Global oil firms urge govt to fix investment climate

Global oil firms urge govt to fix investment climate

Dadan Wijaksana, The Jakarta Post, Jakarta

An international conference on energy and mining got underway on
Monday with participants emphasizing the absolute necessity for a
greatly improved investment climate in Indonesia, so that it can
take advantage of the rapidly rising global energy demand.

Because oil production is on the decline here, it was of the
utmost importance that Indonesia clears its obstacles that
continue to hamper investment in the sector to secure the
domestic market and also tap in to the global market, industry
players said.

Rex W. Tillerson, president of ExxonMobil Corporation, told
the forum of about 400 attendees from 11 countries, that the
government had to place a higher priority on attracting investors
by improving the investment climate, especially in the crucial
oil and gas sector.

"(Investors want) clear commitments with transparent legal and
regulatory frameworks. These frameworks need to honor the
sanctity of a contract.

"This is crucial to support large investment. In the recent
past, a lack of such regulatory clarity has been a substantial
obstacle to investment," Tillerson said.

He did not elaborate, but he was likely referring to a number
of cases in the energy sector, which have contributed to the
government's faltering reputation within the international
business community in terms of honoring contracts.

The dispute between the Karaha Bodas Company (KBC) and state
oil and gas firm PT Pertamina stands out as one of the culprits
in putting off investors.

Secondly, he added, was the creation of a stable and
attractive fiscal regime, which provides the necessary elements
to recognize the risks in upstream investment.

ExxonMobil is a U.S.-based energy giant, which has a huge
investment portfolio in the country.

At present, Indonesia produces less than 1 million barrels of
oil per day (bpd), compared to the 1.3 million bpd quota set by
the Organization of Petroleum Exporting Countries (OPEC).

Another major player in the industry, Royal Dutch/Shell Group
reiterated a similar refrain: Indonesia has the potential to
seize the opportunities ahead in meeting the increasing energy
demand, and securing those investments was the key to doing so.

"The International Energy Agency (IEA) has suggested that a
total of US$6 trillion will be needed over the next 30 years to
develop the world's oil and gas resources .. a massive rise from
today's already high levels of $125 billion a year on upstream
investment," Dominique Gardy, the company's CEO on Exploration
and Production in Asia Pacific, said in his presentation paper.

The massive investment, he added, was needed to meet the
rising demand in global energy.

Gardy quoted IEA data, which shows a 50 percent increase in
global oil demand in 2030 and a doubling of the gas demand.

Proper regulatory, legal and commercial frameworks, are all
factors that investors will want to see before making large
investments, he said, as well as clear and predictable tax
policies, social stability and a secure environment.

Meanwhile, Vice President Jusuf Kalla said in his speech that
in order to do that, the government would modify the country's
tax system.

It may scrap import duties for equipment used in developing
oil and gas areas, and is seeking ways to exempt companies from
the value-added tax (VAT) when doing exploration for oil and gas
reserves in the country.