President promises support for gas industry<\/p>\n
Leony Aurora, The Jakarta Post, Jakarta<\/p>\n
Despite the challenges faced by Indonesia's natural gas industry,
\nthe sector still had good prospects amid declining oil output
\nhere and should be attractive with the support of the government
\nand investors, says President Susilo Bambang Yudhoyono.<\/p>\n
Susilo said at the official opening of the IndoGas 2005
\nconference that the challenges mostly centered on the scattered
\nlocations of natural gas fields, most of which are geographically
\nand far away from the major domestic market on Java.<\/p>\n
\"We still face a lack of infrastructure, and the ability of
\ndomestic consumers to purchase natural gas at an unsubsidized
\nmarket price is very limited,\" Susilo told the hundreds of
\ninternational and local participants.<\/p>\n
Minister of Energy and Mineral Resources Purnomo Yusgiantoro
\nalso said that it was imperative that the country secure some
\nlarge investments to develop the natural gas infrastructure.<\/p>\n
Data from the ministry shows that as of 2003, the nation's gas
\nreserves (proven and potential) stood at 176.59 trillion cubic
\nfeet (TCF) -- among the largest in the world -- but it is largely
\nuntapped due to the limited supporting infrastructure, including
\ndistribution and transmission pipes.<\/p>\n
In 2003, the nation's total gas production by state oil and
\ngas company Pertamina and production-sharing contractors reached
\njust 3.3 TCF, and around 70 percent of that was exported.<\/p>\n
Extensive infrastructure development is necessary in order to
\ndevelop the sector. Six projects, connecting areas in Kalimantan,
\nJava and Sumatra, worth nearly US$2.8 billion in total are
\ncurrently on offer at the Indonesia Infrastructure Summit.<\/p>\n
At present, the country has two liquefied natural gas (LNG)
\nplants in operation, one is located in Arun, Aceh, and the other
\nis in Bontang, East Kalimantan. The construction of a third and
\nmuch larger plant, Tangguh in Papua, is planned to commence
\noperations later this year.<\/p>\n
Susilo assured the participants that as oil reserves became
\nscarce, the demand for gas would rise and that the contracts
\nalready signed would be honored.<\/p>\n
In order to create a more conducive investment climate, the
\ngovernment was synchronizing policies and regulations to make the
\nprocess smoother, he said.<\/p>\n
\"Refunds for value-added tax (VAT) and exemptions for import
\nduties in the upstream sector of the gas industry will be
\nimplemented,\" he said, referring to two major concerns of
\ninvestors. The government was also reviewing the possibility of
\ndeferring the VAT during the exploration stage.<\/p>\n
The ministry's Director General of Oil and Natural Gas Iin
\nArifin Takhyan said that his department was trying to persuade
\nthe ministry of finance to issue a joint decree to implement the
\nVAT exemption during exploration, in lieu of a lengthy process to
\namend the law.<\/p>\n
Having been the world's largest LNG exporter for years,
\nIndonesia has been struggling to reach new markets like China and
\nthe U.S., aside from its traditional buyers Japan, South Korea
\nand Taiwan amid increasing competition from other producing
\ncountries.<\/p>\n
Citing outdated facilities, Japan's third largest power
\nproducer Chubu Electric Power Co. has said it might not extend a
\ncontract with Indonesia over concerns that it would not be able
\nto meet its commitments.<\/p>\n
\"The equipment in Indonesian LNG plants is more than 20-years-
\nold and needs upgrading,\" said managing director Hiroshi Makita,
\nas quoted by Bloomberg.<\/p>",
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