Rules for Foreign Workers in the Indonesian Oil and Gas Industry

The Minister of Energy and Mineral Resources ("MEMR") has issued a regulation that places new restrictions and requirements on foreign workers in Indonesia's oil and gas sector and encourages companies to prioritize the hiring and training of local workers.

MEMR Regulation No. 31 of 2013 regarding Provisions and Procedures for the Utilization of Foreign Workers and the Development of Indonesian Workers in Oil and Natural Gas Business Activities ("MEMR Reg. 31") was issued and took effect in late 2013.

MEMR Reg. 31 requires that contractors, downstream business entities and service companies prioritize the use of Indonesian workers. The regulation provides that foreign workers may be employed as members of the Board of Directors and/or Commissioners and in professional positions requiring mastery of technology and certain special skills to support investment or implement the transfer of technology. Additionally, foreign workers may be employed to fill certain positions that cannot yet be filled by Indonesian workers due to competency or availability factors.

Foreign workers cannot occupy positions related to human resources or legal services, health, safety and the environment, supply chain management, which includes procurement and logistics, or quality control, including inspections. They also are barred from positions in exploration and exploitation activities below the superintendent level or the equivalent structural position.

Contractors, downstream business entities and service companies are prohibited to employ one foreign worker for more than one position or employ a foreign worker who is employed by another company. An exception to this is foreign workers who are on the Board of Directors or Board of Commissioners of another company.

Employing a foreign worker in the oil and gas industry requires approval from the Directorate General of Oil and Gas of a foreign manpower utilization plan (Rencana Penggunaan Tenaga Kerja Asing or "RPTKA") and foreign manpower work permit (Izin Mempek erjak an Tenaga Kerja Asing or "IMTA"). If the Directorate General approves the RPTKA and IMTA, it will issue a recommendation to the Ministry of Manpower and Transmigration, which must issue the final approval. In evaluating the RPTKA and IMTA, the Directorate General may ask the contractor, downstream business entity or service company to clarify certain points.

MEMR Reg. 31 introduces age limits for foreign workers employed in the Indonesian oil and gas sector. Foreign workers in the sector must be at least 30 years old and no older than 55. This provision does not apply to foreign workers holding the position of President Director, General Manager or Commissioner of a PSC contractor, downstream business entity or service company, as well as foreign workers in international employee exchange programs.

The regulation provides that contractors, downstream business entities and service companies must appoint at least one partner Indonesian worker for each employed foreign worker. This provision does not apply to foreign workers who are members of the Board of Directors and/or Board of Commissioners. Contractors, downstream business entities and service companies must transfer technology and knowledge from foreign workers to Indonesian workers and develop their Indonesian workers according to a plan approved by the Directorate General of Oil and Gas during the granting of the RPTKA recommendation. They are required to submit an annual report to the Directorate General regarding the implementation of this transfer of technology and knowledge and the development program for Indonesian workers.

Failure to comply with these provisions shall result in administrative sanctions in the form of written warnings and/or the revocation of RPTKA and/or IMTA.

Using foreign workers for upstream oil and natural gas business activities without Directorate General of Oil and Gas approval of the RPTKA or IMTA will result in companies being unable to recover their operating costs for such foreign workers.

The provisions of MEMR Reg. 31 also apply to the Representative Offices of foreign companies engaged in oil and gas business activities in Indonesia.

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