By Fergus Jensen and Andjarsari Paramaditha
JAKARTA (Reuters) - Indonesia's anti-graft agency on Wednesday arrested the head of the energy regulator to investigate allegations he received about $400,000 from a private oil firm, piling more uncertainty on energy policy in Southeast Asia's biggest economy.
The arrest is a new blow to Indonesia's attempts to attract more investment from international energy companies, several of which have threatened to scale back operations due to uncertainty about the investment environment.
The former OPEC member's oil output is declining, and the country has faced criticism for unclear regulations and complaints about a nationalist stance on resources.
SKKMigas Chairman Rudi Rubiandini and two others were taken into custody by officials from the Corruption Eradication Agency (KPK), said Elan Biantoro, a spokesman for the energy regulator.
KPK spokesman Johan Budi told Metro TV that Rubidandini had been caught taking around $400,000 from two people from a "private firm". Biantoro said the two officials were from an oil company that he was not familiar with.
Rubiandini could not be reached for comment.
Some oil company officials were shocked by the news.
"This industry is already tough to deal with and it shouldn't be weighed down by this sort of scandal," said an official at a foreign oil firm with operations in Indonesia. 0
The oil and gas sector is politically crucial, accounting for about a fifth of Indonesia's government revenue.
Indonesia was once self-sufficient in oil and gas but has been struggling for years to attract investment to halt declining output from a peak of around 1.6 million barrels per day in 1995. Indonesia produced an average 831,000 bpd in the first half this year.
Rubiandini was appointed in January to head SKKMigas after the independent industry regulator BPMigas was declared unconstitutional. Some experts say the motivation was to gain greater control over the sector after SKKMigas was placed within the energy ministry.
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SKKMigas denied the arrest would damage Indonesia's oil operations. The agency has existing contracts with oil majors including BP Plc, Chevron and Exxon Mobil.
"Operations will continue to run. There is no impact," Biantoro said. "For now, with the vacuum in the top post, there are no crucial issues that need to be decided upon."
The head of the oil regulator was currently being questioned at the KPK headquarters and the graft agency had sealed off his offices, said Biantoro.
The SKKMigas chairman is the latest high-profile government official to be accused of corruption in Indonesia.
KPK in December named Youth and Sports Minister Andi Alfian Mallarangeng as a corruption suspect, while senior police official Djoko Susilo is currently on trial for money laundering.
While foreign investment continues to pour into the resource-rich country, there are growing concerns that rampant corruption and an incompetent bureaucracy could throttle growth and see that investment turned away.
(Additional reporting by Nilufar Rizki and Kanupryia Kapoor; Writing by Randy Fabi; Editing by Ed Davies)