JAKARTA – The upstream oil and gas industry in Indonesia is not only faced with the problem of a natural decline in production but is also faced with the practice of illegal oil drilling, either outside or within the area of operation of the Cooperation Contract Contractors (KKKS).
Based on the records of the Coordinating Ministry of Political, Legal and Security Affairs (Komenko Polhukam), the number of illegal oil drilling activities reached 137 activities in 2018.
The number of cases increased to 195 activities in 2019. Meanwhile, in 2020, the number rose by 119 cases to 314 illegal drilling activities. The main points of illegal drilling are spread across eight provinces, namely Aceh, North Sumatra, Riau, East Kalimantan, Jambi, South Sumatra, Central Java, and East Java.
Based on data from the Special Task Force for Upstream Oil and Gas Business Activities (SKK Migas), there are currently around 4,500 illegal wells in Indonesia. The government also noted that the potential for production loss due to being produced illegally so that it is not recorded in the state can reach 10 thousand barrels per day (BPH).
Last month, it is still fresh to remember how the illegal oil well fire occurred in Bungku Village, Bajubang District, Batanghari Regency. The oil well contains gas so the fire is difficult to extinguish for two weeks. As a result of this incident, the forest in Bungku Village covering an area of 2.5 hectares (ha) was completely engulfed in flames.
Then a fire also occurred due to illegal drilling that occurred in Kaban 1 Village, Sanga Desa Subdistrict, Muba Regency, South Sumatra in the second week of October. The South Sumatra Police at that time sent a team to extinguish the fire at three fire points. The location of the fire was far from the control site for 1,000 illegal oil wells in Bayung Lencir District, Muba Regency.
Illegal oil and gas drilling activities must be prohibited because apart from violating the law, there are other bigger consequences, namely polluting the environment, disrupting KKKS operations and not supporting the investment climate, causing casualties, only benefiting certain parties.
Julius Wiratno, Deputy for Operations of SKK Migas, said that the government is currently reviewing regulatory changes which are expected to be a way to suppress and not rule out the possibility of eradicating illegal oil well drilling. Discussions on the revision of the Minister of Energy and Mineral Resources Regulation No. 1 of 2008 regarding the exploitation of old wells have been carried out by involving various stakeholders, especially with the local government.
“Now in the handling involving many parties from the Provincial Government, the Regency Government, we are trying to revise the Ministerial Regulation, and also propose a study on how to handle illegal drilling,” said Julius in a virtual press conference recently.
Julius said that there would be two provinces that would be the trial areas for the implementation of the new regulation, namely Jambi and South Sumatra.
He explained that one of the crucial points that will be regulated in the revised regulation is related to the selling price of oil from the miners to Pertamina.
“These are the things that we need to cover in the revision of the Ministerial Regulation, the problem is that the price from Pertamina is too cheap apart from being more expensive, which we are trying and better yet, it has been in a FGD with the governor and regent so that it can be handled immediately,” explained Julius.
The rules do need to be strengthened. With a strong legal umbrella, law enforcement officers can move more freely.
“We have closed hundreds of wells as well, but just like that, it appears again when oil prices go up, it flares up again. With the legal umbrella, we will empower Village Unit Cooperatives (KUD) and Regional-owned enterprises (BUMD) to be actively involved,” said Julius.
Komaidi Notonegoro, Executive Director of the Reforminer Institute, stated that the existence of illegal well drilling activities certainly has an impact on the upstream oil and gas investment climate which is currently being developed by the government.
“It will certainly have an impact on the investment climate. This is part of the risk that makes investors think again about investing,” said Komaidi to Dunia Energi (28/10).
He admitted that cases of illegal oil well drilling were repeated because the regulations were not yet strong enough. He suggested that the regulation should also clearly state the role and involvement of the government and regional apparatus.
Komaidi assessed that the involvement of local governments in eradicating illegal oil drilling was very reasonable because so far, the regions have also enjoyed positive benefits from official oil and gas industry activities.
“I think there needs to be a regulation that gives responsibility and involves local officials. However, the regions have also benefited positively from the Oil and Gas Profit Sharing Funds (DBH Migas) and the Oil and Gas Industry CSR program. So, it is appropriate to contribute,” explained Komaidi.
Meanwhile, Ahmad Redi, Mining Law Expert, stated that the legal problems of illegal tapping and illegal drilling are more related to the aspect of supervision and law enforcement. So, it’s just the government’s consistency in carrying out the necessary regulations.
This prevention effort should actually be prioritized. According to Redi, preventive efforts in the form of monitoring all illegal drilling and illegal tapping are still not optimal.
“Supervision carried out by both companies and law enforcement is an important pillar so that these illegal acts can be prevented,” said Redi.
Cross-Sector Synergy
Eradication of illegal oil well drilling cannot be done by one agency alone. Synergy between ministries and institutions is needed that already have a common vision in eradicating actions that are detrimental to the state, society and the environment.
Andhi Nirwanto, Expert Advisor to the Head of SKK Migas emphasized that his party immediately sought a solution to handling illegal drilling which has the potential to accelerate the depletion of oil and gas natural resources (SDA).
Andhi proposed the formation of a task force team to handle illegal drilling in areas that will be designated as pilot project locations.
Later, task force teams will be formed in other oil and gas working areas. “From law enforcement, there are already rules. If socialization has been carried out but is still being done, there must be law enforcement,” explained Andhi.
A Rinto Pudyantoro, Head of the Program and Communications Division of SKK Migas, stated that there are a number of recommendations from SKK Migas that can be used as input in dealing with illegal well drilling, including the formation of a Joint Team of Related Agencies coordinated by the Coordinating Ministry for Political, Legal and Security Affairs to stop illegal well activities and regulate Ex-Illegal Well Concession Management.
“As well as implementing a moratorium on data collection on the number and potential of illegal well production, especially those outside the Cooperation Contract Contractor Working Area (KKKS WK),” said Rinto.
Not only from the upstream side, the downstream side of this illegal oil business also needs to be given serious attention. Illegal Downstream Business such as transporting, storing and refining of illegal oil should be prohibited.
Locations that already have illegal wells are managed by the Regional Government through Regional-Owned Enterprises (BUMD) as the coordinator in collaboration with the local community.
“For the location of illegal wells outside the Working Area (WK), the request for approval is submitted by Regional-Owned Enterprises through the Regional Government to the Ministry of Energy and Mineral Resources and for the location of illegal wells inside the Working Area, the request for approval is submitted by Regional-Owned Enterprises through the Cooperation Contract Contractor (KKKS)-SKK Migas to the Ministry of Energy and Mineral Resources,” explained Rinto.
Furthermore, what is no less important is that public education must be encouraged about the dangers of being involved in illegal oil well drilling. “Especially those related to environmental damage and aspects of work safety,” said Rinto.
