Government Reregulates Utilization of Natural Gas by Power Plants
In a bid to increase the utilization of natural gas by power plants while ensuring supplies of natural gas for purchase by the electrical power sector at fair and competitive prices, the Ministry of Energy and Mineral Resources recently issued Regulation No. 45 of 2017 on the Utilization of Natural Gas by Power Plants. This new regulation addresses several provisions which pertain to the following matters: 1) Natural-gas supplies for power plants; 2) Natural-gas pricing; 3) Natural-gas distribution tariffs; 4) Natural-gas sale-and-purchase agreements; 5) Natural-gas allocation periods; and 6) The development of power plants which utilize natural gas in their wellheads.
Govt. Introduces Greater Flexibility for Oil-and-Gas Contractors Operating under Gross-Split Production Sharing Contracts
The government is putting a lot of effort into ensuring that oil-and-gas contractors operate under the Gross-Split Production Sharing Contract (GS-PSC) scheme. After witnessing the apparent reluctance of contractors to engage in these contracts however, which are believed to be unfavorable to their businesses, the Ministry of Energy and Mineral Resources has finally issued Regulation No. 52 of 2017, which amends Ministry Regulation No. 8 of 2017 on Gross-Split Production Sharing Contracts. Under this new GS-PSC regulation, the government is offering more attractive contractors’ takes, which were previously set in a more limited sense under the previous regulation.
New Mechanism for Purchase of Electricity from Renewable-Energy Power Plants
In order to create a better investment climate as regards the renewable energy sector, the Ministry of Energy and Mineral Resources has issued Regulation No. 50 of 2017 on the Utilization of Renewable-Energy Resources for the Production of Electricity. This new regulation basically adds one new type of renewable energy which can be utilized for the production of electricity. The regulation also redefines the purchase mechanism for any electricity which is generated by renewable-energy power plants.
Govt. Limits Scope of Recoverable Upstream Investment Costs during Cooperation-Contract Transition Periods
The government has finally clarified the ongoing uncertainty which had prevailed over the exact investment costs which can be recovered at the end of cooperation contracts, as set out under Ministry of Energy and Mineral Resource Regulation No. 26 of 2017 on the Mechanism for the Recovery of Investment Costs for Upstream Oil-and-Gas Business Activities. This clarification takes the form of Ministry of Energy and Mineral Resource Regulation No. 47 of 2017, which has now limited the scope of the investment costs that can be recovered. The new Regulation also includes a provision for newly appointed contractors which describes their responsibility to cover any investment costs which were incurred by previous contractors.
Mandatory Provisions for Power-Purchase Agreements Amended
The Ministry of Energy and Mineral Resources has issued Regulation No. 49 of 2017, which amends Ministry Regulation No. 10 of 2017 on Main Provisions for Power-Purchase Agreements, with the ultimate goal of offering greater certainty as regards the sale and purchase of electrical power by removing government force majeure from the list of risks which must be covered. In essence, the amendment alters two main provisions, specifically: 1) The scope of the risks that must be covered by sellers and buyers of electrical power (risk allocation); and 2) The scope of force-majeure events.
Ministry Relaxes Supervision of Businesses Operating within the Energy and Mineral-Resources Sectors
With the objective of maintaining a healthy investment climate, as well as implementing the principles of Good Corporate Governance, the Ministry of Energy and Mineral Resources has issued Regulation No. 48 of 2017 on Business Supervision within the Energy and Mineral-Resources Sectors, which repeals and replaces Ministry Regulation No. 42 of 2017. In essence, this new regulation eases procedures which relate to the transfer of participating interests or shares, as well as changes which are made to boards of directors (BoDs) and/or boards of commissioners (BoCs) by eliminating the obligation to first secure approval from the Ministry. Instead, relevant parties will now only be required to submit reports to the Ministry.
New Provision on the Supervision of Businesses in the Energy and Minerals Sectors
Over the past month the Ministry of Energy and Mineral Resources (“Ministry”) has been subject to criticism from energy and mineral businesses (“Businesses”) following the issuance of Ministry Regulation No. 42 of 2017 on Business Supervision within the Energy and Minerals Business Sector. This regulation is expected to improve the effectiveness of the Ministry’s supervision of Businesses, however it is also perceived to represent a substantial obstruction to investment, both in terms of State-Owned Enterprises and private entities. The Regulation requires businesses working in the energy and minerals sector to secure approval from the Ministry for any transfers of shares, transfers of participating interest, as well as for any changes which are made to the composition of any board of directors and/or board of commissioners. Furthermore, the Regulation also alters a previous provision which related to the procurement of biodiesel fuel, as funded by the Palm-Oil Fund Management Agency.
Working Areas for the Indirect Utilization of Geothermal Energy Further Regulated
With the aim of setting out further provisions on working areas for the indirect utilization of geothermal energy, the government has issued Regulation No. 37 of 2017, which encompasses the following matters: 1) Planning, preparation and establishment of working areas; (2) Additions of data to working areas; (3) Changes, cancellations and unifications in relation to working areas; and (4) Reinstatement of working areas.
New Cost-Recovery Scheme for Oil-and-Gas Contractors Finally Regulated
The government is finally redefining the basic provisions for cost-recovery schemes as part of cooperation contracts held between oil-and-gas contractors and the government. Government Regulation No. 27 of 2017, which amends Government Regulation No. 79 of 2010 on Recoverable Operational Costs and Income-Tax Treatment in the Upstream Oil-and-Gas Business Sector, is expected to stimulate exploration and exploitation activities undertaken by contractors, which should eventually lead to an increase in oil-and-gas production in spite of the current downturn in global oil prices. The new regulation amends several provisions, including the scope of petroleum operations, production-sharing calculations, tax and non-tax incentives, recoverable and non-recoverable operational costs, goods depreciation, bookkeeping, overseas transactions and transitional provisions.
Detailed Provisions on New Mining Licensing Regime Issued
In a bid to clarify several matters pertaining to Ministry of Energy and Mineral Resources Regulation No. 34 of 2017 on Licensing Within the Minerals and Coal Sectors, the Ministry of Energy and Mineral Resources has finally issued Circular No. 10.E/30/DJB/2017 (“Circular”) on Following-up the Implementation of said Ministry Regulation. In essence, this circular addresses seven major points, specifically: (1) Cooperation with Other Parties; (2) Principle Licenses; (3) Changes to Articles of Association and Investment Status; (4) Ministry Authority; (5) Approval Documents on Working Plans and Budgets; (6) Technical Requirements; and (7) Transitional Provisions.