Foreign investors reassured on mining contract security

JAKARTA (JP): Minister of Mines and Energy Kuntoro Mangkusubroto reassured foreign investors yesterday that the government would honor existing mining, gas and gas contracts despite future changes in the country's regulations on the sector.

"We can assure you that we are not going to amend investor contracts which guarantee terms and conditions which may no longer be in compliance with the prevailing laws and regulations," Kuntoro told about 300 Australian mining, oil and gas businesspeople at a business luncheon organized by the Indonesian-Australian Business Council (IABC).

Kuntoro said the government was preparing a new law to liberalize the country's upstream and downstream industries of the oil and gas sector and was also mulling a plan to replace the mining law.

But these would not affect contracts that had been signed by the government, he said.

Regarding the oil and gas sector, Kuntoro said the government was committed to scrapping the decade-long monopolies enjoyed by state oil and gas company Pertamina and changing the latter into a limited company which would compete with private companies for business.

In the mining sector, Indonesia was committed to regaining its precrisis position as one of the world's top destinations for mineral investments.

He said the monetary crisis, which has gripped the country for more than a year and was followed by the political crisis leading to the downfall of former president Soeharto, caused a downturn in foreign investments.

He said that while the mining, oil and gas sectors were not much affected by the crisis, many potential investors had taken a wait-and-see position until they were assured of security for long-term investment.

To reinstate confidence among investors regarding the security of their ventures, the ministry will establish a system which will produce a more simple and transparent service for the mining and energy industries, Kuntoro said.

Caltex

Kuntoro confirmed on the sidelines of the luncheon that he may drop a plan to transfer the development of the Coastal Plain Pakanbaru (CPP) oil block in Riau to state oil and gas company Pertamina after PT Caltex Pacific Indonesia (CPI)'s contract on the block expired in 2001.

Caltex wanted to continue developing the block for another 30 years after 2001, but Soeharto gave approval last year to Pertamina to take over the development of the block at the end of CPI's contract.

Analysts doubt Pertamina's ability to develop the block due to its financial difficulties.

Pertamina will need an investment of around US$1.3 billion to install the high enhanced oil recovery (EOR) technology in the block to maintain its current production rate of 70,000 barrels per day (bpd), analysts say.

They say the block's throughput would significantly drop if Pertamina does not funnel in new funding.

"The most important thing for me is (how) to secure state income (from the oil block). It makes no difference for me whether Pertamina or Caltex will continue developing the block," Kuntoro said, adding that was studying the ability of both companies to develop the block.

Caltex, the country's largest oil producer, is jointly owned by Chevron Corp. and Texaco, both of the United States. (jsk)