Entry into Indonesian market 2010
Start date of contract with Technip at Bangka subsea exploration siteNovember 2015
Imports to Indonesia made easierOctober 14, 2015
Chadi Nehme, managing director of PT Energy Logistics, talks to TOGY about the impact of Indonesia’s cabotage law on offshore projects as well as local vessels’ capacity for serving this market and how authorities can improve customs processes. PT Energy Logistics is an integrated logistics company that serves oil and gas companies operating in the Indonesian market, providing customs brokerage and ship agency services.
What challenges has Indonesia’s oil and gas industry faced with the 2008 Shipping Law’s cabotage principle?
Although the cabotage principle was included in the 2008 Shipping Law, it began to have concrete effects in 2010 when Indonesia’s maritime sector was overwhelmed by foreign vessels operating without any restriction or control.
In 2011, the law was gradually implemented, initially targeting general cargo transportation and evolving to encompass the oil and gas industry. Implementing cabotage for the industry has proven to be challenging as local vessels do not have sufficient technological capabilities to handle deep-sea assets, such as drilling rigs.
Under cabotage requirements, multinational hydrocarbons companies that would normally use their own offshore fleets, or those of an international contractor, are required to use Indonesian-flagged vessels. These companies must be at least 51-percent Indonesian owned.
Given the challenges of implementing such a measure, the government has allowed some flexibility on cabotage requirements for the oil and gas industry. For example, the implementation of the cabotage principle has been delayed to December 2015 for drilling rigs.
Additionally, foreign-flagged vessels are still allowed to operate under a foreign vessel usage permit, known as an IPKA operating permit. These permits are granted under specific conditions such as a lack of availability of required vessels among Indonesian fleets, a recommendation from the Indonesian National Shipowners Association and the utility of the vessel for a project serving the nation’s interest. These permits are currently being granted for longer periods, from six months to one year.
How has Indonesia’s Customs clearance system improved?
The Customs clearance process has been drastically improved with the introduction of an online system to declare imports. Just five years ago, almost everything was done manually with a lot of paperwork resulting in lengthy processes for clearing and releasing the goods out of the Customs zones.
The Indonesian Customs Department now has a user-friendly website that allows operators to go online, describe the goods and declare a harmonised code for those goods. The website also lists the restrictions or the permits needed to clear the goods.
The taxes are dependent on the harmonised tariff schedule, but generally value-added tax is 10 percent, and the withholding tax is 2.5 percent, provided the importer has an import license. This allows us to prepare documents ahead of time, which enables our clients to check for any corrections to be made before inserting the data in the website.
What is the attitude concerning the development of Indonesia’s logistics and maritime infrastructure?
Developing maritime infrastructure is President Joko Widodo’s top priority, which is welcomed by the industry. A great deal must be done in remote areas, such as eastern Indonesia, where basic infrastructure such as roads is lacking. The port of Surabaya is located in eastern Java but is occasionally used to serve regions as far away as Papua as eastern Indonesia still lacks the jetties and discharging facilities that vessels require.
A positive step in that direction is the maritime toll road, which intends to create a transportation system that will link thousands of Indonesian islands to the western regions of the country. This will result in cutting freight costs by up to 50 percent.