the in-house lawyer in a foreign mining companies, we usually must be equipped with skills, to bridge the understanding and perceptions and wants of the Mining Investors and the officers either local or central.This is significant, to enable in reaching meeting of minds between the foreign investors who are used with their way of dealing with mining operations in their home country and the local mindsets.In common language, if we want to make our sandwich and hamburgers be eaten and taste by the local people, than we have to try to put some local traditional contents in serving such sandwich and hamburgers.
  • With the same spirit, if the local people want their traditional foods to be viewed by foreigners, than the local people must take into considerations in putting some foreign vegetables or contents, which are known by such respective foreigners wherever they come from.
  • By making the above samples, I just wanted to say as a practice business lawyer, that regulations and laws does not stand by itself in a vacuum empty space, but is developed and shaped by the surroundings where such mineral deposits is located.
  • If such same minerals deposits for instances ore, gold, coal or nickel is located in Australia, then the laws and rules of the people in Australia will influence them in making and developing such mineral deposits.
  • These principles will also apply to other countries, where such mineral deposits of ore, gold or nickel are located for instance in America Latin Countries like Chile, Venezuela and in other parts of the world.
  • We also understand that in Indonesia, when Indonesia was under the sovereignty of the VOC, as well as the Dutch, the VOC, and Dutch economical, political system and their peoples view, had shaped the laws and regulations related to the Mineral Deposits, where individual Dutch / Foreign person or Dutch /Foreign Companies may owned the mineral deposits which is known as concession right.
  • While as we understand the local have their traditional perspective relating to the minerals deposits, like in Irian Jaya or Papua, the local people has the believe system that the mountain, including what it contains which are mineral deposits, are considered to be their mother
  • Having said the above, we may understand the laws and regulation more clear, since the rules and laws which are being laid down by the Legislator are influence and at a certain level a political product of such Nation and State.
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    • Agung Supomo Suleiman
    • Partner at Law Firm Suleiman Agung & Co
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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


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Thursday, October 16, 2008

Knock To Knock Arrangements in Oil/Gas Operastional Contracts

When you are negotiating and drafting legal contracts between parties in the oil and gas operations, you frequently are faced with a situation where the other party is asking for a knock to knock arrangements.

Interesting isn't it. Well what does it mean.

Let me share my experience on some interesting experience relating to this knock to knock arrangement.

These may occur when the other party is having the same strong position when they negotiate the terms related to shifting the risks relating to the liability and indemnifications issues.

For instance, you happen to be a lawyer representing one of the Oil and Gas Companies in establishing and incorporating such liability clauses, you are asking the Contractor to indemnify, release and hold harmless the Oil/Gas Company from and against any claims in whatsoever form and kind being filed by any person or party, who are employed or engaged by such Contractor, regardless of the cause.

In these case the Contractor which is represented by their lawyer, may ask for a knock to knock to knock arrangements relating to this liability issue.

In response to their request you as the lawyer of the Oil and Gas Company, shall then request such Contractor’s Lawyer to provide you with their revisions and versions.

After receiving such revisions, you then as the lawyer of the Oil and Gas Company will come again with your comments and inputs, for instance that you may agree, to also indemnify, hold harmless the Contractor from and against claims coming from any person under the Oil/Gas Company employment relation, however, to the extent such losses or damages are solely caused by the deliberate and major fault of the Company.

As you may see, the risks of liability, and the burden of proof elements, may be moved from one party to the other party, depending on the strength position of such respective parties who are negotiating such terms.

In practice, this may happen since under the Indonesian Law, we adopt the freedom of contract, Article 1338 of the Indonesia Civil Code, whereby the parties are free to enter and negotiate any kind of agreements in our case commercial agreement, which they want, provided however that such agreement does not violate the applicable compulsory law, public law or the public order.

Thus, in my experience and practices as a commercial lawyer, I have the perception that, whether an agreement is in more favor to a party compared to the other party, really depends on the situation and position of the parties during the negotiation, drafting and completion or signing the agreement.

Agung Supomo Suleiman

Senior Partner Law Firm Suleiman Agung & Co

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Wednesday, October 15, 2008

Construction Contract Exposures in the Oil /Gas Operations

When you are building a certain Gas and Oil Production Facilities Project, in a certain Contract Area, In Indonesia, you might then have to prepare and enter into an Engineering, Procurement, Construction and Commission Work Contract Agreement.

In the Oil and Gas operations, we usually call this the EPIC Contract Agreement. Under this EPIC Contract Agreement the skeleton or table contents of this Agreement which may be drafted, in practice covers among other the following issues :

the Definitions, the Work, the Responsibilities of the Oil/Gas Company ( Company), the Responsibilities of the Contractor, the Project Schedule, Time Completion, the Contract Price, the terms of Payment, Changes in Work, Guarantees and Warranties, Acceptance of Work, Default, Termination and Suspension, Liquidated Damages, Labor Relations, Relation with other Contractors, Insurance and General Indemnification, Patent Indemnification, Treatment of Proprietary Informations, Invention and Licenses, Liens and claims, Assignments and Subcontracts, Force Majeur, Accounting Records, Arbitration and Governing Laws, Taxes, Duties, Contractor's Representatives, Company's Representatives, Notices and Communications, Miscellaneous, Obligations and Liability.

In the preamble of the EPIC Contract Agreement, we usually describe, the reference relating to the background of the Oil/Gas Company, as to what basis is this Company conducting its oil and Gas Operations in Indonesia.

In my practice as Lawyer, we usually refer to the Production Sharing Contract or TAC or EOR, depending on the cooperation arrangements between the Oil and Gas Company with the GOI which is now BP Migas.

Furthermore, if the Oil/Gas Contractor is conducting its operations in cooperation with other investors, then we shall refer to the Operating Agreement which is specifically entered by such oil/gas Companies with the other Oil/Gas Investors.

As we all are aware, since the funds required to conduct the oil and gas facilities are significant, then such Oil/Gas Contractors, may enter into a Joint Operation Agreement (JOA) with other oil/gas companies, share the funds, costs and expenses. In this JOA arrangements, one of the Oil/Gas Contractors shall be elected as the Operator, who usually shall be responsible to enter into the agreements with 3rd Parties, to conduct the oil and gas operations, in which in our case is the EPIC Contract Agreement.

As an oil and gas Lawyer, having the opportunity and experience in being involved in preparing the EPIC Contract Agreement is really very interesting.

The interesting part is that the Construction Contractor, which we are asking to perform the Construction work, shall not only be responsible for the Construction work of the Oil and Gas Production Facilities, but shall also be responsible for coordinating and managing the Engineering, the Procurement, Installation and the Commissioning of such Production Facilities.

Thus as the Lawyer who shall be responsible for preparing and reviewing the legal aspects of these arrangements, we have to make sure that our Client who is the Oil and Gas Company are really being given the full legal right to request such Contractor to perform the Work in a professional manner by utilizing sound engineering principles, Project Management Procedures and supervisory procedures in accordance with the accepted practices in the petroleum processing industry.

We also have to make sure that the Contractor has inspected the Site and surrounding locations and is familiar with the conditions related to the performance of the Work. This is important since there may be cases where, the Contractors is not aware of the Site conditions, which shall result delay in the performance of the Work.

If the Contractor has to fabricate outside of Indonesia any pressure vessel to be used in connection with the Project, such Contractor has to advise the Oil/Gas Company at the earliest practical date, that it has to fabricate and will obtain all the necessary permits from the Directorate General of Oil and Gas (MIGAS) (through the Oil/Gas and BP Migas) prior to the beginning of the fabrication.

This EPIC Contract Agreements usually comprised of several Sections and Volumes, where we have to set up the order of priority in the event there is a discrepancy or consistency between the Sections or Volumes of such legal documents.

The significant part in preparing such EPIC Contract Agreement, is also on the Scheduling of the Work, in which the Contractor has to schedule its Work to comply with any design, construction and commissioning schedule constituting part of the EPIC Agreement and with any sequence or priority described in the Scope of Work.

The Contractor is required to submit to the Oil and Gas Company within a certain period of time for instance 2 weeks a time schedule ( Project Schedule).

This Project Schedule in practice among others includes the activities such as Identification of the Critical path with all the restrains and interrelations clearly indicated, start of the survey for pipelines, start and completion dates of detail design and schedule issue dates for “ Issued for Approval” Drawings, Start and Completion Dates and scheduled issue dates for Approved for Construction Drawings, Preparation and issuance of bills materials, start and end of mobilizations and demobilizations. All normal construction activities including Site Clearing, excavation work, foundation and equipment installations etc.

The Contract Price for the full payment of the EPIC Work to be completed by the Contractor to the satisfaction and accepted by the Oil/Gas Companies Work shall be a Lump Sum Price. There will also be the terms of payment where schedule of payment shall be established under the EPIC contract agreement.

Well, those above are some of the items that the oil and gas lawyers has to be involved in helping the end users and the management of the Oil and Gas Companies from the legal aspect to support and protect the legal rights of the Oil and Gas Companies in conducting its operations in Indonesia.

Agung Supomo Suleiman

Senior Partner of Law Firm Suleiman Agung & Co

email :

Mobile Phone : 0816830647

Tuesday, October 14, 2008

Experience Negotiating PSC - TAC with GOI

I have experienced negotiating the Production Sharing Contract ( PSC) with the team from the Government of Indonesia (“GOI”), which previously was represented by Pertamina, but now is being represented by BP Migas, which I would like to share my experience as follows.

As we are aware in the Oil and Gas practices in Indonesia, Pertamina is now being positioned not as the regulator anymore, but shall have the same positions such as the other oil and gas Investors. However, the difference with other oil/gas contractors, is that Pertamina, is established and owned 100% by the State as stipulated by a certain Indonesian rulings.

I was representing my Client who was, the Oil and Gas Investor, who was negotiating the terms and conditions of the PSC or EOR (Enhance Oil Recovery) with the GOI.

Our team which is the Oil /Gas Investor, is usually represented by several persons from technical people, commercial, economics, tax, HRD and legal.

Usually there is a general format standard format of PSC, being introduced by the GOI, however, in the implementation of practices, before a PSC is agreed by the GOI and the Oil/Gas Contractor, negotiation shall take place between GOI and the Oil/Gas Contractor upon certain significant terms and conditions of such PSC.

From my practical experience, the issues which are discussed with the GOI among others are issues concerning the figures of the information Bonuses which are related to the giving of data/information by the GOI and received by the Oil/Gas contractors. There is then the Signature Bonuses, and the production Bonuses. These production bonuses are usually related to the level of production during the production stages of such oil and gas activities.

Furthermore, the commitment expenditure were also being discussed as to the amount of the aggregate total commitment expenditure, and when shall such amount obligated to be spent during the first 6 Years period.

As we all are aware, under the PSC arrangement, the GOI is always asking the Oil / Gas Investors to make their commitment assurance, that certain amount of commitment expenditures must be spent by the Oil / Gas Contractors during the 1st Six Years commencing from the effective date of the PSC for conducting the oil and gas operations.

This commitment expenditure is very significant to the GOI, since the GOI is relying on the Commitment Expenditure made by the OIL/Gas Contractors, which can demonstrate their seriousness in conducting the Oil and Gas Operations, starting from the General Survey, Explorations Period, Appraisal, Exploitation period, Production.

If during the running Year the Oil/Gas Contractor is spending less than the amount of money required to be so expended, than an amount equal to such under expenditure, with BP Migas consent may be carried forward and added to the amount to be expended in the following Contractor Year, without prejudice to the OIL/Gas Contractor’s Rights under the PSC.

There are certain period established and agreed by the GOI and the OIL/Gas Contractors for each of such stage of oil and gas operations.

It should also be noted, there is also a certain period of time, during the term of the PSC, that Contractor is obligated to surrender part of the Contract Area which is considered as area which shall not be developed by the Oil /Gas Contractor.

This scheme of surrendering such portion of Contract Area, is to ensure that such surrendered Area, can or may then be offered to another Oil /Gas Contractor who are interested to explore and develop such Area.

Well, those above are among others a glance picture of what shall be going on during the negotiation process of the PSC, TAC or EOR between the Oil/Gas Contactors and the GOI now being represented by BP Migas.

Date : October 14, 2008 Agung Supomo Suleiman

Senior Partner

Law Firm Suleiman Agung & Co

Email :

Mobile phone : 0816830647

Monday, October 13, 2008

People's Representative Proposal to Law No. 22/2001 Oil/Gas Law

At this present moment the People's Representatives are making suggestions to LAW No. 22/2001 Oil/Gas Law.

The suggestion are among others :

Note the inside brackets are the suggestions

Article 1 Paragraph 19 The Cooperation Agreement is a Production Sharing Contracts or other form of Cooperation Agreement which is more beneficial to the States by "increasing the products and efficiency and the results shall be used for the most welfare of the people.

Article 8 paragraph 1

The Government is "obligated" to grant priority upon the usage of the Gas for the domestic consumption and shall have the task do make available the Oil Strategic Reserve to support the supply of the Domestic Oil which shall be further agreed with a Government Rulings.

Article11 paragraph 2 Every Cooperation Agreement "which shall be signed is obligated to be consulted and obtained the approval" from the Peoples Parliament of the Republic of Indonesia.

Article 12 paragraph 1 The Working Area which shall be offered to the Business Body (Badan Usaha) or Fixed Business Body ( Badan Usaha Tetap) is determined by the Minister after consultation with the Local Government and "the Local Peoples Representatives."

Article 12 paragraph 3 The Minister shall determined the Business Body or the Fixed Business Body "to" conduct the Exploration and Exploitation in the Working Area as meant by paragraph 2 "after obtaining the approval form the Local People Representatives".

Article 14 paragraph 1 The duration of the Cooperation Agreement as meant by Article 11 paragraph 1 shall be performed at the most" 25 years"

Article 14 paragraph 3 "The Government shall be entitled to revise and /or cancel the working contract if it is deemed not to be in accordance with the national interest and State with the consent of the Peoples Representative Body."

Article 14 paragraph 4 "The People Representative is entitled to propose revision upon the cooperation agreement as meant by paragraph 1 if in the implementation evidence is found, showing that there is a violation against the rulings.

Article 22 paragraph 1 The Business Body or the Fixed Business Body is obligated to deliver 75% of the oil and/or Gas production to full fill the domestic consumption.

Article 28 paragraph 1 A Oil Fuel and the result of certain ......(olahan) may only be exported after the domestic consumption is fulfilled.

Article 28 paragraph 2 The Oil and Gas price is determined by the Government after obtaining the approval from the Peoples Representative Body.

Business Lawyer

As a business Lawyer you must have the skill and knowledge of drafting legal advice and legal opinion relating to the business of your Client.From my experiencing as an Independent Lawyer for more then 10 Years, I realize that we have to concentrate on a certain field of business that you are mastering and that types of Client that are being referred to you.

Most of the Clients that are being forwarded to my firm, are Oil and Gas Contractors, Mining Companies, Coal Trader Companies who intend to purchase coal but at the same time is willing to financing the Coal Mining License owner who needs some financing back up to support their infrastructure such as their Coal Plan Facilities, in order to produce their Coal products.

Occasionally I had also been requested to assist Hotels who wishes to enter into a Management Agreement with other Hotel who has international interchange contacts, which includes the Technical Assistance Agreements.

During my previous experience of Lawyering, I was also experiencing drafting Financing arrangements such as Loan Agreements including its collaterals agreements, which involve the financing of Vessels operations and Aircraft Operations.

Thus, it was really quite a wide range of experience, and when I was in the Oil and Gas Lawyer as in-house Lawyers, I usually handle explorations and productions sides of the operations, in which we are also requested by the end-users to assist them in reviewing and drafting the Vessels Charter Agreement as well as the Helicopter Agreements.

Since I was frequently involve in the Vessel and Aircraft business operations, which includes from the registration of the flags and nationality and numbers of the Vessel and the Aircraft in the respective Directorate General Office, which for Vessels are in the Directorate General of Sea Communications and the Aircraft with the Directorate General Of Air Communication, it really helps me, conducting such supporting activities which are needed in the Oil and Gas Operations as well as in the General Mining Operations.

On the upfront side within the Oil and gas Operations, we as Lawyers are requested to advise on the Production Sharing Contracts Agreements (PSC), starting from reviewing and advising the management upon the meanings or interpretation of such PSC.

We are also frequently requested to contact the Directorate of Oil and Gas, which is now the Directorate of Mineral and Energy, to discuss about issues which needs some clarifications. When I was experiencing as In House Legal Counsel in the Mining Copper Contractor, we also were usually requested to make contacts with the Legal Bureau of Legal Divisions within the Directorate General Of General Mining, to obtain or clarify certain significant informations relating to the COW (Contract of Work) as well as the rules and regulations relating to the General Mining Activities.

Based on the above range of experience, as a business lawyer I am attached and is most interested in the progress and development of the legal aspects occurring in Indonesia, in particular related to the Oil and Gas, General Mining Operations, Coal Mining and other related legal aspects surroundings such operations activities. Jakarta, October 13 , 2008

Agung Supomo Suleiman

Partner of the Law Firm of Suleiman Agung & Co

Email :

Mobile Phone : 0816830647

Friday, October 10, 2008

The Skill and Art of Drafting Oil/Gas and General Mining Contracts

Well as a Lawyer it is really fun for me to prepare, draft or review Contracts.

Maybe, it is like a geologies, when they see rocks or stones whether it still at the ground or at the mountain, or even after it had been polished, placed in a building at the walls or as titles, such geologies can tell many stories about such stone or rocks, the history of it where does it originated and came from and many other interesting stories related to such rocks.

It is also like painters, when they painted something either it is nature, abstract, or whatever imaginations they have captured and visualized it with their paintbrush, such painter seems to be deeply involved and is having fun in drawing such painting.

In my personal experience, this kind of fun, enjoyment and excitement can also happen to us as lawyers when we are drafting, preparing and reviewing legal documents or legal transactions.

The surroundings of their day-to-day place or field of work will shape their perception on what they are drafting. So if we focus drafting contracts related to oil and gas and general mining operations activities, the skill of preparing such legal documents to support the management, the end users, the operations person in the field, is to open widely your imagination but focusing and concentrating on the core of the business operations in the oil and gas, or general mining operations.

For instance, as the business lawyer, we have to be fully aware of the circumstances surrounding the operations person, where they are shaped to be persons who are always rushing to get the operation start without delay, if possible to be done yesterday. In the Oil /Gas as well as in the General Mining operations, the stages of the operations are usually processed through the same pattern of stages starting from general survey, exploration, appraising whether there are deposits which are commercially ready to be developed, or un commercial, or in the oil and gas operations dry hole.

If commercial production is being agreed upon, then development of production, will commence and ready to be stored either in the station gathering if it is oil/gas, or production stock for mining products and after that ready to be sold to the market and make profit.

Well, it sounds very interesting isn’t.

Yes, but please make sure that the risk are high, where there will be sinking fund situation borne by the oil/gas or general mining investors, if they have spent lost of monies for starting up the operation from general survey and exploration stages, but after being appraised in the appraisal stage it is determined, that such location is as non commercial for production.

Accordingly, having said the above, then you or us as a business Oil and Gas Lawyer and General Mining Lawyers, must have full consciousness and awareness from the operations/technical side, the business/ economics / commercial side, as well as the legal aspects, and safety, environmental, local culture perspective must be in such a manner, to maintain balance upon all such significant aspects.

Agung Supomo Suleiman

Senior Partner

Of the Law Firm Suleiman Agung & Co


Email :

Mobile Phone : 0816830647

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