Further restriction on employment of expatriates in the oil and gas industry

According to Partner and Vik Tang, International Counsel at HBT, Nadia Harto, Associate, Jakarta, last year, the Indonesian Ministry of Energy and Mineral Resources (ESDM) issued ESDM Decree No. 31/2013 on Expatriate Utilization and Development of National Employees in Oil and Gas Business (Decree 31), which introduces more stringent requirements and restrictions on the employment of expatriates for certain roles in the oil and gas sector.

Decree 31 requires an responsibility on upstream and downstream companies in the Indonesian oil and gas sector, and related supporting industries, to make a priority on the employment of Indonesian workers, and particularly forbids employment of expatriates for the following roles:

·         human resources;

·         legal;

·         health, safety and environment;

·         supply chain management, including procurement and logistics;

·         quality control, as well as inspection; and

·         exploration and exploitation functions below superintendent level or equivalent positions.

Decree 31 allows the utilization of expatriates for oil and gas activities in restricted circumstances, slike employment of expatriates:

·         as director or commissioner for the purpose of encouraging investment in the oil and gas sector;

·         for professional positions requiring specific skills and technological expertise in this sector in order to transfer knowledge relating to new technology; and

·         for certain positions that cannot be filled by domestic workers.

The application of expatriates for ‘non-prohibited functions’ in the oil and gas industry ought to be permitted by the Directorate General of Oil and Gas. Decree 31 endows with for a reasonably meticulous set of requirements that should be met by the expatriates in question. -For example, they should have at least of 5 years related working experience, be 30 – 55 years of age, be able to communicate in the Indonesian language and enthusiastic to transfer knowledge and skills to Indonesian workers. The Indonesian language requirement for expatriates has attributed in some of regulations, even if to date it has not been imposed firmly.

Although Decree 31 is intended for encouraging the use of Indonesian workers in the oil and gas sector, there had been no complaints, but there is a warning, it risks further limit the availability of skilled senior international personnel that the Indonesian oil and gas industry presently requires.

Businesses operating in the Indonesian oil and gas sector should be aware of the restrictions concerning hiring expatriates, as a result of nonconformity with the said restrictions range from nuisance of administrative sanctions, probable revocation of the pertinent expatriate’s work permit and non-recovery of operating costs from the government. The degree to which the new requirements are enforced in practice must be monitored by companies operating in the Indonesian oil and gas sector.