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

Law Firm’s Blog http://www.sacolaw.blogspot.com

Email : agungsacolaw@telkom.net

Mobile Phone : 0816830647

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

Law Firm’s Blog http://www.sacolaw.blogspot.com

Email : agungsacolaw@telkom.net

Mobile Phone : 0816830647

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.

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

http://www.sacolaw.blogspot.com

Email : agungsacolaw@telkom.net

Mobile Phone : 0816830647

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

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

Email : agungsacolaw@telkom.net

HP : 0816830647

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.
• Jakarta Indonesia
• Also Published in ALLVOICES GLOBAL MEDIA
  • Agung Supomo Suleiman
  • Partner at Law Firm Suleiman Agung & Co
  • Blog :

    http://www.sacolaw.blogspot.com

  • Email :

    agungsuleiman@gmail.com

    agungsacolaw@telkom.net

  • Mobile Phone : 0816830647

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