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Indonesia anti-graft agency to take on ‘oil and gas mafia’

Indonesia’s independent anti-graft agency will target the energy industry to investigate what President Joko Widodo has called an “oil and gas mafia.”

Widodo was sworn in last month. He has pledged to reform Pertamina, the state-owned energy firm with a production monopoly.

“For the first time, the Corruption Eradication Commission(KPK) plans to work with tax officials, police and other authorities to investigate Pertamina . . . and all stakeholders in the energy sector, said an official with the anti-graft agency,” Reuters said.

A KPK audit of Indonesia’s mining industry earlier this year uncovered more than $2.3 billion in tax fraud, leading to the revocation of more than 4,000 mining permits.

Indonesia’s oil and gas sector is the largest contributor to state income, making up an estimated 12 percent of state revenue this year, Reuters said.

“In 2015, we plan to undertake a comprehensive study of the management of the entire oil and gas sector,” Johan Budi, deputy chairman of the KPK, told Reuters.

Budi said the investigation could led to more prosecutions.

Widodo’s administration has said the oil and gas mafia has corrupted decision-making by high-level officials whith oversight over the industry.

Former energy minister Jero Wacik quit three months ago after being implicated in a case involving extortion and kickbacks worth about $841,000, Reuters said.

Indonesia was formerly a member of OPEC. But falling production caused it to become an oil importer. It spent $27.7 billion importing oil in 2013.

Rudi Rubiandini, the former head of Indonesia’s oil and gas regulator, SKKMigas, was sentenced to seven years in prison in April for taking more than $1 million in bribes from a Singapore-based trading company.

Rubiandini was replaced at SKKMigas by a former deputy chairman of KPK, Amien Sunaryadi.

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Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.

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