IPA calls for strong business climate
Fitri Wulandari, The Jakarta Post, Jakarta
Oil and gas contractors called on Tuesday for a favorable investment climate in a bid to maintain sustainable development in the oil and gas sector.
Chairman of the Indonesian Petroleum Association (IPA) Brian W. Marcotte said while the IPA was fully aware that oil and gas sector was a high-risk business, legal and fiscal uncertainties were still a bigger problem for oil and gas contractors.
"Significant issues which affect the outcome expected from our decision-making analysis in an arbitrary way is much more difficult for investors to understand and mitigate," Marcotte said in his speech on the opening ceremony of the 29th IPA Annual Conference and Exhibition on Tuesday.
"Issues such as contractual uncertainty and fiscal-terms uncertainty are much more difficult to deal with as they may come in very unexpected ways," Marcotte said, adding that they would undermine investors' confidence if the uncertainty becomes too high.
Sustainable development of energy resources became the central theme of IPA's conference.
A favorable business climate would support sustainable development of oil and gas resources which are non-renewable resources.
"Our goal is to provide a climate that will allow the resources of Indonesia to be developed both today and tomorrow for the companies involved in the investment decisions, the government and the people of Indonesia," Marcotte remarked.
Legal uncertainty, red tape and collusive practices are often blamed as the major hindrance in luring investors to Indonesia.
Particularly in the oil and gas sectors, apart from legal certainty, the unattractive split in oil and gas revenue between the government and the production sharing contractors (PSC) was often blamed for declining investment in the sector.
Marcotte said Indonesia's oil and gas production had been struggling to offset decline over the past few years due to depleting resources.
Thus, it will be more difficult for Indonesia to maintain or even to increase production.
"The answer will rely on investment as it will lead to exploration that will lead to development and to production," Marcotte remarked.
However, Marcotte applauded the government's efforts to improve the investment climate in the sector through Law No. 22/2001 on oil and gas, which he said would help boost investors' confidence.
Minister of Energy and Mineral Resources Purnomo Yusgiantoro acknowledged the need to preserve oil and gas resources for future use.
In line with the sustainable development of oil and gas, Purnomo said the government had formed policies on supply and demand management, appropriate domestic energy pricing and promoted an environmentally friendly policy.
As for the investment climate in oil and gas sector, Purnomo said it was still conducive.
"One of the indications is that the realization of the upstream expenditure has increased by about US$3 billion from 2000 to 2003," Purnomo said.
Purnomo added the government will soon issue regulations on upstream and downstream business activities to provide a legal foundation for investors.
The oil and gas industry has been the backbone of the country's economy for decades, contributing between 25 percent and 30 percent of the annual budget.
The Indonesian Petroleum Association (IPA) is an influential non-profit organization consisting of 38 companies of oil, gas and geothermal operations in Indonesia.
The association provides a forum for its members to exchange ideas on all aspect of the oil, gas and geothermal industry from both upstream (oil and gas exploration and exploitation) and downstream (fuel refining and distribution).
Additionally, IPA has 91 organizations affiliated with petroleum and geothermal industries such as service companies, research and educational institutions. Some 1,417 individuals related to the industry such as geologists and geophysicists are also members of IPA.