Restrictions on Contractors in the Indonesian Oil and Gas Sector

Oil & Gas Regulation 2017

By Fitriana Mahiddin and Syahdan Z. Aziz

There are a number of rules for Production Sharing Contract (“PSC”) Contractors in Indonesia’s oil and gas sector, including those on the export of production, currency exchange and the transfer or disposal of development rights.

Subject to obtaining requisite export approvals, a Contractor is entitled to export its production entitlement, subject to its domestic market obligation (“DMO”), by which at least 25% of the Contractor’s entitlement must be allocated for the domestic market.

Currency Exchange Restrictions

The Indonesian Currency Law and Bank Indonesia (“BI”) Regulation No. 17/3/PBI/2015 regarding the Mandatory Use of Rupiah restrict most transactions within Indonesian territory from being carried out using foreign currency. Core upstream activities in Indonesia are exempted from this requirement for a certain period of time, such as expenditures in relation to firm commitment, over/under lifting and domestic oil and gas sales transactions by upstream players, which are exempted for 10 years.

Bank Indonesia also requires all oil and gas export proceeds be deposited in a foreign exchange bank in Indonesia before being remitted overseas. This is contained in BI Regulation No. 16/10/PBI/2014 as amended by BI Regulation No. 17/23/PBI/2015 regarding Receipt of Export Proceeds in Foreign Exchange and Withdrawal of Offshore Loan Foreign Exchange. Read more »

Salaries of Foreign Workers Seconded to Indonesia

Labor & Employment

By Wynne Prasetyo

Bank Indonesia has refined its position regarding the exemption of a cross-border supply of services from the currency requirement, particularly in the case of a foreigner who is employed by a foreign company and seconded to an Indonesian company (Article 8.(1).b.1 of Bank Indonesia Regulation No. 17/3/PBI/2015 and Article C.3.b.1 of Bank Indonesia Circular Letter No. 17/11/DKSP).

Previously, Bank Indonesia took the position that if the salary of such foreigner was paid by the Indonesian company, it had to be paid in Rupiah.

Presently, Bank Indonesia views that the salary of a seconded foreigner may be paid in foreign currency even if the payer of the salary is the Indonesian company, provided that the seconded foreigner receives an assignment letter (surat tugas) from the home employer for his or her secondment to the Indonesian company.

Update on Free Employment Law Webinar on the Implications of Brexit for Businesses in UK and EU

Employment Law Alliance

The Employment Law Alliance is offering a free 75-minute webinar on “The Implications of Brexit: What Does It Mean for Businesses in the UK and Across the EU?” This free webinar is now scheduled for Wednesday, June 14 (the date has been changed from May 24).

Webinar Description

It has been nearly a year since the UK voted to leave the EU, and in March 2017 the UK formally triggered a two-year exit negotiation under Article 50 of the EU Lisbon Treaty. The negotiations will no doubt be difficult and we do not yet know what (if any) “deal” will be done.¬†However, we can expect substantial changes to the UK’s relationship with the EU and the employment landscape; in particular, the UK has said there will be changes to the rights of EU citizens to live and work in the UK (and the rights of UK citizens to live and work across the EU), and the UK will have the freedom to determine its own laws (including employment laws) without answering to the European Court of Justice.¬† These changes will have a direct impact on businesses operating both in the UK and the wider EU.

Experienced legal counsel from the UK, France, Switzerland, Ireland and Belgium will provide practical insight on what Brexit may mean and how companies can prepare for the changes: Read more »

Michael Carl of SSEK Features at Asia Bancassurance Conference

Michael S. Carl

Michael S. Carl, an international legal adviser at SSEK Indonesian Legal Consultants, was a featured speaker at the 18th Asia Conference on Bancassurance and Alternative Distribution Channels, organized by Asia Insurance Review. The conference was held May 15-16 at Hotel Mulia Senayan in Jakarta.

Michael discussed foreign ownership of insurance companies in Indonesia, and looked at the development of the bancassurance market in Indonesia and the regulatory framework.

You can find his presentation here.

Michael Carl joined SSEK in 2004 and has more than 20 years of experience practicing law in Southeast Asia, principally in Indonesia. He is recognized by Chambers & Partners as a leading lawyer for Indonesian banking and finance, corporate/M&A, projects and energy, and real estate, and by IFLR1000 for banking, project finance, and restructuring and insolvency. Read more »

SSEK Wins Deal of Year for Alibaba Acquisition of Lazada

AMC DOTY_2013

SSEK Indonesian Legal Consultants has been recognized in Asian-MENA Counsel’s Deals of the Year 2016 for our involvement in Alibaba’s US$1 billion purchase of a controlling stake in Southeast Asian online retailer Lazada Group.

SSEK acted as Indonesian counsel to Alibaba as part of the acquisition. The SSEK team was led by founding partner Ira A. Eddymurthy and partner Fahrul S. Yusuf. Read more »

Indonesia Extends Cabotage Exemption

Shipping

By Dyah Soewito and Stephen Igor Warokka

The Indonesian Shipping Law and its implementing regulations contain Indonesia’s cabotage rules, requiring that domestic sea transportation be carried out by an Indonesian shipping company using an Indonesian-flagged vessel and an Indonesian crew. These provisions are broadly interpreted to cover most vessels, including different types of vessels operating in Indonesian waters that are not engaged in domestic sea transportation.

On August 31, 2016, Indonesia’s Minister of Transportation (“MOT”) issued a regulation on the procedures and requirements to obtain a permit to use a foreign-flagged vessel in Indonesian waters for activities other than the transportation of passengers and/or goods, MOT Regulation Number PM 100 Year 2016 (“PM 100″).

The regulation revoked MOT Regulation Number PM 10 Year 2014, which was amended three times, by MOT Regulation Number PM 79 Year 2014; MOT Regulation Number PM 10 Year 2015; and MOT Regulation PM 200 Year 2015.

Cabotage Exemptions

Under PM 100, specific types of foreign-flagged vessels operated in Indonesian waters for specific types of activities may be exempted from cabotage rules. Such foreign-flagged vessels may be operated in Indonesia by a holder of a Shipping Company Business License (Surat Izin Usaha Perusahaan Angkutan Laut or “SIUPAL”) after meeting the requirements provided in PM 100. The cabotage exemption is granted in the form of a permit to use foreign vessels (Izin Penggunaan Kapal Asing or “IPKA”), which can only be issued to SIUPAL holders. Read more »

SSEK Nominated for 6 Awards at 2017 ALB SE Asia Law Awards

ALB SE Asia Law Awards 2017

SSEK Indonesian Legal Consultants is a finalist in six categories at the Asian Legal Business SE Asia Law Awards, which recognize the leading law firms and lawyers in the region.

SSEK is nominated for:

  • Energy and Resources Law Firm of the Year
  • Technology, Media and Telecommunications Law Firm of the Year
  • M&A Deal of the Year (Alibaba’s Acquisition of Lazada)
  • Project Finance Deal of the Year (Well Harvest Alumina Refinery Project)
  • Woman Lawyer of the Year (Ira A. Eddymurthy)
  • Young Lawyer of the Year (Fahrul S. Yusuf)

The winners will be announced on May 18 in Singapore. Read more »

SSEK Features at AmCham Indonesia Discussion on Work Permits

SSEK

The American Chamber of Commerce in Indonesia (AmCham Indonesia) hosted a discussion on Tuesday, May 9, on work permits.

Coping with Work Permits: Finding the Way Forward was moderated by Darrell R. Johnson, the senior foreign legal adviser at SSEK Indonesian Legal Consultants, and featured SSEK senior associate Stephen Igor Warokka.

The session took participants through the process of obtaining and renewing work and residence permits, whether you require the permit yourself or you are hiring expats.

PwC and EY joined SSEK on the panel.

Michael Carl of SSEK to Speak at Asia Bancassurance Conference

Michael Carl

Michael S. Carl, an international legal adviser at SSEK Indonesian Legal Consultants, will be a featured speaker at the 18th Asia Conference on Bancassurance and Alternative Distribution Channels, organized by Asia Insurance Review. The conference will be held May 15-16 at Hotel Mulia Senayan in Jakarta.

Michael will discuss Legal Issues and M&A Deals in Bancassurance. He will touch on issues including the development of the bancassurance market in Indonesia and the regulatory framework, and bancassurance agreements. His presentation is scheduled for the first afternoon of the conference, on Monday, May 15.

You can read more about the 18th Asia Conference on Bancassurance and Alternative Distribution Channels and register here. Read more »

Indonesian Oil and Gas Sector: Role of the State

Oil & Gas Regulation 2017

By Fitriana Mahiddin and Syahdan Z. Aziz

Extracted oil and gas in Indonesia remains owned by the State until it passes the point of export or other delivery point. Thereafter, the Government is entitled to a certain percentage of the production output as apportioned under the Production Sharing Contract (“PSC”), as is the Contractor.

Under the Oil and Gas Law (Law No. 22 of 2001 regarding Oil and Gas), entities in the form of a state-owned enterprise (“SOE”), regional-owned enterprise (“BUMD”), a cooperative, small business or private business entity may enter into a PSC with the Special Task Force for Upstream Oil and Natural Gas Business Activities (“SKK Migas”) to undertake upstream oil and gas business activities. Pertamina, as an SOE and the state oil company, can hold participating interests in numerous PSCs as a Contractor of SKK Migas. There is no maximum limit on the participating interest that an SOE, BUMD or Pertamina may hold.

Upon the first Plan of Development (“POD”) approval, a Contractor is required to offer 10% Participating Interest (“PI”) in its PSC to a BUMD. The BUMD may accept or decline based on its financial capability, and in the latter event the offer must be tendered to an SOE. As of the preparation of this article, Indonesia’s Ministry of Energy and Mineral Resources (“MEMR”) is anticipated to issue a regulation on the requirements and procedures relevant to this 10% PI offer. Read more »