The provision and supply of bio-fuel as an alternative fuel source has been steadily gaining momentum throughout 2006 with the issue of Presidential Regulation No. 5 of 2006 on the National Energy Policy (Perpres NEP) and Presidential Instruction No. 1 of 2006 on the Provision and Exploitation of Bio-Fuels as an Alternative Fuel Source (Inpres Bio-Fuel). This Minister of Energy and Mineral Resources (ESDM) Regulation, No. 51 of 2006, has been issued to facilitate the implementation of Point 2 of the Inpres Bio-Fuel.

The Government has realized that the ability of the State electricity provider, PT. Perusahaan Listrik Negara (PLN), to facilitate the expediting of coal-fired electricity development as mandated under Presidential Regulation No. 71 of 2006 (Perpres 71/2006) will require the government to provide covering guarantees to convince investors to make the necessary commitments and has therefore issued Presidential Regulation No. 86 of 2006 (Regulation).

A rapidly expanding population will continue to place extraordinary pressures on the Government and its agencies to provide sustainable economic and social development in the future. This has been recognized in the development of bus corridors and the monorail in Jakarta where the ultimate emphasis is decreasing the reliance of citizens on private transportation by providing a viable and workable public transportation alternative. Nevertheless, until such time as these alternatives become viable and practical, people will continue to use their own private vehicles. A quick scan of the horizon will provide a lay persons view of the amount of exhaust emission pollution that forms a perpetual haze of the greater Jakarta metropolitan area.

The Government through Minister of Energy and Mineral Resources Decision No. 2602 K/23/MEM/2006 has prepared 41 oil and gas blocks for sale to interested and able investors with profit percentage splits ranging from 85:15 through to 60:40 for the Government and the investor respectively.

For companies involved in the oil and gas sector the requirements to ensure sufficient oil and gas supplies for domestic consumption in compliance with joint work contracts is not a new phenomena. However, the procedures and mechanisms for the fee payments associated with Domestic Market Obligations (DMO) and over / under lifting fees have been amended to reflect the new role of PT Pertamina (Persero) in the market place. Over / under lifting is where a company exceeds or fails to lift the agreed amount of oil or gas stipulated in the Joint Work Contract (JWC).

The ongoing hot mud flow that has resulted from the drilling activities of Lapindo Brantas Inc (Lapindo) has brought into sharp focus the potential negative environmental impacts that drilling activities can have. Even though the Lapindo hot mud leak has so far been uncontrollable the Minister of Energy and Mineral Resources (MEMR) has issued a Regulation governing the management of drilling activities, waste products from drilling and drill cuttings in the oil and gas sector.

The Commission for the Supervision of Business Competition (KPPU) handed-down its decision in Case No. 22/KPPU-L/2005 on the tender process for the procurement of gas pipes for South Sumatera - West Java (SSWJ) project stage II. The report that initiated the investigation alleged breaches of Articles 19(d) and 22 of Law No. 5 of 1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition (Anti-Monopoly Law).

A report alleging a breach of Articles 6, 19(a) and (d), and 25(1)(a) of Law No. 5 of 1999 on the Prohibition Against Monopolistic Practices and Unfair Business Competition (Anti-Monopoly Law) was made to the Commission for the Supervision of Competition (KPPU) and were found to be unproved against the 3 reported parties: PT Pertamina (Pesero), PT Banten Inti Gasindo, and PT Isma Asia Indotama.

In fulfilling the electricity needs plan through 2009 the Minister for Energy and Mineral Resources has issued Regulation No. 44 of 2006 on the expediting of electricity energy sources from oil fuels to coal. To ensure that this diversification occurs as planned there needs to be a mechanism in place for the direct selection of coal providers and to ensure that there is a degree of price stability the Minister also set maximum standard prices for electricity provision.

Oil and gas exploitation remains an important revenue earner for Indonesia and to facilitate the granting of work area and work contracts the Government is determined to put in place mechanisms to determine policy in this sector based on technical, economic, risk level, and efficiency considerations as well as policy that is open, fair, accountable, and competitive.