November 19, 2012 / 9:31 AM / in 5 years

UPDATE 1-Indonesia's new energy regulator must prioritize national interests -Energy Min

* New body must be more pro-Indonesian society, not pro-foreigner

* Government must respect the wishes of foreign investors

JAKARTA, Nov 19 (Reuters) - Indonesia’s new oil and gas regulatory body that will replace scrapped energy regulator BPMigas must prioritise national over foreign interests, Energy and Mineral Resources Minister Jero Wacik said on Monday.

The government of Southeast Asia’s largest economy last week put on hold all dealings with energy firms while it sets up a replacement for BPMigas, which was dismantled in the wake of a constitutional court decision.

Indonesia’s energy sector has struggled to attract investment in recent years, leading to regular criticism of BPMigas from both the industry and politicians.

“It (the new body) must be more pro-Indonesian society, more efficient .... It must not be pro-foreigner. Foreign companies are allowed to operate here because we need investment but the policy must not be pro-foreigner,” Wacik said in a speech to regulators.

National companies must get more opportunities, he said.

“This means foreigners must not get too much while we get too little,” he said, but added the government must also respect the wishes of foreign investors or else they would leave the country.

The court ruling that shut BPMigas follows a series of policy decisions in the mining sector this year that have shaken investor confidence in Indonesia, though foreign direct investment remains robust.

Moody’s ratings agency said the ruling was credit negative for Indonesia and jeopardizes the country’s attempts to increase domestic crude production.

The decision “will likely deter new investment and negatively affect expiring concessions”, it said in a credit outlook on Monday.

Wacik said the new unit for the Implementation of Upstream Oil and Gas Activity, set up under the Energy ministry, will attempt to reduce the amount of fees charged for new contracts.

President Susilo Bambang Yudhoyono said last week all existing contracts with BPMigas would be honoured in the wake of the court ruling. BPMigas managed contracts with oil majors such as BP Plc, Chevron, Exxon Mobil and CNOCC .

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