The Importance of Accelerating and Simplifying Permitting for the Upstream Oil and Gas Industry
Friday, 3 September 2021 | 09.00-11.00
“Permitting Post-Omnibus Law”
The Indonesian government enacted the Omnibus Law or the Job Creation Law in October 2020. This law is expected to increase the ease of investing and doing business in Indonesia, including for the oil and gas industry sector.
However, there are things that are of concern to the upstream oil and gas industry. One of them is the Environmental Approval for business activities regulated in Government Regulation Number 22 of 2021 on the Implementation of Environmental Protection and Management.
Article 3 Government Regulation No. 22 of 2021 states that Environmental Impact Analysis (Amdal) or Environmental Management Efforts (UKL) and Environmental Monitoring Efforts (UPL) are prerequisites for obtaining a Business Identification Number (NIB) before being able to conduct upstream oil and gas business activities. This rule is considered an obstacle for business actors in the upstream oil and gas industry to obtain NIB.
Director of the Prevention of Environmental Impacts of Business and Activities (PDLUK), Ministry of Environment and Forestry Ary Sudijanto explained, the interpretation of this rule needs to be understood more deeply.
“No business license can be issued without an Environmental Approval. However, at the initial stage of the Cooperation Contract, the company must already have a NIB, each NIB must have a Statement of Ability to Manage and Monitor the Environment (SPPL). That is enough. Then at the exploration stage, you can complete UKL, UPL and Amdal,” he said.
Ary added, basically the Job Creation Law is the fifth generation of the UKL-UPL Amdal document regulations. According to him, the current regulations have been simplified and are very different from previous regulations that require more permits, including oil and gas activities. "We are refining and adapting to the existing challenges," he said.
Moreover, he said, in a derivative regulation of the Job Creation Law, namely Government Regulation No. 5/2021, it is explained that upstream oil and gas activities are included in the high-risk business category so that licensing arrangements are considered complicated, including those related to environmental documents. Whereas the bottlenecking of upstream oil and gas activities is uncertainty, considering that this business process requires time and costs. Starting from working areas auction, contract signing, exploration, exploitation, to production.
However, according to Ary, in the context of setting the level of risk in Government Regulation No. 5/2021, the upstream oil and gas business does not mean that it must fulfill an Amdal requirement even though it is included in the high-risk category. In the Minister of Environment and Forestry Regulation No. 4/2021, the criteria for upstream oil and gas activities that have an Amdal requirement are production above 7,500 barrels per day onshore.
In the future, his party will encourage the establishment of a mechanism related to the Plan of Development (POD) which will go hand in hand with environmental documents. “So, the POD does not need to be agreed upon first and then to process environmental documents later. This is to shorten the time," he explained.
Head of the Formalities Division, at Deputy for Business Support, Special Task Force for Upstream Oil and Gas Business Activities Republic of Indonesia (SKK Migas) Syaifudin explained the permitting mechanism that has been running in his institution. There are documents that can be directly handled by the Cooperation Contract Contractor (KKKS) to the relevant ministries and institutions, but there are also those that are processed by SKK Migas.
The existence of a one door service policy will facilitate permitting services for KKKS. “We provide consulting services and share knowledge so you know what’s required when processing the permit,” he said.
He revealed that the preparation of good documents will greatly assist the permitting process. For this reason, there is a need for communication regarding the criteria for documents that are in accordance with permitting. To speed up the permitting process, SKK Migas also proposes that UKL UPL permits do not need centralized permit given by the Ministry of Environment and Forestry.
Syaifudin considers that the existence of the Job Creation Law will actually put more burden on the Central [government] because environmental permits only go through one door. "SKK Migas hopes that the approval is not given by the Minister, it is enough by the Director General," he said.
The Senior Advisor on Energy, Deputy I of Executive Staff of the President, Didi Setiarto, stated that the basic philosophy of the Omnibus Law/the Job Creation Law is to ensure that approvals and permits issued have a clear timeline, considering oil and gas investors also need business certainty.
“The regulations already exist, we are just waiting for input from all parties. We are optimistic that we can parse NIB, so KKKS friends don't have to worry," he said.
Meanwhile, to oversee the implementation of the Job Creation Law in the oil and gas sector, the Ministry of Energy and Mineral Resources (ESDM) has issued the Decision of the Minister of Energy and Mineral Resources Number 123 of 2021 concerning the Coordination Team for the Acceleration of Permitting for Upstream Oil and Gas Business Activities.
According to the Expert Staff for Natural Resources Economics at the Ministry of Energy and Mineral Resources, Sampe L. Purba, this team will discuss proposals to improve the process and timing of licensing in the oil and gas sector, mainly the ones involving other ministries/agencies so that it is hoped that the acceleration and simplification of permitting can be achieved.
“The objective of the coordination team is to accelerate the issuance of permits for upstream oil and gas activities. Second, clustering upstream activities related to spatial planning; Security, Safety, Health and Environment (KKKL); use of resources other than oil and gas; and imported goods," he explained.
According to Sampe, the Job Creation Law aims to increase competitiveness, provide legal certainty, ease of doing business, and efficiency in permitting in Indonesia. Therefore, its implementation must be disseminated more intensely.
He revealed, to synchronize the regulations in the Job Creation Law, there are 3 strategies, namely internal sector, intra-sectoral, and inter-sectoral. Internally, KKKS, SKK Migas and ESDM must resolve technical issues. Meanwhile, within the intra-sector, coordination and regulation of ministries and agencies related to upstream activities must be strengthened.
"Meanwhile in inter-sector, it is how to communicate targets and dissemination of information, as well as harmonization of regulations. These are tasks that are expected to be carried out together in the Omnibus Law," he said.