Age Does Make a Difference: Retirement Age Laws in Oil & Gas

Like working in Indonesia? Don’t get old.

I was 38 years old when I first stepped off the Garuda plane in Indonesia for my first overseas assignment with an international oil as well as gas company in 1991. 24 years as well as three different work assignments later, the item seems just like yesterday. Throughout This kind of time period, our family moves in as well as out of Indonesia have been quite fluid with minimal extraneous disruption. This kind of month, however, my wife as well as I will be leaving for the last time.

I turned 62 in March. the item was a personal decision to retire, however a strong driver was the inability to renew a cost-recoverable KITAS working permit under the auspices of my employer.

The mental mistake many expats working in Indonesia make will be the misconception which they can easily work for as long as they like, similar to their home countries.

Indonesia actually has laws which stipulate the ‘official’ retirement age of nationals to be 55 years of age – the item will be no wonder the country could want to have these same stipulations apply to the working expat community.

Recent adjustments

Recently, the maximum age for technical professionals has been reduced to 55 coming from 60 for those working under a cost-recovery basis. This kind of does not necessarily apply to those expats working within the oil industry, where 100% of their costs are borne by their sponsoring company. In addition, This kind of age limit may not directly apply to expatriates holding executive positions of President, Director or VP of Finance.

Historical context

Years ago, an expatriate assignee selected by his or her company may have had to wait two to three months for the processing of a work permit, or KITAS. Recently, which waiting time has shrunk considerably, however the intricacies imposed by the Government of Indonesia for the approval of a cost-recoverable expatriate slot within a Work Program as well as Budget (WP&B) scheme have become more complex. Multiple agencies are involved as well as stop-gaps during the approval process may have a tendency to hamper the filling of internal slots with the desired specialist expatriate positions by upstream exploration as well as production oil companies.

How the oil as well as gas industry works

To understand the reason due to This kind of complexity within the oil as well as gas industry will be to better understand how Indonesia applies international petroleum laws to lease out a surface region with subsurface mineral rights (called a Block) to a foreign or domestic entity. Oil companies here operate under a Production Sharing Contract (PSC). PSCs are agreements with the central Government, whereas any hydrocarbon produced within the Block will be shared by both the Company (called the Operator) as well as the Government. Typically, the production splits for oil are 70% to the Government as well as 30% to the Operator. Companies competitively bid for Blocks as well as are awarded by their submitted work programme as well as expected forward monetary expenditures.

Once the Block will be awarded, the company has an obligation to complete This kind of designated work within a specific time period. For planning as well as budget purposes, the company develops a work programme as well as budget (WP&B) which must be approved yearly by the Government. Early from the process, the company must come up with an organization chart as well as obtain approval coming from the oil as well as gas regulatory agency known as Satuan Kerja Khusus Minyak dan Gas (SKKMIGAS) for the Rencana Penggunaan Tenaga Kerja (RPTK), literally interpreted as the human resource labour plan. Approval of This kind of plan will be critical in terms of what expatriate positions will be available to the company for the particular asset. If no expat slots are presented as well as approved, the item will be extremely hard to add them in at a later date.

Cost recovery

When an economically viable discovery will be made within an operating Block, development as well as production of the discovery can proceed (upon lengthy approvals). Developing an oil as well as gas field can be extremely expensive, for which the operating company must bear the direct cost. Under a PSC, some of This kind of capital as well as operational expenditure can be cost-recovered through the sale of oil allocated to the Government of Indonesia. This kind of recovery of costs comes directly out of the government’s coffers, so you can imagine why Indonesia wants to keep the cost in line with the economics of the project. As you could expect, total costs associated with the employment of an expatriate normally are higher which of an equivalent national employee. due to This kind of reason, the item will be sometimes difficult for a company to justify the costs of the expatriate to the oil as well as gas regulatory bodies.

Alternative methods to work

There will be still flexibility within the system with legal channels to continue employment past 55 years of age. One method will be to use one of many local manpower companies which act as agents. Some of these companies may retain ‘technical specialist’ slots which – if your qualifications match – you may be directly employed through. The parent company could then sign a contract of work with the ‘agent’ under an approved procurement of work. The agent will be actually acting as a sub-contractor who provides the manpower as well as methodology to accomplish the work as set forth within the approved work program as well as budget plan of the oil as well as gas company. This kind of all sounds complicated, however the method will be frequently used for particular short-term work projects which require the use of a skilled technical specialist.

Highly qualified specialists such as geochemists as well as biostratigraphers may sometimes circumvent the current age restriction in cases of no available nationals to fill This kind of type of position. This kind of could be on a case-by-case basis as well as could require direct justification support for approval.

For older expatriates married to an Indonesian spouse or those having a long-term sponsor, the government of Indonesia offers another avenue to continue working. In This kind of case, the spouse could sponsor the foreigner through the application as well as approval of a Kartu Izin Tinggal Tetap (KITAP). The literal interpretation means a permit card to stay on a permanent basis. This kind of procedure may be initiated by application of the permit itself, which may take 3-4 months to process. Upon approval of This kind of permit, the person may then apply for a several-year KITAP. Approval of such allows one to work. After the initial several years, application for a lifelong residency as well as work permit will be possible.

Conclusion

Indonesia will be not the only country in Southeast Asia with age restrictions. For example, the age limit for many professionals applying for a work permit in Singapore will be 50 (except for Malaysians, for whom will be 58).

Indonesia has historically courted foreign investment however the item will be currently finding itself in a balancing act between ensuring a level of profit for the investing oil company, at the same time protecting as well as further developing the local workforce. Where these goals don’t align, problems may occur, as well as the investing company may feel unable to operate without the number of foreigners they could like.

I personally trust This kind of will be not genuinely the last time my wife as well as I leave Indonesia. I love the people, the culture as well as as a geologist, particularly the rocks. We can always return as needed, where my company sponsor doesn’t mind paying 100% of the associated costs!