Jakarta – The Supreme Audit Agency (BPK) has called on the Energy and Mineral Resources Ministry to create a more transparent mechanism in the decision-making process for investment in the oil and gas sector to ensure the law is upheld.
BPK commissioner Rizal Djalil said on Tuesday a better mechanism in investment would help determine whether state losses at state-owned enterprises (SOEs) were purely a result of business risks or if laws were broken.
He said the ministry needed, for example, to establish rules that required legal studies before making decisions on investments by SOEs. With such a mechanism, chief executive officers of SOEs would not face any legal problems if an investment ended in failure and caused state losses, he added.
"Every investment decision that comes from a board of directors needs to be supported by a legal study. It is also necessary to regulate the decision-making process with boards of directors or boards of commissioners," he said in a seminar on risks in the oil and gas industry.
Meanwhile, Energy and Mineral Resources Minister Ignasius Jonan stressed the importance for the ministry and the BPK to have a mutual understanding on oil and gas, particularly when it comes to investment risks. He therefore called on the BPK to hire experts in the industry.
"The BPK needs to hire experts in geology and oil and gas so that both the ministry and the BPK have a mutual understanding on the risks and uncertainty in oil and gas exploration and exploitation," Jonan said at the same event.
Speaking about exploration risks, Jonan stressed that there could not be precise predictions about what could be found inside the earth.
"Before the Banyu Urip oil field in the Cepu Block became the second-largest source of oil in the country, Pertamina and Humpuss had searched for oil reserves in the block for 40 years with no result," he said. "However, when Exxon came and explored the block, they found one of the biggest oil reserves in Indonesia." (bbn)