Oil Regulator in Indonesia Arrested in Bribery Investigation
By JOE COCHRANE
Published: August 14, 2013
JAKARTA, Indonesia — Indonesia's anticorruption agency has arrested the head of the country's oil and gas regulatory authority in connection with a bribery investigation, officials said Wednesday, in the latest setback for the country's troubled energy sector.
Rudi Rubiandini, a former deputy energy minister who took over the oil and gas regulatory authority in January, was being detained for questioning by the anticorruption agency, known as the KPK, after being arrested Tuesday night following a raid on his home, said Elan Biantoro, a spokesman for the regulatory authority.
"They are still questioning him and we don't know the progress," the spokesman said. "The KPK came to our offices this morning and sealed off Mr. Rudi's private office."
On Tuesday evening, investigators went to Mr. Rudi's house in South Jakarta and found him with $700,000 in cash, Johan Budi, a spokesman for the anticorruption commission, told reporters. Two men later identified as representatives of Kernel Oil, an oil trading company, were at Mr. Rudi's home at the time of the raid and were also arrested, he said.
Mr. Elan said the oil and gas regulatory body had no official relationship with Kernel, as it is a foreign trading company and not involved in oil exploration or production in Indonesia. A person who answered the phone at Kernel's office in Singapore refused to comment or forward any calls.
The arrest is the latest in a series of problems that have increased uncertainties for foreign investors in Indonesia, which is hoping to bolster oil production, which has plummeted during the past decade.
Last November, Indonesia's constitutional court shocked the energy industry by dissolving the oil and gas regulatory authority's predecessor, known as BP Migas, which was an independent state body, after a legal challenge by people connected with Islamic-based political parties. The ruling came as Indonesian lawmakers were calling on the government not to renew expiring oil production-sharing contracts with foreign energy companies. The current regulatory body, known officially as the Special Task Force for Upstream Oil and Gas Business Activities, or SKK Migas, was created to replace BP Migas.
Last month, an anticorruption court sentenced three Indonesian employees of Chevron, a leading oil producer in Indonesia, to two-year prison terms for graft in a case that analysts said could lead to the future criminalization of civil disputes in the energy sector.
"All of these issues are creating a lot of noise and dissonance for investors," said Andrew White, executive director of the American Chamber of Commerce in Indonesia. "Whatever the facts may be, a narrative is unfolding in Indonesia that it's becoming more difficult to invest here."
Indonesia relies increasingly on the technical expertise and investment dollars of multinational energy companies for future exploration because most of its untapped oil reserves are in deepwater areas in the eastern part of the archipelago.
However, there has been growing uncertainty among foreign investors over bureaucratic red tape for permits, overlapping regulations and an increase in anti-foreign sentiment in the energy sector. Those concerns have been followed, more recently, by legal uncertainty about production-sharing contracts because of the Chevron case.
Oil and gas account for about 8 percent of Indonesia's gross domestic product and 28 percent of state budget revenue, according to the Indonesia Petroleum Association.
But oil production has steadily dropped over the last decade to less than 900,000 a day at present from 1.4 million barrels in 2000, according to the Ministry of Energy and Mineral Resources, which prompted Indonesia to give up its membership in the Organization of the Petroleum Exporting Countries in 2008 after it became a net oil importer.
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