JAKARTA. As the number of domestic vessels is insufficient to meet demands for offshore activities, the government is set to extend contracts with foreign vessels.

The foreign players meet offshore construction, dredging and salvage demands in Indonesian waters.

Transportation Ministry sea transportation director general Bobby Mamahit said that the ministry was currently discussing the matter with the related ministries and stakeholders regarding how many years extension would be given.

 “We realize that we do not have enough domestic players to work in this specific area so we plan to extend contracts with foreign players,” Bobby said in Jakarta on Monday.

 “We have to do this because we need to support offshore activities in the country and make sure their businesses run smoothly.”

According to the cabotage principles, which was introduced in 2005, all vessels operating within Indonesian waters should be domestically owned, however, the contract ends in December 2013.

With the contract extension, a number offshore support and salvage type vessels such as derrick, Subsea Umbilical Riser Flexible (SURF), laying barge, heavy floating crane, heavy crane barge and heavy salvage, which belong to foreign shipping companies would continue to operate across the archipelago.

Bobby said that the new contract was expected to be signed between the government and foreign players before the Christmas holiday.

Separately, Indonesian National Shipowners Association (INSA) chairwoman Carmelita Hartoto said that its members were ready to further explore the sector next year.

 “Some of our members are set to establish joint venture companies with foreign shipping firms to better develop this sector next year. We believe that if the government, and every related department, fully supported us, we would not need foreign players,” Carmelita said.

According INSA data, the investment of local firms in offshore supporting vessels grew from zero in 2005 to US$1.25 billion by the end of June 2013, which is equal to 132 ships.

In addition, the number of management and owning companies that deal with offshore marine operations rose from zero in 2005 to 130 today.

INSA’s offshore division head Nova Mugijanto said that this sector still faced challenges such as short-term contracts, which discouraged aggressive investment in the sector.

He said players usually secured contracts between one to two years and it slowed down the return on investment.

“We need facilitation and support from the government and every related department to help us get long-term contracts. It is crucial since this sector requires huge investment,” he said, adding that one ship could cost Rp 1 trillion. (Nurfika Osman/The Jakarta Post)

Editor: Asnil Amri