BP Migas dismissal costs $70 billion in loss

JAKARTA. The Constitutional Court’s ruling that dismissed the upstream oil and gas regulator BP Migas would cost US$70 billion in loss, BP Migas chairman R. Priyono said Tuesday.

“If BP Migas is dismissed, then all of the signed contracts will have no legal binding,” he said after a meeting with the lawmakers at the House of Representatives Commission VII overseeing energy affairs, as quoted by kompas.com. “We have signed 353 contracts that will cost $70 billion if they are annulled.”

The Constitutional Court on Tuesday annulled all articles related to the regulatory body stipulated in Law No. 22/2001 on oil and gas. The court said that the articles had violated the 1945 Constitution and the regulatory body did not have legal grounds.

The court said that the regulatory body degraded state control over natural resources as it did not directly manage oil and gas. Instead, BP Migas handed it over to state-owned companies or private companies through cooperation contracts.

According to the judges, such a mechanism had limited access for the state to maximize the benefits of natural resource management for people’s welfare, as stipulated in Article 33 of the 1945 Constitution.

As a consequence of the ruling, BP Migas is terminated and its functions will be handed over to the Energy and Mineral Resources Ministry.

Following the ruling, Priyono said that BP Migas would conduct an internal meeting to discuss the future of its employees. BP Migas would also discuss the future of its contracts with oil and gas companies, he added.

BP Migas was established in 2002 to take over the authority of managing and supervising the upstream oil and gas industry from state oil company Pertamina.

Since its establishment, BP Migas has been operating under the system of cooperation contracts, with 85 percent of its revenue from oil going to the state and the rest going to the company, which has a contract with BP Migas. As for gas, the state gets 70 percent of the revenue.

Between 2001 and 2011, 74 percent of oil and gas in the country was handled by foreign companies, according to data from the Energy and Mineral Resources Ministry. (The Jakarta Post)