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NEWS UPDATES 6 September 2009

New rule for oil, gas sector may benefit Indonesian shipbuilders

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The local shipbuilding industry expects its currently idle shipping capacity, which has now reached about 50 percent, to be fully exploited under a new government rule that requires the oil and gas sector to rely on Indonesian vessels for its shipping needs, the Jakarta Post reported.

Industry Ministry director for maritime and engineering Soerjono, who like many Indonesian uses only one name, has said the new rule would allow the industry to recover next year from the negative impacts of the financial crisis which started to hit the industry in the second half of last year.

Soerjono said under the new rule, production sharing contractors in the oil and gas sector could reclaim expenses made for renting vessels to support their operations as long as the vessels were constructed in Indonesia.

He further explained that these shipping expenses would be eligible items as part of the oil and gas cost recovery scheme to be reimbursed by the government on the approval of the upstream oil and gas regulator BPMigas.

"BPMigas has the authority to request PSCs to hire locally produced vessels if they want to recover costs they spend (on vessels for their operations)," Soerjono told The Jakarta Post recently.

A memorandum of understanding for the implementation of the new rule, based on the 2008 Maritime Law, was signed by the Industry Ministry and BPMigas last month, he said.

Iperindo chairman Harsusanto previously said it was estimated that the industry could benefit by up to 20 percent of $1.5 billion in average annual charter costs spent by oil and gas contractors.

According to ministry data, at present there are 631 vessels comprising 541 national-flag vessels and 90 foreign-flag vessels working in support of the sector. Prior to the amendment of the maritime law, which introduced the local shipping quota, foreign operators once controlled 90 percent of vessels operating in Indonesian waters.

Echoing Soerjono, Indonesian National Shipbuilding Industry Association (Iperindo) secretary-general Wing Wirjawan said he expected "as much as possible" to benefit from the MoU.

He said the domestic shipbuilding industry was able to build almost all 20 types of vessels needed by oil and gas contractors, for example anchor handling tugs, tug boats, mooring boats, barges and utility vessels.

"What we are incapable of is to build FSOs (floating storage and offloading facilities) and FPSO (floating production, storage and offloading facilities). They are too big at this time. Our shipbuilding production facilities are not big enough yet," he told the Post.

He said the domestic industry would be able to start producing FSOs and FPSOs with a capacity of between 300,000 and 400,000 dead weight tons within three to four years at the shipyards being developed at Lamongan in East Java.

Currently, China, Japan and South Korea are the main countries able to build these facilities.


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