supporting businesses in THE INDONESIA investment negative list

Based on Ministerial Regulation 27 of 2008, only Indonesian legal entities may conduct a Supporting Business. However, Ministerial Regulation 27 of 2008 shows inconsistencies through further stating that the “companies” referred to covers: (i) National Oil and Gas Supporting Services’ Companies, (ii) Domestic Oil and Gas Supporting Services’ Companies and (iii) Transnational/Multinational Oil and Gas Supporting Services’ Companies, without further defining the definitions of the companies. Readers of Ministerial Regulation 27 of 2008 are also confused about the differences between a National Oil and Gas Supporting Services Company and a Domestic Oil and Gas Supporting Services Company.

What about foreign ownership in companies conducting a Supporting Business? Based on the Investment Negative List, several sectors in Supporting Businesses have limited foreign ownership:

No.	Business Sector	Limit
1.	Offshore oil and gas drilling services outside eastern Indonesia	Maximum foreign ownership 95% (ninety five percent).
2.	Onshore oil and gas drilling services	Maximum foreign ownership 95% (ninety five percent).
3.	oil and gas operating and maintenance services	Maximum foreign ownership 95% (ninety five percent).
4.	Engineering Procurement Construction (EPC) services	Maximum foreign ownership 95% (ninety five percent).

Floating Production Storage & Offload or Floating Storage Offload

Regarding offshore oil and gas drilling services or oil and gas operating and maintenance services, we have become familiar with tankers or large crude carriers modified or converted to be used as Floating Production Storage & Offload (“FPSO”) or Floating Storage Offload (“FSO”).  The FPSO is a tanker which operates as a production, offloading, and temporary storage vessel. The FPSO is not a sailing vessel and usually docks in a certain radius near the seashore at places that are not harbors. The FPSO or FSO’s nature is unique because (i) it conducts a business activity categorized as offshore oil and gas drilling services, and therefore is regulated under oil and gas regulations, however (ii) it uses a ship as the media in conducting its business activities. This has resulted in 2 (two) different perspectives regarding the limitation of foreign ownership in companies in FPSO or FSO business sectors.

If considered as vessels, the FPSO or FSO shall be subject to the prevailing laws and regulations in the shipping industry. Foreign entities may conduct business activities in shipping in Indonesia through a foreign investment company. Based on the provisions in the Investment Negative List, companies engaging in general material or hazardous material transport can be owned by foreign entities to a maximum of 49% (forty nine percent).