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.