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.