Foreign investors reassured on mining contract security

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)