IndoGas begins, RI opens door for investors

Urip Hudiono, The Jakarta Post, Jakarta

In a bid to boost more investment in the gas sector, the government will open wide all available business opportunities in the sector to foreign investors, including six major gas-related projects worth US$2.89 billion offered in the ongoing infrastructure summit here.

The government has also addressed investors' concerns, particularly in ensuring the legal certainty of their investments in the gas-related projects.

Speaking at a discussion in the four-day IndoGas 2005 conference, which opened on Monday, Minister of Energy and Mineral Resources Purnomo Yusgiantoro explained that investors are welcome to consult and negotiate with the government's oil and gas regulatory bodies -- BP and BPH Migas -- about interesting business opportunities.

"You may invest in all lines of the gas sector: exploration, exploitation, transportation, storage and trading," he told the forum participants, mostly representatives of major oil and gas companies.

Among the participants are BP, Caltex, CNOOC, ConocoPhillips, Exxon Mobil and LNG Japan.

The event itself is organized by the ministry, BP and BPH Migas, the Indonesian Gas Association and state enterprises of Pertamina and PGN.

The gas sector is expected to be one of the country's most lucrative industries, in light of the government's plan to start shifting the use of oil to gas for power generation, industries and general consumption.

"We plan to build two natural gas reserve terminals in Java -- in the western and eastern part of the island," Purnomo said. "To give a picture of the gas industry potential, however much gas you can supply to Java will be completely absorbed by consumer demand."

Purnomo acknowledged that investments in the gas sector would still face several challenges but promised that the government would continue to address them.

"We will resolve overlapping regulations affecting the oil and gas sector and maintain the sanctity of all contracts that have been signed," he said. "We will also address problems that might arise from regional autonomy and fiscal regulations."

Addressing concerns from oil and gas companies on a future amendment of Law No. 22/2001 on oil and gas that would oblige them to dedicate more of their production for domestic supply, Purnomo explained that the government was still considering all suggestions on the matter.

The Constitutional Court recently asked the government to amend the oil and gas law, ruling that Article 22 of the law on domestic market obligation be set at a minimum of 25 percent.

As for the legal certainty of signed contracts, Purnomo said the government has succeeded in winning the House of Representatives' approval to continue 150 contracts affected by Law No. 41/1999 on protected forests, which had been signed before the law was passed. The law prohibits mining exploration and exploitation in protected forests.

On the regional autonomy issue, Purnomo said the government had established the Regional Autonomy Consultative Council under the Ministry of Home Affairs, tasked to prevent and remove any bylaws in the oil and gas sector that were incompatible with higher regulations.

"We are also involved in continuous discussions with the finance ministry to give tax incentives for oil and gas producers," he said.

The finance ministry had given such incentives in which oil and gas producers could get reimbursement of import duties and value-added taxes they have paid but withdrew the policy in 2000.

Six major gas-related projects offered in Infrastructure Summit: - Natural gas reserve terminals in West Java and East Java
- $1.4 billion East Kalimantan-East Java pipeline network
- $580 million East Java-West Java pipeline network
- Two phases of Duri Dumai (Riau)-Medan (North Sumatra) pipeline
network worth $380 million and $225 million respectively
- $110 million Singkang-Makassar pipeline network
- $100 million Kepodang-Tambak Lorok pipeline network