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Concern Lingers Over New Indonesia Energy Regulator, Lawyer Says

Investors will look for government guarantees that rulings from a temporary office replacing Indonesia’s dissolved energy regulator won’t be overturned, according to a local law firm.

With presidential elections due in 2014, a permanent regime and new oil and gas legislation are unlikely to be adopted in coming months following the disbandment of BPMigas, Shamim Razavi, foreign legal counsel at Susandarini & Partners in association with Norton Rose Australia, said in a report.

“We can’t expect certainty on the fundamental constitutional issues any time soon,” Jakarta-based Razavi said in the report. “A few measures should be taken in the coming weeks to alleviate investors’ concerns and remove ambiguities where legal realities have not kept pace with political will.”

One such action would be the adoption or ratification of BPMigas policies, rules and procedures through appropriate regulation, he said.

Indonesia’s Constitutional Court dissolved BPMigas last week after ruling the agency’s role violated the nation’s constitution. A temporary working unit named SKSPMigas was created within the nation’s energy and mineral resources ministry to handle the agency’s role. All contracts already issued by the agency remained valid.

The dissolution of BPMigas has raised concerns about future investments in Indonesia as the country struggles to stem a decline in oil and gas output. The nation, with its aging fields pumping less amid a lack of foreign investment, withdrew from the Organization of Petroleum Exporting Countries in 2008.

“The Government has taken care to signal that it is business as usual, and the foundations are in place to make that so, but more needs to be seen and done before investors will respond in kind,” Razavi said.

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