INSA Rejects Shipping Law Revision

Wandrik Panca Adiguna | 28 Desember 2010 05:18 WIB

JAKARTA: The shipping industry sends a letter to the Minister of Transportation asking him not to revise Law 17/ 2008 on Shipping. Instead, the Minister is asked to revise only Minister of Transportation Decree No. KM.26/2006.

They believe the revision of the decree on the Simplification of Ship Procurement and Ship Flag Use/Change Procedures is one of legal loopholes that can be used to accommodate the inability of category C offshore boats to comply with the cabotage principle, which requires domestic commodities be carried by Indonesia-flagged boats. According to Law 17/2008, category C ships-namely jack up rig, MODU (mobile offshore drilling unit), drill ship, seismic 3D, and construction ship-have to comply with the cabotage principle by May 7, 2011. Johnson W. Sutjipto, the Chairperson of the Indonesian National Shipowners' Association (INSA), said the industry suggested the Minister revise the decree."The revision is not the only choice, however," he told Bisnis yesterday. Chairperson for Liquid Transportation at the INSA Widihardja Tanudjaja said the organization since the very onset had rejected the revision of the Shipping Law. According to him, the reason for the revision, namely to secure oil lifting, had not been empirically proven. "That's only an excuse made up to revise the Shipping Law without seeing that the number of national commercial ships over the past three years has surged 63%." In the meantime, a survey conducted by Saut Gurning, a maritime lecturer at the Surabaya Institute of Technology (ITS), showed unfavorable fiscal and taxation policies were the main reasons why oil and gas operators or contractors were reluctant to change their boat flags to Indonesian one. Eleven of 13 respondents of the survey objected to the service tax regulation. In addition, 10 of 13 oil and gas contractors or operators cited lack of domestic financing and the application of a corporate income tax of 1.2% as the reasons why they were reluctant to change their flags. Saut was worried the revision of the Shipping Law would be taken advantage of by parties that had been unsupportive to the programs to empower the shipping industry. "To respond to the foreign operators' reluctance, the government has to revise Government Regulation (PP) 38 year 2003, which limits boat ownership at five years." Clear regulation Head of the upstream oil and gas executive agency BP Migas R. Priyono previously calculated oil lifting volume could decline by 270,000 barrels of oil per day (bopd) if the cabotage principle applied to the oil and gas industry in January 2011. "They [the contractors] said they would pull out this December if there was no clear regulation on the cabotage principle. Oil lifting volume may decline by 270,000 bpd." According to him, the oil and gas contractors asked for a written guarantee from the government to serve as a legal umbrella to do drilling in Indonesia. Data by the BP Migas showed 54 boats (of the total 63 foreign-flagged drilling boats) will be prohibited from operating in Indonesia following the application of the cabotage principle. The current problem is the contractors have not yet had Indonesia-flagged category C upstream oil and gas industry boats. According to Priyono, no Indonesian business had been willing to procure the boats due to the limited number of short-term contracts. "On the other hand, demand for the boats by 2016 is estimated at 235 boats." Deputy General of BP Migas Achmad Samsu Rizal argued the application of the cabotage principle was not favorable for the owner of partnership contractors' drilling rigs. "The drilling rigs will only operate for 3-6 months and they will move to other sea looking for new sources of oil and gas." (k38/wiw)

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