Head of SKK Migas issued a circular letter about this requirement last week.

The Special Taskforce for Upstream Oil and Gas Business Activities (SKK Migas) has instructed oil and gas contractors to use local shipyards or be banned from bidding in project tenders.

SKK Migas Deputy for Business Support Control Rudianto Rimbono said that the Head of SKK Migas issued a circular letter about this requirement last week. In the future, contractors will be obliged to construct floating production storage and offloading (FPSO) facilities in Indonesia. (Read: Oil and Gas Contractors Must Use Locally Produced FPSO).

SKK Migas Head of Public Relation Taslim Z. Yunus said that the requirement aimed to maximise the use of domestic shipyards. “The SKK Migas will not approve tender bids if the bidder uses shipyards and fabrication yards overseas,” Taslim told Katadata, Tuesday (23/8).

Of several shipyards are now operating in Indonesia, Taslim said that contractors could use the facilities in Batam and Karimun, Riau Islands.

Fabrication yards are available in several locations, such as Batam and Cilegon. A fabrication yard is a facility where items ranging from semi-finished materials, production tools, and construction tools are made. In the oil and gas industry there are offshore and onshore fabrication yards.

SKK Migas and oil and gas contractors currently manage and operate some 620 ships for long-term projects, 80 ships for medium-term projects, and 24 facility ships. The cost of operating these vessels is up to US$820 million or around IDR 11.1 trillion.

(Read: Oil and Gas Contractors Urge Government to Control Local FPSO Prices).

Meanwhile, Joint Venture and PGPA Manager at Ephindo Energy Private Ltd., Moshe Rizal Husin, said that he knew nothing about the circular. “I haven’t received it,” Moshe told Katadata, Wednesday (24/8). 

Previously, President Director of PT Energi Pasir Hitam Indonesia (Ephindo) Sammy Hamzah said he would continue to support the government policy requiring oil and gas contractors to use domestic FPSO. However, he added that several issues need to be addressed. If the government requires contractors to construct FPSO in Indonesia, the facilities must be able to comply with industry standards. (Read: Obligation to Use Local FPSO Raises Monopoly Concerns).

“Don’t forget, under the production sharing contracts (PSC), the FPSO belong to the government. If quality is substandard, ultimately the state will lose out,” Sammy Hamzah said some time ago.