The Use of Bonded Logistic Center to Increase Efficiency in Indonesia Upstream Oil and Gas Industry

Abstrak

The falling of oil price and the slowdown in global economic have forced oil and gas industry ("O&G") to cut their operating and production costs. One of the most highlighted cost was the supply chain management related cost. Within Production Sharing Contract, all expenses incurred by the O&G Company will be reimbursed by the Indonesian Government. Therefore, cost efficiency initiatives by either O&G Company or Government of Indonesia will subsequently increase the profit sharing to both parties. The Government of Indonesia has initiated the establishment of Bonded Logistics Centers (“BLC”) which serve as multi- function logistics warehouses for imported and local goods by exempting the import duty and value added tax ("VAT") of imports and thus enabling operational flexibility. The legal basis for construction of the BLC's is the Government Regulation No. 85 year 2015 regarding BLC. The BLC's are located across Indonesia and they comprise multiple products, from automotive, industrial raw materials, to mining materials. The presence of BLC can speed up logistic processes by cutting the trade chain. The product, initially to be exported, is diverted to the local market, shortening the customer's lead time for heavy equipment or spare parts needed. Customers also enjoy the benefit from exempted duties by getting equipment and spare parts at more affordable prices.

A number of benefits from BLC will enable PSC Contractors to reach efficiency in terms of time and budget. In terms of time, the existence of BLC will allow PSC Contractors to manage purchasing strategy and ensure delivery when accelerated good supplies is needed. From budget perspective, BLC will reduce PSC Contractors' spending on logistic mobilization and demobilization costs.

The lowered cost will increase the portion of profit sharing between the Indonesian Government and the PSC contractors, which eventually will improve the economic value of the project carried out by the PSC contractors.