Too many uncertainties in oil and gas bill: IPA<\/p>\n
JAKARTA (JP): The lack of clarity in the new oil and gas bill,
\nsuch as in the case of sanctity of contract and market
\nderegulation, could cause uncertainties in the industry and
\nimpede foreign investment inflows, the Indonesian Petroleum
\nAssociation (IPA) said on Monday.<\/p>\n
\"Investors hate uncertainty, any kind of change makes them
\nnervous,\" IPA chairman Bill Fanagan told The Jakarta Post
\nfollowing a hearing with the House of Representatives's
\nCommission VIII, which, among other things, oversees energy
\naffairs.<\/p>\n
He suggested that improvements be made in some areas of the
\nbill to ensure better certainty in the industry. \"On the sanctity
\nof contract in particular, that there'll be clarity with respect
\nto the existing contracts and new contracts,\" he said.<\/p>\n
Other questions, he said, concerned articles which called for
\nthe establishment of regulating and executory bodies in the oil
\nand gas industry. The two bodies will replace the industry-
\nregulating role of the state oil and gas company Pertamina.<\/p>\n
Under the new bill, the government plans to turn Pertamina
\ninto an ordinary company and liberalize the oil and gas sector.<\/p>\n
\"Part of the government's job is to make sure that it's
\nclearly understood how the executory body will work and what its
\nauthority will be,\" Fanagan asserted.<\/p>\n
He said that companies were confused over the role of the
\nexecutory body when it came to signing oil and gas contracts.<\/p>\n
Under article 11 of the bill, a company must negotiate the
\nterms of a contract with the minister, but must also arrange for
\nthe contract's signing with the executory body.<\/p>\n
\"The law must ensure that there'll be no renegotiation with
\nthe executory body,\" the IPA said in its presentation to
\nCommission VIII.<\/p>\n
Legislators are currently debating the new oil and gas bill
\nwhich was submitted by the government earlier this year.<\/p>\n
With the bill, the government hopes to replace two laws,
\nnamely Law No. 44\/1960 on the oil and gas industry, and Law No.
\n8\/1971 on the state oil and gas company Pertamina.<\/p>\n
Fanagan also called for more flexibility in the bill, saying
\nthat it should allow the government to adjust rulings so as to
\nattract investment.<\/p>\n
He proposed that the minister of energy and mineral resources
\nbe granted discretion in some areas of the law.<\/p>\n
\"That allows the law to stay competitive on an international
\nbasis, so he (the minister) may decide that the terms are too
\ntough, that they're not getting the investment that they want, so
\nwhat he'll do is make some adjustments to the areas where he has
\nthe discretion to make it attractive to investment to continue to
\ncome into the country,\" he explained.<\/p>\n
Fanagan said a study showed that Indonesia was ranked among
\nthe top 25 percent of countries with the toughest contract terms
\nin the oil and gas industry.<\/p>\n
\"That means it (Indonesia) has got the highest level taxation
\nin the industry,\" he said.<\/p>\n
Although the study was issued about four to five years ago, he
\nadded that little has changed since then.<\/p>\n
Fanagan suggested the government strike a balance between
\nimposing tight taxation rules and attracting oil and gas
\ninvestments.<\/p>\n
An alternative, he said, would be to provide incentives during
\ndifficult political circumstances so as to continue to lure
\ninvestment.<\/p>\n
\"If they (the government) see investment starting to drop,
\nthen they have to ask themselves whether it's just politics or a
\ncombination of tough politics and tough fiscal terms that stop
\ninvestment,\" he explained.(bkm)<\/p>",
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