Investment in gas sector reaches $112.6 million
Investment in gas sector reaches $112.6 million
The Jakarta Post, Jakarta
Although the government has yet to issue regulations on the
gas sector, private firms have started building a network for gas
distribution, showing great confidence in the future prospects
for the business.
Ministry of Energy and Mineral Resources director of oil and
gas commerce and processing Erie Soedarmo said on Wednesday that
investment in the gas sector had reached US$112.6 million since
the sector was officially liberalized a year ago.
That investment included $51 million for the construction of
infrastructure to distribute natural gas and about $61 million
for the construction of liquefied petroleum gas (LPG) production
plants and reception terminals.
"The investment will increase in the future when government
regulations on the oil and gas downstream sector have been
issued," Erie said.
The investors will not be allowed to operate until after
November 2005 when the government starts applying the free market
system to the oil and gas downstream sector.
The ministry completed a draft regulation for the oil and gas
downstream sector last year and sent it to the State Secretariat
for approval by President Megawati Soekarnoputri. Thus far,
however, there has been no indication that the President will
sign it in the near future.
The great enthusiasm felt by gas investors is, however, not
shared by oil investors. The government has issued temporary
licenses to seven private companies to market oil-based fuel but
none has pledged to invest.
Erie said that in contrast to their gas counterparts, oil
investors were very careful when making investment decisions as
the business carried higher risks.
"They want to be satisfied on all legal matters before making
an investment," Erie said.
Private firms are now permitted to engage in oil and gas
distribution following the introduction of Law No. 22/2001, which
aims at liberalizing the oil and gas sector.
In the past, only state oil and gas firm PT Pertamina was
allowed to distribute oil-based fuel, while the right to
distribute gas was held by Pertamina and PT Perusahaan Gas Negara
(PGN).
Pertamina will retain the right to distribute oil-based fuel
until November 2005.
While Indonesia's oil reserves have been much depleted and the
country imports a significant amount of oil-based fuel to meet
domestic demand, the nation has huge gas reserves, which largely
remain untapped. The government is now aggressively promoting the
use of gas to reduce public consumption of oil-based fuel.