New Export Regulations for Upstream Petroleum Product
Government recently has issued 2 important regulations that further govern and tighten of oil and gas export and import. Ministry of Trade (MoT) Regulation No.03/M-DAG/PER/1/2015 provides tighter control of oil, natural gas and other fuel export and import. The regulation will be fully enforced since April 7, 2015. The other is MoT Regulation No. 04/M-DAG/PER/1/2015, will be effective since April 1, 2015, require L/C payment for some key commodities export including crude oil and natural gas.
MoT Reg. No 03/M-DAG/PER/1/2015
The new regulation is intended to replace previous regulation No. 42/M-DAG/PER/9/2009. There are at least 3 main changes from the previous regulation or from the current practice as follows:
- Obligation to register in Ministry of Trade or obtaining acknowledgement as a Registered Exporter (ET-Eksportir Terdaftar). This is extra step must be taken by exporter. Current practice only requires export permit/approval and recommendation for export.
- Export Permits or Approval both for exporting Contractor’s share or exporting Government share if the Contractor is appointed to sell the Government share.
- Export verification or inspection by independent surveyor before export can be proceed
MoT Reg. No 04/M-DAG/PER/1/2015
MoT Regulation No.04/2015 introduced a new payment method for export, in which Government requires exporter to use Letter of Credit (L/C) effective since April 1, 2015. This rule effects coal, oil and gas, palm and palm-kernel oil, and minerals including tin.
REGISTERED EXPORTER (ET) ACKNOWLEDGEMENT
Indonesian business entity and Permanent Establishment who engage in upstream petroleum business (“PSC Contractors”) are allowed to export crude oil and natural gas. First step shall be taken is to register in Ministry of Trade to obtain acknowledgement as a Registered Exporter. A written application must be submitted to MoT or Directorate General of Foreign Trade completed by copy of business license, copy of Tax ID, and Copy of Certification of Business Registration (TDP). MoT will issue acknowledgement within 5 working days and will last 3 years since issuance date.
EXPORT APPROVAL (PE)
Export Approval from MoT is mandatory for PSC Contractors to be allowed to ship product. Approval is required both for shipping Contractor share and/or Government share. A written application must be submitted to MoT supported with Recommendation Letter from MoEMR (both for Contractor share and Government share export volume), ET Acknowledgement, copy of business license, Tax ID, Customs ID, TDP, and Report of previous export realization. PE will be in force following validity period of MoEMR Recommendation Letter.
Export can be proceeded after a verification or technical inspection has been conducted by an independent surveyor. Surveyor Inspection Report is necessary to complete export documentation. Cost of inspection/verification shall be borne by Government, or could be charged to the exporter in case no fund is available.
Exporters are obliged to file report on their export activities both for the realized value and unrealized value. Monthly regular report must be submitted by 15 following months at the latest. Penalty for not submitting could be administration, postponement of export, or revocation of ET.
L/C PAYMENT REQUIREMENT
L/C payment method is mandatory in exporting oil & gas. Transaction will not be permitted if the exporter does not use L/C payment. The use of L/C must be stated in the Export Document (PEB), reflected actual value of transaction, and shall be accepted by local bank.